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Predatory pricing is a commercial pricing strategy which involves the use of large scale undercutting to eliminate competition. This is where an industry dominant firm with sizable market power will deliberately reduce the prices of a product or service to loss-making levels to attract all consumers and create a monopoly. [1]
Cost reduction is the process used by organisations aiming to reduce their costs and increase their profits, or to accommodate reduced income. Depending on a company’s services or products , the strategies can vary.
Michael Porter's generic strategies describe how a company can pursue competitive advantage across its chosen market scope. There are three generic strategies: lower cost, product differentiation, or focus. The focus strategy has two variants, cost focus and differentiation focus, so it is possible to see the concept in terms of four distinct ...
Predatory pricing: One firm substantially reduces its prices for a sustained period below its own cost of supply in an attempt to reduce market competition. [9] Predatory pricing on the international market is called dumping. That is, when a foreign company sells a product in a domestic market at a price below market value, and in doing so ...
Activity-based costing establishes relationships between overhead costs and activities so that costs can be more precisely allocated to products, services, or customer segments. Activity-based management focuses on managing activities to reduce costs and improve customer value. Kaplan and Cooper [1] divide ABM into operational and strategic:
Barak Orbach, an academic economist, argues that competition typically drives shrinkflation: "When supply shocks or other factors inflate production costs, businesses must pass on cost increases to maintain profitability. However, in competitive markets, direct price increases are risky.
Anti-competitive behavior refers to actions taken by a business or organization to limit, restrict or eliminate competition in a market, usually in order to gain an unfair advantage or dominate the market. These practices are often considered illegal or unethical and can harm consumers, other businesses and the broader economy.
When a business specifically cuts prices in order to make a sale, the customer can sense that the original price must be inflated if the business is so quick to slash the price. As a result, the customer may lose respect for the business and realize the prices are too high to begin with. Good customer service must show value to the customers.