The industry has been able to preserve margins by increasing prices
Symptom: The industry has been able to preserve margins by increasing prices.
Implications for the market:
Serious erosion of long-term competitiveness can be masked by the ability to raise prices in the short term. As unit demand growth slows or even declines, price hikes can protect the bottom line.
By holding prices high, the industry may be encouraging market hostility.
These price hikes may reduce product demand.
More important, they encourage the entry of new competitors drawn in by high margins. The expansion of competition is what causes most hostility.
New competition could harm the industry for several years. Once competition has become established, it withdraws only very rarely. More frequently, it expands even in very tough economic environments, perpetuating hostility for some time.
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Perspectives: Conclusions we have reached as a result of our long-term study and observations.