This document discusses factors to consider when responding to a competitor's price change, including the product's life cycle stage, its importance to the company's portfolio, and the competitor's intentions and resources. It advises that in homogeneous markets, companies should find ways to enhance their product or meet price reductions only if it benefits the industry. For non-homogeneous markets, the document suggests determining why the competitor changed prices, if the change is temporary or permanent, and considering the impact on the company's market and profits of not responding, as well as likely responses from competitors to different reaction strategies.

1. RESPONDING TO
COMPETITORS’
PRICE CHANGE
-KARTIK BHARGAVA

2. FACTORS TO CONSIDER

3. •Product’s stage in life cycle
•Its importance in company’s portfolio
•The competitor’s intention and resources

4. •The market’s price and quality sensitivity
•The behaviour of costs with volume
•The company’s alternative opportunities

5. HOMOGENOUS MARKET

6. •Find a way to enhance the augmented
product or meet the price reductions
•Price increased only if it benefits the
industry as a whole

7. NON-HOMOGENOUS MARKET

8. Why did the competitor change the price ?

9. Does the competitor plan to make the price
change temporary or permanent?

10. What will happen to the company’s market
and profits if it does not respond?

11. What are the competitors’ and other firms’
responses likely to be to each possible
reaction?

12. Reaction to
low-cost competitors

13. •Further differentiate the product or service
•Introduce a low-cost venture
•Reinvent as a low-cost layer