Price War Essay

How should a company try to deal with the threat of a price state of war? Fontinelle (2010) believed that price war has a big sham which sinks to a string of price reduction that vaporizes the profit margins. There ar some solutions which can cope with the menace of a price war. To incision with, Rao et al. (2000) showed that the manager of a company should take into account of some other options in front answering the price racecourses call. The manager should consider matching price cut is a good choice or not before deciding. Moreover, additional information active the price war is needed to be forecast out immediately. Does the discounted price apply for a short period of era or long term? In addition, the terms and conditions for the promotion ar also involved.For archetype, Starbucks drove their customers crazy because of the 50% discount Frappuccino in blessed hour campaign. In addition, it also attracts more new customers. Meanwhile, their adversarys should co nsider about applying the same strategy or do nothing. The competitors managers moldiness(prenominal) be particularly c beful as the threat of price war is high. In addition, they may get more disadvantages instead of advantages as if their filth is not as strong as Starbucks. Misreading the competitors purposes which is one of the main factor causes price war can lead to un stave offable price war (Little, 2003).Therefore, correct information about competitors intentions mustiness be obtained carefully. The reason behind the price cuts must be figured out to mother the right respond. With the same example above, the competitors managers should research in detail about Starbucks promotion campaign to have their suitable marketing strategy. According to Rao et al. (2000), marketing communication strategy plays an Copernican role in ensuring the competitors understand the reason behind the company set tactics which assists in avoiding a price war. Advertisement should not only (prenominal) focus on the price but also the quality and benefits of the product. Therefore, the companies should selectively reveal their strategy intentions in the purpose of staying away from price reductions.To avoid igniting a price war, Swartz (2012) claimed that products are required to be differentiated. It baseborns that the products must be customized to become outstanding in the market share. Although other traders may offer products which are similar to those competitors are selling, it doesnt necessarily mean the company must serve identical products or services. Therefore, there are many ways of differentiation in order to make the customers induce which product is more valuable to purchase. Rao et al. (2000) pointed out that awareness of customers level of price sensitivities is also important.To carry out a winning pricing strategy, a company must first comprehend the fundamental understanding of customer perception of price sensitivity. This changes when new com petitors enter the ongoing market as company have to be aware of other competitors pricing strategy as well. As a conclusion, companies should keep clean up of price wars as it can be difficult to manage as soon as price wars begin to gain a channel start. Arguments between companies regarding price wars should be handled calmly to avoid unnecessary conflicts. As a side benefit, it would also reduce the chances of initiating price wars.