3. The Art of Price Wars

“To fight and conquer all your battles is not supreme excellence; supreme excellence consists in breaking the enemy’s resistance without fighting.”Sun Tzu, The Art of War

American marketing experts usually see price wars as a strategy of last resort—a choice for the truly desperate or the deeply crazed.1 The price war is regarded as a kind of nuclear option, a quick way to not only destroy the competition, but also blow yourself up—and maybe even ruin the profitability of your industry forever. From the PeopleExpress airfare wars of the 1980s to various price-slashing schemes by mindless dotcoms in the late 1990s, plenty of evidence seems to support the conventional wisdom. As an old Fortune magazine article put it, ...

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