Preiskämpfen

Preiskämpfen, meaning "price wars" in German, refers to a competitive situation where businesses, typically in the same industry, engage in aggressive price reductions to gain market share or drive out competitors. This strategy involves repeatedly lowering prices, often to a point where profit margins are significantly reduced, or even unsustainable.

Price wars can be triggered by various factors. A new entrant might initiate a price war to quickly establish a customer base. Alternatively, an incumbent firm might launch a price war in response to a competitor's actions, aiming to protect its market position. Sometimes, a price war can be an unintended consequence of marketing campaigns or promotional activities that escalate.

The effects of price wars can be far-reaching. For consumers, they often represent a period of lower prices and better value. However, for businesses, price wars can be detrimental. They can erode profitability, damage brand perception if products become associated with being cheap, and lead to a "race to the bottom" where quality may be compromised to maintain lower prices. In extreme cases, prolonged price wars can lead to business failures and market consolidation.

While price wars can be a short-term tactic to achieve specific goals, they are generally considered a high-risk strategy. Sustainable competitive advantage is often built on factors beyond price, such as product quality, innovation, customer service, and brand loyalty. Businesses that engage in price wars must carefully consider the potential long-term consequences before initiating or escalating such a conflict.