Potential Retail Trade and Competitor Reactions
There are various potential retail trade and competitor reactions that emerge as a result of interdependent of this type of trade and cannot operate independently of one another. Therefore, a retailer running in a business with entrant experiences potential reactions of their nearby opponents during decision making for their businesses. These reactions are;
- Decreasing product prices
This is whereby a trader reduces his/her product prices in order to compete with the fellow traders in the market. For instance, in the case of the Cambridge Sciences Pharmaceuticals, the retailer desires to increase its market share by decreasing the price of the medicines. This trader considers the possibility that nearby competitors can decrease their cost in retaliation.
- Launching new product or service
Some retailer traders react by implementing new products or services in order to be different from their competitors. When one competitor differs from the other in terms of products and services, chances are that he/she will create uniqueness in the eyes of customers. In this case, when retailers have differing resources, assets, capabilities as well as market positions, they are likely to attract more customers.
A good example is depicted in the snack food retail business, for instance, the two leading retailers, Burger King and McDonald’s, undergo similar market trends. However, they have reacted in obviously different approaches to the obesity reaction. For the Burger King, it has launched high-calorie, high-fat sandwiches that are reinforced by in-your-face, and is politically wrong advertisement. For the McDonald’s, it has rolled out food varieties, it regards as healthy. As a leading business, the McDonald becomes the steering for the government and consumer reaction to obesity. Once the other retailers, such as Burger King realizes this, it gets a chance to cherry-pick share in the less health conscious fast food segment. In this case, Burger King responds asymmetrically. In some cases, the objectives of business decision makers never align fully with other corporate objectives and companies normally react in ways which seem to be conflicting with their declared strategic purposes or having unbiased judgments of outsiders regarding the right path for them to follow.
Potential channel conflict issues
There are potential channel of conflict issues that result from competitor reactions. These can be;
- Unjust competition
This involves one retailer distributing misleading and false information, which can harm the company’s interests of another business. In this case, misleading and false information to customers, including dissemination of information that lack a reasonable basis related to properties, price, suitability of uses as well as the quality of goods, fake use other brand names, product labelling or farm name and packaging.
- Predatory pricing
This is whereby a retailer sets its product prices at the level, which signifies the sacrifice of returns in the short run to abolish competition and obtain higher returns in the long run once a competitor or more competitors have been chased away.
- Products and services price limits
This means that some retailers set low prices and high outputs so that other retailer competitors cannot make any return at that price. This is normally achieved by trading at prices just lower than the average sum costs of a potential competitor. This signifies to the potential competitors that it is impossible to make profits. In addition, some retailers can be having a higher level of knowledge regarding the product pricing, market, production cost as well as its customers, which eventually can deter competitors to prosper in the market and result in conflicting issues.