Question

A competitor of your pharmaceutical company is about to launch a product that will challenge one of your very profitable medications. At a marketing strategy meeting, one colleague recommends a preemptive price reduction to maintain market share Discuss the pros and cons of this suggestion.

Answer 1

Preemptive price reduction Pros :

• Increases the sales
• Attracts more people to buy the product
• Increased competitive strength to the industry stimulates more exports
• Increases productivity
• Cost reduction lays emphasis on a continuous search for improvement which will improve the image of the firm for long-term benefits.
• Reducing cost create more demand for the products, economies of large scale production, more employment through industrialisation and all-round improvement in the standard of living.

Preemptive price reduction cons of this suggestion:

• Compromises quality of the product
• It causes conflict between product objectives and organizational objectives
• It reduces profit
• Increases material,labour,over head cost