This means that if a firms product quality is superior to all its competitors
and its services (including delivery, after-sales etc.) is equally good, it can
price its product higher than the competitors.
However if the firms product and services are similar to the competitors
then its price should be similar to that of major competitors prices.(if it
decides to price its product higher it would lose its sales)
Competitive Bidding
Significant amounts are purchased through Competitive Bidding in IMs
This system is used as a means of exploring and determining price
levels when purchasing non standardized, complex products on which
manufacturing methods may vary.
Majorly those items that do not have an established market price.
Competitive Bidding
can be closed/open
Formal invitation to potential suppliers, submitted in sealed bids
At a decided time, all bids are opened and reviewed.
Open Bids are more informal where one may write or say orally.
Costly, time consuming
Sometimes contracts are given to the lowest responsible bidder
This means that award is based on the suppliers promise and ability to
deliver, past experience with the bidder and his technical, managerial
and financial capabilities.
Questions
if there is a price cut by a competitor, what strategies should be used
to manage these price cuts?