Price Wars

Pricing is one of the most necessary factor a company must take into consideration upon venturing into a selected industry. This is affected by different factors such as the manufacturing costs, marketing costs, legal mandates of the state, the competition, the condition of the industry and the quality of the product. Through this a company is capable of determining their profitability which then may determine how they can generating appropriate amount of income that will support their operation. This may, as well, serve as great strategic tool as this may help the company cope up with their competition through certain adjustments and empolying different strategies. There are certain phenomena that may occur upon utilizing such in an industry and one of those is the price war.

Price war is a market situation characterized by the cutting of prices of companies below their competitors prices. This may mainly occur on conditions wherein there is a very heavy competition present. In such situation, companies will do every strategy in order for them to overthrow competitors and have themselves obtain greater market share in the industry. This, as well, is done due to the stronger bargaining power of buyers due to the presence of substitute products. Companies may prefer to lower their prices in order for consumers to choose their products over their competitors'.

I think, the environmental condition which will most likely trigger price war is when there is recession in a country. I think, this is the condition in which companies will be most likely be forced to adjust prices in order to keep up with the reduced purchasing power of their consumers.

Another condition that I think would most likely trigger such phenomena is when a company is engaged in a new market or when a good is newly turned into a commodity. As an example is the smart phone industry. During the first years of the industry, most smart phones are priced highly as it is considered that time