W3: Hill & Hult (2022). Chapter 18 Flashcards
Price discrimination
Exists whenever consumers in different countries are charged different prices for the same product or for slightly different variations of the product. It helps to maximise profits
Price elasticity of demand
A measure of the responsiveness of demand for a product to a change in price. It is elastic when a small change in price results in a large change in demand. Inelastic if it results in only a small change in demand. It tends to be greater (more elastic) in countries with low-income levels, as there is an awareness of where to spend money on. Generally, the more competitors, the greater the consumer bargaining power, which causes high elasticity of demand
Strategic pricing
Has three aspects; predatory pricing, multipoint pricing, and experience curve pricing
Predatory pricing
The use of price as a competitive weapon to drive weaker competitors out of a national market. Once competitors leave the market, they can drive up the price
Multipoint pricing
Refers to the fact that a firm’s pricing strategy in one market may have an impact on its rivals’ pricing strategy in another market. Another aspect arises when two or more global companies focus on particular national markets and launch vigorous price wars in an attempt to gain market dominance
Experience curve pricing
Occurs when firm prices are low worldwide in an attempt to build global sales volume as rapidly as possible, even if this means taking losses initially. Such a firm believes that in the future, when it has moved down the experience curve, it will be making substantial profits and have a cost advantage over its less aggressive competitors
Dumping
Occurs whenever a firm sells a product for a price that is less than the cost of producing it. However, there is ambiguity as to what is defined as ‘dumping.’ The vague terminology used in most antidumping actions suggests that a firm’s ability to engage in price discrimination also may be challenged under antidumping legislation. Most developed nations have regulations designed to promote competition and restrict monopoly practices
Technological innovation
The core of competition, which dramatically decreases product life cycles. It is both creative and destructive
Reason for failure
Includes the development of technology for which demand is limited, failure to accurately commercialise promising technology, and the inability to manufacture a new product cost-effectively
Cross-functional product development teams
One way to achieve cross-functional integration
Leading-edge technology
Not enough on its own; the firm must also apply that technology to develop products that satisfy customer needs in a cost-effective manner. To do that, the firm needs to build close connections among R&D, marketing, and manufacturing
