Essay Example on Competition: Strategies for Regaining Market Share

The competitive process enhances innovation and invention and may cause a deterioration of the market share for the existing companies, which may even lead to bankruptcy for some companies. Therefore, companies can explore different strategies with the motive of regaining its market shares. For instance, a company can employ the strategy of cutting prices of its product to help in fixing the problem in the short-run, especially when the market share has been lost to the competitors (Esty & Fisher, 2019). Through price-cutting, a company will be able to rally a significant number of customers away from the competitors, and with the bottom line to increase its market share.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

As the strategy leads to higher market share, it is also costly to the company including operating of its business at lower margins per unit share; therefore the strategy is suitable to large companies such as Gillette that have the opportunity to enjoy economies of scale, which allow lower marginal cost operation compared to the competitors, and in some cases, the company can operate at a loss because it has to recapture adequate market share to surpass its competitors (Esty & Fisher, 2019). Notably, every company's long-term and short-term objective is to record higher sales and being in the position of enticing its customers to prefer its products again, and that is implemented through cutting prices, which will benefit the company in the short-run, but in the long-run competitors can as well use the same strategy which will only benefit customers but it is a loss to the companies in the same industry.

After many years of market share losses, Gillette executed a strategy to cut prices for its products such as razors and blades, with approximately 20% price reduction and to focus on selling cheaper products to regain its market share (Esty & Fisher, 2019). The strategy of designing and producing sophisticated and expensive razors and then selling them at low prices to the customers has significantly increased sales and enable the company to regain its market share; hence, establishing a price gap that upstarts can explore. Due to its economies of scale, the company can benefit from a discount of up to 12 percent, and the price cut includes flagship offerings such as the Gillette Fusion (Esty & Fisher, 2019). The price cut has been followed by subsequent market campaigns and websites with the focus on winning back their customers; thereby, claiming more than 200000 customers are already backing for their products (Esty & Fisher, 2019). The Gillette crisis is a reflection of the challenge encountered by the traditional CPG giants, and the razor price war has caused a decrease in the US market.

Reference

Esty, B., & Fisher, D. (2019). Gillette: Cutting Prices to Regain Share. HBS Case, (720-378). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3481513