Price Wars! One of the biggest challenges for any business is to deal with a competitor who sell more or less similar products, but at a much lesser price. How do businesses react under such circumstances, and what do they do to out survive such low-cost rivals?
Facing competition is very normal in any business. But, if the competitor is hitting hard on the price point, then the competition becomes a hard nust to crack. Business executives of premium brands face tough times when low cost competitors appear in the market. This would be the time to decide upon whether the business should be continued as usual, or the company should modify its strategies and come up with counter approaches to tackle the situation.
As is said, 'better the devil you know', it is easier to handle a situation, which the business is able to anticipate. Companies invest big money, time, and staff to fight archrivals. Tough, challenging, yet surprisingly reassuring, brands face opponents with ambitions, operating strategies, strength and even weaknesses resembling their own.
When big brands underestimate their rivals:
Big brands adopt slow and subtle ways to build their reputation in the market. Much focused on conventional strategies, most of the time, premium brands fail to realize the presence, and resulting threat of low cost competitors in the market. Obsessed with their traditional rivals, brands are blinded to the threat rising from low cost competitors.
Occasionally, it happens that, low cost competitors rise very quickly in the market, that, they do not give time for the premium brands to anticipate their arrival. For instance; in apparel retailing; colors, design, and patterns of premium brands may be copied, and apparels will be sold in store racks, very similar to that of premium brands in appearance, but with a much lesser price.
Customers dominate; write, and rewrite market rules. They form their own norms for selecting, and switching to other brands. They follow them stringently and alter them without giving any chance for the brands to be aware of. Finally, premium brands find themselves facing a frustrating 'catch 22' situation where they need to suppress their low priced competitors to survive the market, and they need to survive the market to suppress their cut-rate rivals.