Chap013 Oligopoly, Monopolistic Competition & Price Strategy
Price and Non-price Competition. Price Competition The main aim of businesses is to maximise...
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Transcript of Price and Non-price Competition. Price Competition The main aim of businesses is to maximise...
Price Competition The main aim of businesses is to
maximise profit.
Firms may try to increase sales by cutting price – price competition
Price Competition Loss leaders (below cost prices on one item to
get you into a shop where you will hopefully buy more – supermarkets use it)
Non-price Competition
Product Differentiation Product Variation
Location
Packaging
Advertising
Branding
Service
Sponsorship Modification of the product
Vertical product variation
Location Choosing a better location than it’s competitors (convenience, classy, close to other shops, good parking).
Businesses of similar goods locate close together as it becomes acceptable for consumers to buy a certain product in that particular area (e.g. second hand car dealers, restaurants, takeaways, etc)
Packaging: Firms compete by making their packaging more
attractive (stand out). Includes logo’s and trademarks that helps to
identify a product (e.g. horse-National Bank)
Advertising: Media e.g. TV, radio, print media (magazines,
newspapers, posters etc) Usually used for non-price competition by
attracting attention to the business by other means Sense of fair play Discredit the opposition (Whitakers) Sex appeal Fun
Branding: Producers can create a brand name to differentiate
from another product e.g. Coke for cola, BP for fuel. Brand loyalty can be encouraged through
competitions and promotions (fuel stations)
Service: Extra or better services could be offered.
Petrol station- check oil & water, wash windscreen Fast food outlets-claim the fastest service available
Sponsorship: Some firms sponsor events (sporting, cultural) to
be identified with something worthwhile, at the same time as getting media exposure for their brand name. Rebel Sport Super 14 Heineken Open (tennis)
Product Variation
Real variations are made to the product so it actually is different.
Product modification: Producers attempt to bring in new
variations, i.e. new features (cars- cruise control)
Vertical product variation This is aimed at creating a range of their
products in order to appeal to a wider range of consumers.
E.g. subaru (car manufacturer): Impreza (sedan and wagon) WRX (sedan and wagon) Legacy (sedan and wagon) Outback (wagon) Forrester (wagon)