Pricing and competition

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Pricing andcompetition

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A low-cost leader would enforce its leadership by doing a variety ofactivities, for example, lowering prices or even issuing deals thattheir rivals might feel they have an obligation of matching so as tostay competitive(Ray Gehani, 2013). With real strategic advantagesover their competitors on aspects like the cost of manufacturing,this might put the low-cost price leader in a position of ruling themarket although it is usually not a guarantee that it will have ahigher ranking.

For instance, when the business organization by the name Walmartstarted opening numerous stores around the states, stores of similarpresentations act as its rivals, thus creating a stiff competitionbetween them. Walmart employed a strategy of cutting costs and at thesame time maximizing its profits, and this made the company dominantsince the prices for consumers were lowered hence attracting them tothe enterprise.

A firm becomes a low-cost price leader in the presence of unequalmarket shares or different costs it employs strategies such as beinga company that incurs lower costs they might charge low prices andhigh-cost firms will get forced to follow the trend making thecompany dominant in the market. Despite following the existingpattern, high-cost companies will not maximize its profits(RayGehani, 2013).

An oligopoly is an example of a market that can apply this strategy.The market gets controlled by a few businesses that realize how theiractions might produce a response from its rivals that might affectit(Ray Gehani, 2013). Due to the changing in the economy where ashift towards a more global perspective gets employed smallcompanies continue to emerge as oligopolies which might create stiffcompetition to larger companies.

Reference

Ray Gehani,&nbspR. (2013). Innovative Strategic Leader TransformingFrom a Low-Cost Strategy to Product Differentiation Strategy. Journalof Technology Management &amp Innovation, 8(2), 23-24.doi:10.4067/s0718-27242013000200012

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