Foreign competitors are expanding with low prices
Symptom: Foreign competitors are offering 10-15% discounts.
Implications for the market:
These foreign competitors may not be successful in the long term.
The discounts that foreign competitors offer are usually large enough to move share in the early years.
Once an industry turns hostile, however, these discounters face poor prospects. Their share, as a group, rarely exceeds 20 percent and usually shrinks once traditional competitors begin matching their discounts.
These discounters may have a longer-term impact on the industry, however, if they are able to establish some advantage in addition to price.
Discounters with low cost structures may gradually reduce their reliance on price and shift instead to performance-based competition. They then become much tougher long-term competitors.
While winning share on price, discounters can often establish entirely new channels of distribution. These new channels increase the degree of competition in the industry and will usually migrate to performance-based competition as their formerly discounting suppliers shift strategies to emphasize performance. Back-channel distributors can become much stronger.
|For a greater overall perspective on this subject, we recommend the following related items:
Perspectives: Conclusions we have reached as a result of our long-term study and observations.