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Ocean Adventures

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Submitted By samma
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1. The underlying causes for the outbreak of the price war are the close proximity of two competitive businesses and the lack of pricing cooperation needed to benefit from such a situation. Having two competitive businesses in a “fish bowl” atmosphere like this requires both businesses to agree on a price and stick to it. They also need to find ways to differentiate themselves from one another. This could decrease the “head to head” atmosphere and help both businesses carve out their own niche. In a business that relies on sales to tourists, customer loyalty is not an issue. Therefore, a price war is not going to be productive for either business. Settle on a price and let each capitalize on there own segment of the market by differentiating from one another.
The problem with a price war is that when one business lowers its price it won’t be long before the other business will do the same. It just goes back and forth until one or the other is out of business. The only one that wins is the customers taking advantage of the good deals. However, that advantage will be short lived once one of the businesses exits the market and the other can then charge what it wants. This is referred to as predatory pricing. According to Miller, Cross (2007) “predatory pricing is when one firm drives the other out of business by lowering its prices. Once control of the market is gained back, the firm will attempt to recapture its losses and go on to earn higher profits by driving prices up far above their competitive levels”. Therefore, a price war is not good for the customer or the market.
2. Some tactics that can be adopted by the players to end the price war and to keep it from starting again are location and product differentiation. One of the keys in operating a successful business is location. In this situation you are dealing with a small section of a

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