What are the reactions of competitors to price changes?

DECREASE IN PRICE

They wiil think the company is trying to steal the market.

That the company is doing poorly & trying to boost its sales.

That the company wants the whole industry to reduce prices to stimulate total demand.

IINCREASE IN PRICE

That the  company has stolen & taken over the market thus its doing skimming.

That the company is doing extremely well & can dictate price..

That the company has been the price leader & has gained a larger market share.

STRATEGIES

The company may be forced to do market penetration or skimming respectively to meet the status of the competitor.

The company may have to diversify in its products, product line, distribution methods to cope up the stiff competiton.

The company may find it necessary to continuously develop & innovate its products to meet the market standards.

The company may find it necessary to aquire a technology breakthrough to oust its competitors or match them.

Thanx for the invitation

1. Will reduce the price at par with competitors’ price or below competitors’ price

2. Will provide added advantage to the existing product with better quality, or ‘a buy one get one free’ offer

3. Will offer better quality of the product at a higher price thereby not being at par with other players.

i m agree with emmanuel opinion 

thank you for your invitation Mr. Nadjib Rabahi. I would like to follow the answer of Mr. Emmanuel.

Thank you for invitation, experts already explained well 

 has to worry about the reaction ofits competitors as well as its customers. Competitors are most likely toreact when the product is uniform, and when the buyers are well informedResponding to price changesWhen a ±rm is responding to a price change by a competitor, it needs toconsider several issues:(a) Why did the competitor change the price? Was it to increase its marketshare, to use excess capacity, to meet changing cost conditions, or to leadan industry price change? Is the price change temporary or permanent?What will happen to the company's market share and pro±ts if it does notrespond? Are other companies going to respond?(b) The company has to consider its own product stages in the life cycle(c) The product importance in the product mix(d) The intention and resources of the competitors(e) The possible consumer reactions to price changes.Assessing and Responding to Competitor's price change

A.      Depends on the competitive arena.

B.      Increase in Price by Market Leader: A market leader may opt to increase the price to gain higher margins banking on Brand Loyalty; Competition may just watch the price change for a while, without immediately increasing their product pricing or try to make use of it against launching a fierce “GO-TO Market” Strategy to increase their Market Share, Playing on the relatively lower ‘Price Point’. This strategy is most helpful to the next Brand Leader who is in the second position.

 Or, Competitors may follow the suit to gain out of the opportunity. However, this strategy has to be carefully used (unless there is a genuine cost increment) as it may ‘backfire’ companies with lower market share/Value proposition. Market will accept an increase in prices when the Perceived Value of a Product/ service is justified or higher than the price of the offering.

C. Lowering the current price: Happens when - the competition is fierce and the market potential is huge or operating in a new market/geography -to gain higher chunk of the Market Share. Here, Responding to the change is most beneficial and all of the competitors will respond with a lowering of the prices to gain higher market share. As the market matures, the prices are stabilized.

D.In a more matured Markets, Generally price reductions does not happen but for a limited period, to attract more sales seasonally. here, competition may come up with alternative price strategies like offering high ‘trade margins’ or Spending more on Marketing or Promotions to attract more customers or just resort to ‘Cash back’ schemes to win over.

Thanks for the invitation..

Agree with expert ansewrs above

 Thanks for the invitation, I  agree with all answers