Question

* Please use your own words.

* Please provide sources for your answers.

1. Provide an example of any two leading companies from the same industry which are competing directly for marketshare. Give a short profile (300-500 words) for each (provide references for your answers).

2. If you are the manager of one of these companies, what pricing policy do you adopt to be in the first position? Why? (100-200 words)

3. When the whole sector of the market is occupied by the little number of big corporations who share the leadership, what do we call this type of market structure? Explain in details the benefit of this market for the leading company and the disadvange of such situation on final consumers (300-500 words)

Answer 1

one example from the car manufacturing industry, a comparison between Toyota and BMW.
Both companies are well established with a long heritage of success, however each of them implements a totally different strategy.
Toyota is pretty famous for its 'Total Quality' strategy, which tends to focus on providing the widest visible market with a product that holds all the required functionalities with an excellent quality and for a feasible price for most consumers. Toyota has led and pioneered this kind of strategy, especially during the 1980s and 1990s and proved to be very successful to deliver its promises to consumers all over the world.
On the other hand, BMW is company that strives to implement high technology and extra functionalities to its consumers. BMW strategy focuses on delivering a top notch product that offers the consumer prestige and luxurious experience for a relative high price. BMW doesn't target wide slice of the total cars market, instead it focuses on top notch sectors only.

If you’re planning to set the price above the price of your competitor, then you’d need to bring in new features and improvements in your product that would justify the increased price.
2. Pricing below your competitor’s price depends on your resources. If you can increase the volume without affecting the production cost to a great extent, then this might be a good strategy for you. However, there’s the risk of diminishing profit margin and you might not be able to recover your sunk cost and even face bankruptcy. So, it’s really important that you evaluate each step of your competitor while establishing the price for your product.
3. When you set a price equivalent to your competitor, then the differentiating factors cease to exist. The focus shifts to the product itself, and if you can offer more (and better) features at the same time, it’s a win-win for you, and your competitors will fall behind.

So, competitive pricing is a game to play. Competitive pricing intelligence demands that you have in-depth knowledge of your market and target audience.

A lot of effort goes into the process of establishing the price based on competition. According to a recent survey, minor variations in prices can lower or raise profit margins by more than 20-25%. Competitive price analysis is essential to competitive pricing strategies. Let’s look at some competitive pricing examples, to get a better understanding of this process.