Did you pay attention to the fact that in different stores the prices for the same goods, albeit slightly, but still differ? This is price competition. Such a move is used by almost all sellers: from single in the markets to reputable stores and companies.
Of course, price competition today is significantly limited, since its size is minimal and sometimes amounts to a fraction of a percent. But failure to take it into account would still be erroneous. In world practice, there are many examples of cheapening goods, fast and even large-scale (electronic household appliances, semiconductors, ceramics, products, etc.).
Usually a quick and cascading “drop” in prices is a rare, forced and economically disadvantageous (unprofitable) event. More preferably, of course, price fixing, i.e. keeping them unchanged. A significant reduction in prices is possible only in two cases: either the seller immediately “winds up” the price (puts the goods at a price much higher than the producer’s price) and therefore can afford discounts on purchases (especially wholesale), or the laws of scientific and technological revolution come into force (revolution scientific and technical). As for the second option, this is understandable: outdated products (especially electronic household appliances), not being sold cheaper today, will not be sold tomorrow at all, as demand for them will fall.
The emergence of new, more technically complex products leads to the transformation of the very concept of price, as such. Here we are already talking about a multi-element consumer price, reflecting the possible amount of expenses of the main buyer, which sellers are guided by and which is an indicator of the demand and full consumption of goods.
Prices with a basis that lie outside the limits of value become the object of competition, which can be directly attributed to the price.
As a result, the understanding of price, as the basis (or as the center) around which consumer preferences should fluctuate, is transformed in some way, giving way to seemingly non-price concepts like quality, novelty, progressiveness, compliance with standards, design, efficiency in maintenance, etc. d. Today, it is these parameters that form the new value system for the consumer, and it is precisely on them that price competition is primarily based. This applies to individual exporting firms, and entire countries acting as exporters.
Expanding the spectrum of consumer requirements dictates more stringent requirements for the exporter and his competitiveness. This is a regularity: only a competitive company can produce competitive goods , which, in turn, requires certain conditions characterized by the country's competitiveness. As you can see - an inextricable chain, a vicious circle.
This pattern has been noticed for a long time and has long been studied. The European Forum on Management Issues (an international organization) regularly conducts studies to assess the competitiveness of Western countries, and the concept of "competitiveness" includes the ability to design, manufacture and, of course, market goods that are most attractive by characteristics (both price and non-price) for the average consumer.
In the struggle for the consumer (and therefore - for profit), the main methods of competition are used - non-price competition and price.
Price competition is a natural struggle of sellers, based on lowering prices to a level lower than that of competitors. The result, by the way, is not always predictable (a decrease in profitability, or “pulling” part of consumers to their product and an increase in profit) and depends on the actions of competitors who either respond with their price cuts or leave the prices unchanged.
Competitors do not always respond by lowering their prices. Often, non-price competition wins, based on higher quality, higher reliability, more attractive design (agree, if you have enough money, you will give preference to a good Japanese car without even looking at a domestic one).
Price competition is based on the fulfillment of two conditions:
1) if the price for the buyer is a decisive factor;
2) if the company has become a leader, "earned a name" and can afford to lower prices, sometimes even to the detriment of itself.
Only then is it possible to make a profit, even despite the fact that other companies suffer losses at the same prices.