ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What Is a Price War? A price war is a competitive exchange among rival companies who lower the price points on their products, in a strategic attempt to undercut one another and capture greater market share. A price war may be used to increase revenue in the short term, or it may be employed as a longer-term strategy.

Detailed explanation-2: -A price war occurs when two or more rival companies lower the prices of their products or services with the goal of stealing customers from their competitors or gaining market share. Price wars come at a significant, albeit temporary, cost since they decrease a company’s profit margins in the short term.

Detailed explanation-3: -How to fight low cost rivals? Kumar describes four alternative strategies: 1) Differentiate your offerings, 2) augment your traditional operations with low cost ventures, 3) switch to cross-selling products and services as integrated packages, and 4) become a low cost provider yourself.

Detailed explanation-4: -S airlines compete with Xone airlines which charges $550 for the same trip. S airlines entered into a price war to attract customers, reduced its price substantially, and lowered the price to $500 per trip. To sustain itself in the market, Xone airlines also dropped its price to $490 per trip.

Detailed explanation-5: -Critically Evaluate Competitors’ Actions Before Reacting. Selectively Communicate Your Strategy. 5 Steps to Improve your Pricing Strategies. Build Strong Information on Your Customer’s Price Sensitivity. Be Consistent & Quick With Your Responses. More items