Deterrent Strategy Based upon your responses to the Strategic Action Survey, it was determined that your organization has a significant market share advantage over the competitor. This market share advantage should allow you to implement our recommended strategy, deterrent actions. Market power can be a valuable asset to the firm as it generally translates into strong profitability for the companies in this position. Firms who enjoy market power in a specific industry have a few notable advantages over their competitors. First of all, customers who have an existing relationship with a company and are generally satisfied with the product or service are likely to remain loyal.
Exceptions do exist.
Customers who are indifferent to brand name and look only for the low cost provider are more likely to move between products. However, companies with strong market positions can absorb price cuts for a longer period than their unfavorably positioned rivals. Such pricing would be considered a deterrent action and will be discussed in further detail below. Companies who have an established relationship with customers also possess a distinct advantage if there are switching costs involved. If there is a cost involved in moving from one provider to another, the customer will generally stay with the original company unless the future savings of moving outweigh these switching costs.