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Written by Founder Fi Entering into a price war is usually a distant thought for the average Zambian entrepreneur. On the one hand, some often chose to ignore it and face certain doom over the long run evidence from small businesses that have closed down due to failure to compete on price. Others on the other hand, chose to engage in a war without fully understanding the consequences and not know how they can compete.
The truth is, price wars are ugly. They have been the demise of many good businesses over the years. When we looked at the low cost airlines in the USA, we found that price wars were so ugly that management teams would forego profits for market share much to the dismay of shareholders.
We have also seen evidence of price wars in the Zambian noodle market Ezee Noodles taking on in store brands from major retailers and Chinese offerings. However, it does not have to be ugly if the players in the game take steps to protect their earnings.
Non Price Responses This includes revealing your strategic intentions and capabilities, competing on quality, co-opting contributors and lobbying for higher standards of products from regulators.
Evidence of Non Price Responses in Zambia When the Bank of Zambia makes a policy statement on revision of interest rates, the banks fall over themselves to get as much information about the revision of their revised interest rates.
By so doing, they are being open about their strategy. MTN, Zamtel and Airtel have all exposed their tariff plans although required by law subsequently revealing their cost advantages.
A look at some of the participants at Zambia Bureau of Standards ZBS shows the intention of players who seek to protect their value.
In Lafarge versus Dangote et al. Price Responses This involves using complex price actions, introducing new products, deploying simple price actions. Pepsi Zambia with its arsenal of soft drinks that are in all segments of the drinks market with matching prices.
Vodafone Zambia bundling modems with 2GB data bundles as it enters the game mobile internet data. Epilogue The Zambian market is very diverse. Consumers are constantly seeking for the best price for a good product. Every industry must understand these desires in order to fashion prices that are acceptable to customers whilst protecting value.
Understanding price elasticity of their products is also an important factor that can lead to a better understanding of why the company found themselves in a price war. On the downside, we believe that quality of product is being compromised and will have huge ramifications in the future.
Continued education on product quality and enforcement of standards by regulators may be the only thing that can save us destruction of value and substandard products.Harvard business review on marketing.. -- The Harvard Business Review paperback series is designed to bring today's managers and professionals the fundamental information they need to stay competitive in a fast-moving world.
How to Fight a Price War by Akshay Rao, Mark E. Bergen, and Scott Davis; Contextual Marketing by David Kenny and John. Companies caught up in the price war have two options: fight the war with either non-price or price responses.
Seeing as many of the players have adopted price responses, we can only hope that they consider Professor Akshay Rao et al. recommendations in his famous Harvard Business Review (HBR) paper “ How to fight a price war “. A Current Affair covers the realms of politics, crime, human rights, science, technology, celebrities and entertainment - all investigated by a dedicated team.
Marketing and Pricing Organizations Articles "How to Fight a Price War" by Akshay Rao, Mark Bergen, and Scott Davis, from The Harvard Business Review "Using the Anticipation of Competitive Actions to Make SMART Pricing Decisions," by Scott Davis, John Cripps, and Steve Kutner, from the Journal of Professional Pricing.
Introducing Reactor™ by Scott Davis. Most managers will be involved in a price war at some point in their careers, and it's never too early to prepare, write Akshay R. Rao, Mark E. Bergen and Scott Davis in the Harvard Business Review. Times of India brings the Latest News & Top Breaking headlines on Politics and Current Affairs in India & around the World, Sports, Business, Bollywood News and Entertainment, Science, Technology.