Price Wars

Attaining victory in your business can be done when you know the right things to do and the right strategies to take. If you can put pressure on your opposition’s leadership, if you can find a weakness in their personalities, their sense of pride and honor, anything that will put them off their game, you will severely cripple their ability to compete with you.

A great example of this from the real world of business is the competition that existed between retail giant Kmart and up-and- comer (at the time) Wal-Mart in the first half of the 1990s. According to Mark R. McNeilly’s Sun Tzu and the Art of Business: Six Strategic Principles for Managers, beginning in 1990, Kmart spent $3 billion dollars on 153 new discount stores and on upgrading 800 existing ones, all in an effort to take on Wal-Mart. But Kmart’s CEO decided to take it a step further: he launched an all-out price war, “lowering prices on thousands of products to be more competitive” and trying to recoup the deficit with apparel sales.

K-Mart did precisely the opposite of what they should have done when they waged a direct assault on a well-defended position. Kmart’s CEO took on Wal-Mart at their strongest point: their cost structure. Wal-Mart simply dropped prices to best Kmart, causing Kmart’s market share to fall from 35% to 23%. The company experienced “falling or negative profits, and flat stock performance”. The Kmart CEO was forced to resign.

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