Strategies for Firms

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  • Price and Non - Price Strategies
    • Price strategies
      • Predatory pricing
        • Pricing below costs to drive out firms. The firms make a loss but in the long run profits can be made impossible with competition
          • However, illegal
      • Limit pricing
        • Pricing at a level low enough to discourage entrance of new firms. This exploits economies of scale.
          • However only drives out existing firms
      • Sales maximisation
        • This occurs at AC=AR. This helps firms to gain customer loyalty. It helps to gain market share.
          • However reduced profit margins
      • Revenue maximisation
        • This too gains customer loyalty
      • Price discrimination
      • Cost-plus pricing
      • Discount pricing
    • Non price strategies
      • Advertising
        • Shifts demand right
      • Investment in branding
        • Shifts demand right
      • Packaging
        • Attracts new customers and impulse buys
      • Customer care
        • Improves consumer welfare and loyalty
      • Product development
        • Research and development improves consumer welfare and loyalty
      • Quality innovation
        • Attracts from a non homogeneous good
      • Mergers
        • The joining of two firms to eliminate competition
      • Collusion
        • Firms join together and cooperate to detract competition
    • These strategies can be used for
      • Increased profit
      • Increased market share
      • Increased power and sales


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