When is predatory pricing a most effective entry barrier? Select one:
a. When the incumbent has incurred them and the entrant has not
b. When incumbents have long-standing relationships with suppliers and customers
c. When channels are few and hard to replicate
d. When a firm has a reputation for toughness or competes in multiple markets
e. When marginal costs are low and flooding the market causes large price reductions
Please explain your answer.
Pricing strategies in the market:
A pricing strategy refers to the act of setting the price for a product taking into consideration market segments, capacity to pay by customers, economic situations, contender activities, etc.
It is focused on characterized clients and against competitors. There are various pricing strategies in a market:
1) Premium pricing: High cost is set as a characterizing measure of the brand and item quality. Such pricing strategies perform well in segments and enterprises where a solid upper hand exists for the organization. Ex: BMW in vehicles.
2) Predatory pricing: Act of setting low prices deliberately trying to kill the competition. This pricing strategy abuses antitrust law, as it makes opens up the path for monopolization of the market.
3) Economy pricing: Prices focusing on the mass market and larger market share. In this setup, revenue margins are very thin; Overheads like marketing costs and promoting expenses are low. Ex: Friendly wash cleansers
4) Price skimming: Charging high cost for an item until rivalry enters bringing down the level of prices. The thought is to extract most benefits before the item or segment pulls in more contenders who will lower benefits for all concerned. Model: Example: Very starting prices for new mobile phone models.
Answer and Explanation: 1
As mentioned earlier, predatory pricing is the act of purposely setting very low prices to drive away all competitors from the industry. It can act as...
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fromChapter 11 / Lesson 10
When a company makes a change in pricing, it is usually in response to inflation or recession. These two tactics are explained to better understand the intricacies involved in devising and implementing a cost strategy.