It is unlikely that a business can withstand such financial losses without thorough preparation. When this strategy gets implemented, the most vulnerable group on the market are newcomers, they are the first to leave, and there are almost no opportunities for new companies to enter the market. Let’s assume that companies ready to implement predatory pricing strategies had a long preparation period, especially regarding building financial capability. In the long run, those businesses will win the market and gain an unfair advantage. Businesses choosing to implement this strategy must be aware of the initial losses that they could face at first, but this strategy can bring long-term benefits.ĭoes this seem like a clear path to establishing a monopoly on the market? When to Implement?Īs mentioned, businesses able to endure losses for some time can implement the strategy to fully drive competition out of the market, after which they are in a position to raise prices again. Predatory pricing strategy aims to undercut the competition and establish an absolute advantage in the market, even if that implies product prices that are below costs. When businesses implement a predatory pricing strategy, they lower product prices to the bare minimum, to the extent that competitors get forced to leave the market. Is it the most commonly implemented? Is it the most ethical one? Let’s dive into the basics.
Predatory pricing is just another pricing strategy among many. Minimum Advertised Price (MAP monitoring).
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