As large competitors match low prices, other competitors face difficulties
Symptom: The largest competitors are matching discounts to defend share, making it difficult for other industry competitors to succeed.
Implications for the market:
Once hostility creates industry-wide price pressures, the two to four potential suppliers for any customer will be virtually indistinguishable in terms of price. They are, for all practical purposes, "peers," and it is extremely difficult for one to secure higher prices than another.
But the customer does recognize differences among these competitors and rewards the better suppliers with more share of their volume. The differences in volume allocated to a primary, secondary, and tertiary supplier are dramatic.
In many hostile markets, then, the reward for superior performance is not a higher price but a better position in the customer relationship, making management of the company's volume in the customer relationship the key to success.
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Perspectives: Conclusions we have reached as a result of our long-term study and observations.