Price Change and Price War

Reasons of Price Change

cost inflation
over/less demand
Price competition
nature of product and product life
promotional campaign

Reaction to Price Change

Reaction by customers
Reaction by competitors

Responding to Price Change

maintain the price
maintain the price with some value addition
reduce the price
increase the price and quality
launch a low price line

Price War

A price war between 2 rival companies is a competitive exchange when they lower price points on their product to undercut each other and gain more market share.

Features

Competition among competitors
Lower the price points on their product/services
To capture greater market share
Used to increase revenue in the short term
Employed as a longer-term strategy

Price War and Possible Strategies

Reliance on strategic capabilities
Compete on Quality
Product differentiation strategy
Form strategic alliance