4/9/2024 0 Comments Penetration pricing advantages![]() The few companies that can survive have to bear heavy losses all because of the predatory pricing strategy of one organization.Īlso Read What is Brand architecture and what are its advantages?Īfter most or sometimes all other rivals are driven out the company that adopted a predatory pricing strategy raises the prices of the products to recoup its loss.Īlthough the customer is unwilling to pay the high prices, he has no choice as any alternative product does not exist in the market. The profitability drags down sometimes in a minus figure as the undercut prices divert the traffic to the cheapest outlet. They go down one by one as casualties of war because it becomes impossible for them to maintain their prices. This is a terrible move for the other participants in this war who are unable to maintain such a dramatic lowering of prices. The rival companies keep on reducing the prices of its products, and the consumer can purchase the products or services from whichever company he thinks is cheaper.Īs the buyer has no loyalty towards a particular brand, it easily purchases from the cheapest one. ![]() In the short-term, it is the consumer who is the winner. #1 Short-term Effects of Predatory Pricing The predatory companies are easily able to eliminate most of the competition from the market and stop the new entrants from gaining entry. Predatory pricing is a deliberate effort of an organization to use its advantages to sabotage the market and damage the position of its competitors. The international company had adopted a predatory pricing strategy to drive away from its competition so that it could establish its stronghold. ABC Food Ltd started losing a chunk of its customers regularly and after some time could not even sustain its cost prices on the products. ![]() This predatory pricing continued for some time. ABC Food Ltd also had to lower its prices to match that of its competitors. An international brand opened its outlet in the same locality and started selling fresh groceries along with related products at nearly the same prices.Īfter a month it reduced its prices considerably and continued to do so every week. This was considered predatory pricing on its part as it was successfully driving up its sales figures in the market and slowly and steadily removing the competitors one by one.ĪBC Food Ltd was a popular grocery store that was always busy as it offered fresh groceries to its customers. It was seen that the giant company could suppose buy a book at 15 dollars and sell it at 10 dollars which other companies were unable to do.Īlso Read Deep Assortment - Definition, Types, Strategies, Importance And Examples ![]() In the year 2013, it became evident that was willing and even able to sell its printed and electronic books at a rate that was considered very low by the competitors sitting in physical stores. ExamplesĪ real-life example is Amazon, which can sell its books at very lowered rates. Predatory pricing can be of two types implicit which are possible via rebates and discounts or explicit. In some places, it is considered an anti-competitive action and hence is illegal.Īlthough everyone is aware of the predatory pricing, it becomes very difficult to prove that the act was deliberate attempt and thus finds a lot of leeway in the court of law. Predatory pricing is generally conducted to achieve new and maintaining the old customers in its fold. It results in a sort o monopoly situation as there are very few or negligible competitors left in the field. Predatory pricing drives away potential as well as existing rival contenders.
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