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Critical Analysis

Predatory pricing is one such strategy that is being used by business organizations across the globe. Predatory pricing involves a strategy in which a firm sells its products at lowest possible rates below the offerings of all the competitors so as to grab the market share of the competitors on the basis of competitive pricing (Denger, American Bar Association & Section of Antitrust Law, 1991, p.3-3). This use of this strategy by business organizations to gain market share and take care of the competition in the market has been questioned by numerous authors and various academic and professional circles. The aspect has been so serious that governments across the world have set up competition policies and also appointed watchdogs to supervise and monitor the competitive strategies so as to maintain a healthy competition in the consumer market. Individuals in favour of predatory pricing state that pricing is an integral part of a company’s unique selling proposition and hence freedom must be given to ensure fair balance in the market. It is also in coherence with the free market policy that seeks equal opportunity for all and survival of the fittest. Proponents’ however have slammed this move by stating that predatory pricing ultimately does not help customers in the long run but leads to closure of firms that generates unemployment that can have drastic effects on the total economic scenario of a market. The present study would undertake a critical analysis of the aspect of predatory pricing so as to analyse the actual implications and the pros and cons of this increasingly popular business strategy adopted by corporate across the world. Focus The aspect of predatory pricing has been a subject of debate among academic and professional circles. An article by Gundlach & Guiltnan (1998) states that predatory pricing is an unethical aspect that does not being any benefits in the market. They have argued that a marketer indulging in predatory pricing strategy tends to reduce the price of the product or service in an attempt to maximise its market share by eating away a chunk of the market share of its competitors. Predators however on the achievement of their objectives of either dislodging their competitors or after gaining a significant market share tend to again increase the prices. Ultimately the customers bargaining power gets considerably reduced in the process. The dislodgement of competitors from the market gives a monopolistic power to the predator that is against the rules of competition and ultimately leads to unhealthy market situation. The authors have stated that the predatory pricing as a competitive strategy has been quite unsuccessful in the past and courts have also pronounced verdicts in famous cases like Brooke thus affirming the faith that predatory pricing is perhaps a negative strategy that has no ultimate benefit to any section of the society or the business world (Gundlach & Guiltnan, 1998, p.884). The views of Gundlach & Guiltnan (1998), however have been refuted by authors like Bolton, Brodley & Riordan (No date) as they have stated that predatory pricing is an integral part of a business strategy of an organization and competing on the basis of cost is normally an outcome of a business’s efficiency to provide products at low prices due to certain organizational efficiency. The authors have slammed the views of critiques advocating the court legislations on cases like Brooke where they have pronounced verdic ...Show more

Summary

Critical Analysis Table of Contents Critical Analysis 1 Table of Contents 2 Introduction 3 Focus 4 Analysis 5 Conclusion 8 References 9 Bibliography 9 Introduction The era of globalisation and competition has led to a situation of intense market competition…
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