Competitors Costs Prices and Offers

Another external factor affecting the company's pricing decisions is competitors' eosts and prices, and possible competitor reactions to the company's own pricing moves. A consumer who is considering the purchase of a Canon camera will evaluate Canon's price and value against the prices and values of comparable products made by Nikon, Minolta, Pentax and others. In addition, the company's pricing strategy may affect the nature of the competition it faces. If Canon follows a high-price, high-margin strategy, it may attract competition. A low-price, low-margin strategy, however, may stop competitors or drive them out of the market.

Canon needs to benchmark its costs against its competitors' costs to learn whether it is operating at a cost advantage or disadvantage. It also needs to learn the price and quality of each competitor's offer. Canon might do this in several ways. It can send out comparison shoppers to price and compare the products of Nikon, Minolta and other competitors. It can get competitors' price lists and buy competitors' equipment and take it apart. It can ask buyers how they view the price and quality of each competitor's camera.

Once Canon is aware of competitors' prices and offers, it can use them as a starting point for its own pricing. If Canon's cameras are similar to Nikon's, it will have to price close to Nikon or lose sales. If Canon's cameras arc not as good as

a so» long distance call will never re the same again.

Low price is one of the strategies that Energis use against BT, the dominant competitor.

Nikon's, the firm will not he able to charge as much. If Canon's products are better than Nikon's, it can charge more. Basically, Canon will use price to position its offer relative to the competition.

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