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Problem

Will the Internet result in stiffer price competition in the business-to-business marketplace? Explain.

Step-by-step solution

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Step 1/2

Pricing is always a tricky and challenging factor in the business world. Often the firms compete with each other either through price wars or through value-added services. The same can be found in e-commerce marketplaces too.

Step 2/2

It is obvious that the internet marketplace will surely result in stiffer price competition in the business-to-business marketplace. Through the internet, the buyers get a wide range of information about the product and service that they need. Thus, it actually bolsters the bargaining power of the buyer. Business marketers lose control over price due to this effect. The difficulty to purchase a product, marketing it, or distributing it is easier and customers can easily move or shift their purchase from one seller to another seller. Thus, the rivals to compete with each other effectively, have to come up with stiffer price competition. The firms cannot attract customers by simply adding value-added services. The reason is that the same product can be availed from another seller at a lower price. The customer will go with purchasing the product alone rather than going for a high price and getting value-added service with the product. The reason is that customer only needs the product to satisfy his need and may not get interested in value-added service. This makes the rivals take only one competitive advantage, that is pricing. This is the reason why it is said that e-commerce will result in stiffer price competition.