What's the difference between predatory pricing and competitive pricing?Ī key difference between setting predatory versus competitive prices is that companies set competitive prices relative to the market. Most markets automatically regard companies with a 50% or higher share of the market as being dominant. Some countries consider a company with a 40% share in any market as dominant.
#Predatory pricing how to#
Related: How to define your target market: examples and types What is a dominant business?Ī dominant business is a company that has a significantly larger percentage of the market than its competitors. Once this happens, the dominant company raises its prices to recoup its losses. The dominant business continues to offer its products and services below market price until the smaller companies leave the market. Companies with less market share are unable to compete with the lower prices. Predatory pricing is when a dominant business drops its prices well below market prices and product costs with the intent of forcing other companies out of the market.
In this article, we define predatory pricing, discuss its effects on the market and consumers and suggest alternative methods for businesses to compete in the market.
Therefore, it's better to know and use other pricing strategies. Many countries prohibit this strategy since it creates barriers to the market and negatively affects consumers in the long term. A pricing strategy is predatory when a dominant company temporarily lowers its prices to drive its competitors out of business.
0 kommentar(er)
