1409

Problem

If a competitor’s price cut threatens only a small portion of expected sales, the sales loss from ignoring the threat is probably much less than the cost of retaliation. Agree or disagree? Explain.

Step-by-step solution

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Step 1/3

Competitor pricing is one of the most important factor in pricing of product by a company. Sometimes competitors cut the price of a product and this makes other companies to cut their prices as well in order to maintain sales and demands of product in the market.

Step 2/3

Sometimes price cut by a competitor has very less effect on companies as in case the price cut by the competitor affects only a small segment of its business. The company in that case would not consider retaliating to the price cut as the loss of sales due to price cut would be more as compared to not reducing of the price.

Step 3/3

The companies also have many product lines, thus a company would consider all the options before going for the price cut.