Price war

A price war occurs when competing businesses drop the prices of their goods in an intentional effort to outbid one another and take a larger portion of the market. A pricing war can be implemented as a longer-term tactic or as a means of short-term revenue growth.Strategic price management, which depends on non-aggressive pricing, in-depth knowledge of the competition, and even active communication with rivals, can stop price wars.Addressing Price WarsThe simplest strategy for a business looking to gain market share is usually to lower pricing, which boosts product sales in turn. If the rival offers comparable goods, it can be compelled to do the same. Additionally, when prices decline, more sales are made, which benefits the consumer.There comes a time when one business can no longer afford to provide a certain pricing and yet turn a profit. Some businesses will even sell at a loss in an effort to totally eradicate the competition.Major Insights• A price war occurs when two competing businesses drop their product prices in an effort to outbid one another and gain a larger portion of the market.• Businesses that engage in pricing wars consciously decide to reduce their existing profit margins in an effort to gain more short-term clients.• In a pricing war, a business may plan to buy supplies at deep discounts from suppliers in order to maintain profitability.Benefits of Price Wars• Customers avoid spending money.• Customers could receive extra goods or services.• Businesses attract new clients.Drawbacks of Price Wars:• Businesses lose revenue and market share.• Lower competition may result in fewer options for consumers and higher costs.• There may be less job options available to workers.