MARKETPROTECTIONSTRATEGIES.docVIP

MARKET PROTECTION STRATEGIES Silvia SUMEDREA, Adrian TRIFAN Transilvania University of Bra?ov, Romania Abstract: The extensively trend of market globalization has determined the companies to search effective market strategies to protect their market share. We analyze and compare some of these strategies and will expose the economic reasons for which some of them are allowable and some are explicitly prohibited both by Romanian and European law. Keywords: strategy, market protection, limits price, predatory price, discriminatory price, entrance barrier. 1. INTRODUCTION For a long period of time, the development of efficient market protection strategies has been considered one of the most effective strategies for company’s profit protection. Key elements for such strategies are either the selling price or a entry barrier in the domain. According to M. Glais (1992) if the central element taken into account is the price, then the price used is one of the following: limit-price, fixed by the company with dominant market share; predatory price, taken up by a company who hopes to ruin its competitors; discriminatory price, used by companies that can sell the same product at different prices to their customers The paper presents the economic reasons that explain why some price-based strategies are explicitly prohibited both by Romanian and European law. 2. MARKET PROTECTION STRATEGIES BASED ON PRICES A. Limit price and production overcapacity The limit price is applied by that company which can fix the level of the selling price for it’s product to such low level that becomes unprofitable for all its competitors in the market. Logically, the limit price is fixed below those who allow profit maximization and depends on two factors: the production cost structure and the indivisibility of the production process. Such strategy can be adopted in domains where important fixed assets investment exists, because those assets are generating high production costs, and consequentl