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Chapter 18. Learning Curves > COMPETITIVE WEAPON

18.14. COMPETITIVE WEAPON

Learning curves are a strong competitive weapon, especially in developing a pricing strategy. The actual pricing strategy depends on the product life-cycle stage, the firm's market position, the competitor's available resources and market position, the time horizon, and the firm's financial position. To illustrate corporate philosophy toward pricing, companies such as Texas Instruments (TI) and Digital Equipment (DEC) have used "experience curve pricing" to achieve an early market share and a subsequent strong competitive position, while companies such as Hewlett-Packard (HP) have used completely different approaches. The focal point of TI's and DEC's strategy has been to price a new product in relation to the manufacturing costs that they expect to achieve when the product is mature. In contrast, HP, instead of competing on price, concentrates on developing products so advanced that customers are willing to pay a premium for them. Dr. David Packard drives the point home by saying,

The main determinant of our growth is the effectiveness of our new product programs.... Anyone can build market share, and if you set your price low enough, you can get the whole damn market. But I will tell you it won't get you anywhere around here.[]

[] "Hewlett-Packard: When Slower Growth Is Smarter Management," Business Week, June 9, 1975, pp. 50-58.


  

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