Recommendation for Pricing Strategy, Product Differentiation and Barriers to Entry During

680 Words Jul 9th, 2010 3 Pages
ECO-561 Week- 5-TEAM PAPER

Recommendation for pricing strategy, product differentiation and barriers to entry during Trough:

U. S. economy entered its 10th recession in late 2007 since 1950 and still recovering from recession in 2010. The rise and decline in the level of activity are called business cycles. Business cycles occur because disturbances to the economy of one sort or another push the economy above or below full employment. Four phases of business cycles are Peak, recession, trough and expansion. The duration and intensity of such business cycle may vary from one business cycle to another.

Different phase of business cycle calls for different set of business decisions to adjust or overcome the business situation.

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Non-price competition is often used by firms that wish to differentiate between virtually identical products (batteries, food products, cigarettes, etc). Larson Inc. can use following measures as non price barriers.

Increase advertising outlay- Currently there is great deal of competition in battery market in America. Investing a substantial amount in ad campaign would help Larson, Inc. to build strong brand name and trademark. Heavy investment in ad by existing firm will make ad more difficult to afford for new competitor and work as a barrier.1 Advertising can create perceived difference in consumers’ minds about its brand from other brands and see its product slightly different from existing or potential competitors. Since brand is associated with products Competitors’ will find it hard to substitute established firm’s brand.

Control of resource- Increasing access or control over essential resources such as raw materials, technical know-how, supply, and distribution network can work as deterrent to new firms.

Patents and License- Increasing investments in R & D can lead to break- through in product or process improvement. Once patents or exclusive licenses are obtained, they will work as barriers to new firm to enter an industry. Large companies like GE, Intel, Pfizer and Microsoft have been able to prevent new competitor from entering their industry through their patents, copyrights.

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