Price competition

Did you pay attention to the fact that in different shops prices for the same goods, albeit slightly, but still different? This is price competition. This move is used by virtually all sellers: from single traders to the markets to reputable stores and companies.

Of course, price competition today is significantly limited, since its size is minimal and at times account for a fraction of a percent. But failure to take it into account would still be erroneous. In the world practice, there are a lot of examples of cheapening of goods, fast and even large-scale (electronic household appliances, semiconductors, ceramics, products, etc.).

Usually a quick and cascade "dump" of prices - an event rare, forced and economically flawed (unprofitable). More preferably, of course, price fixing, i. E. Keeping them unchanged. Reduction in prices in significant amounts is possible only in two cases: either the seller immediately "winds up" the cost (exposes the goods at a price much higher than the manufacturer's price) and therefore can afford discounts on purchases (especially wholesale), or the laws of the STR Scientific and technical). As for the second option, this is also understandable: obsolete products (especially electronic home appliances), not being sold cheaper today, tomorrow will not be sold at all, as demand for it will fall.

The emergence of new, more complex in terms of technical products leads to the transformation of the very concept of price, as such. Here we are talking about the multi-element price of the consumer, reflecting the possible amount of costs of the main buyer, which sellers are targeting and which is an indicator of the demand and full consumption of the goods.

Prices with the base, lying outside the cost, become the object of competition, which can be directly attributed to the price.

As a result, the understanding of price as the basis (or center) around which consumer preferences should fluctuate is in some way transformed, giving way to seemingly non-price concepts like quality, novelty, progressiveness, standards, design, promptness in maintenance, E. Today it is these parameters that form a new system of values for the consumer and it is on them that price competition is based primarily. This applies to individual exporting firms, and entire countries acting as exporters.

Expansion of the range of consumer requirements dictates more stringent requirements for the exporter, for his competitiveness. This is a regularity: a competitive product can only be produced by a competitive firm, for which, in turn, certain conditions are required that are characterized by the country's competitiveness. As you can see, an inseparable chain, a vicious circle.

This pattern is seen long ago and has long been studied. The European Forum on Governance (International Organization) regularly conducts studies on assessing the competitiveness of Western countries, and the concept of "competitiveness" includes the ability to design, manufacture and, of course, the sale of goods that are most attractive in terms of characteristics (both price and non-price) For the average consumer.

In the struggle for the consumer (and therefore for profit), the main methods of competition are used - non-price competition and price competition.

Price competition is a legitimate struggle of sellers, based on the reduction of prices to a level lower than that of competitors. The result, by the way, is not always predictable (reduction in profitability, or "pulling" of consumers to their product and increasing profits) and depends on the actions of competitors who either respond with their price cuts or leave prices the same.

Competitors do not always meet the decline in their prices. Often non-price competition wins based on higher quality, higher reliability, more attractive design (agree, if there is a sufficient amount, you prefer a good Japanese car without even looking at domestic).

Price competition is built on the fulfillment of two conditions:

1) if the price for the buyer is a decisive factor;
2) if the company has become a leader, "has earned a name" and can afford to reduce prices, sometimes even to the detriment of itself.

Only then is it possible to make a profit, even though other companies at the same prices suffer losses.