Price War Beats the WeakManufacturers should be sensible about cutting prices competitively in the household electrical appliance market, said an article in Jiefang Daily. Excerpts follow.The "price war'' in the household electrical appliance market in recent years has greatly attracted people's attention. Those manufacturers not joining the price war and many transnational manufacturers are fearing that they might lose their market shares. To comment on the phenomenon, attention should be given to the following three points. First, the practice of slashing prices is beneficial to manufacturers with high efficiency. Price is closely connected with efficiency. The higher the efficiency, the lower the cost. Manufacturers with lower costs can squeeze those with higher costs out of market by drastically cutting their prices. This will amass resources such as techniques, equipment and skilful labourers in the manufacturers of higher efficiency and enlarge their market shares, which will increase their profits in the long term. Second, it remains doubtful that industrial alliances or price cartels could protect the interests of the whole industry. This kind of alliance usually can not stand the pressure exerted by the fierce competition in the price wars. The more enterprises that join, the higher the cost of maintaining the alliance and the weaker it appears. As long as one member betrays the others, and lowers prices, others follow, and the alliance collapses. Third, "price wars'' speed up the process of adopting new technologies. Manufacturers must produce more advanced products to compete with others in a new round of price war, which eventually accelerates the development of the household electronic appliance industry. |
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