Firms need to take care when responding to competitors action with a pricing change, as this could trigger a potential price war. Therefore, in this activity you need to identify what would be the most appropriate pricing reaction for the following generic situations actions.

Given your response in Q1, what general rules should a firm consider when determining their pricing levels? Answer to Q1 Reduce prices

Here is question 1

1. For each of the above situations, generally outline how the firm should respond. Choose from:

1. To communicate the high quality of your product against a new competitor

Reduce prices

2. The market that the firm operates in is deregulated (allowing more competitors to enter)

No change to prices

3. A new substitute product/industry emerges

Reduce prices

4. A major increase in production costs occurs

Increase prices

5. The firm is looking to benefit from economies of scale

Reduce prices

6. When you know that key competitors will always match your price changes

No change to prices

7. To increase market share significantly

Reduce prices

8. For one of the firms brands/products that has increased its brand equity

Reduce prices

9. When the firms product is experiencing high seasonal demand

No change to prices

10. When a major competitor leaves the market

No change to prices