Which of the following is a possible trap of a price-cutting strategy?
A) Low prices usually achieve increases in both market share and market loyalty when customers switch.
B) The company might need additional business because it has excess plant capacity.
C) The company can initiate price cuts to dominate the market through lower costs.
D) Consumers might not demand price concessions in the future.
E) Competitors that match low prices might have longer staying power because of deep cash reserves.

Question

Quizplus · Accepted Answer

Competitors that have deeper cash reserves might be able to sustain lower prices for a longer period of time, making it difficult for the company to compete in the long run. This can lead to a price war and erode profitability, which is a possible trap of a price-cutting strategy. The other options are not traps, but rather potential benefits or considerations of a price-cutting strategy.

Which of the Following Is a Possible Trap of a Price-Cutting