The article entitled ‘Mitsubishi cuts prices’ was written by Peter Roberts, and was found in The Australian Financial Review website, dated April 28, 2006 (which can be accessed at www.afr.com).
The marketing concept used in the article is that of the pricing-cutting employed by Mitsubishi in its attempt to increase sales for their new products launch.
Price-cutting is rampant in the car manufacturing industry where the only established price in the channel is the one at which the manufacturer sells. Specifically, Yadin stated that price-cutting ‘is a marketing technique involving temporary reductions in the price of a product or service, aimed at increasing market share’ (2000:300) The concept of price-cutting as a strategy means to lower prices as compared to the original price set mainly in order to increase sales (Wilmshurst and Mackay 2002:279). Alternatively, price-cutting may be used as a deliberate pull strategy in order to achieve lower costs by expanding sales.
A company’s attitude to price-cutting, according to Baker (2000:63), should be influenced by its relative position in a particular market. In Roberts’ article, this marketing concept is depicted when the Australian car maker made massive price cuts across its range, as a direct response to its blunder in the company’s launch pricing strategy, particularly in the locally made 380 model. The introductory paragraph immediately pointed this out, and in the later part of the article showed how the firm was able to do this, which is by shaving dealer margins and negotiating better supply prices from Mitsubishi in Japan.
In relation to the article and the way the price-cutting concept has been discussed in the lectures and in the text book, the two are comparatively alike because of the latter’s discussion of using the price-cutting strategy in already established companies, which is reflective of Mitsubishi’s position in the automobile manufacturing industry. In the same way, Mitsubishi used the price cutting concept in order to respond to excess capacity, falling market share, and dominate market through lower costs, just what the discussions in the initiating price changes similarly pointed out.
The lecture notes also implied that customers are responsive to price cutting as long as the perception of brand and product value remains unchanged, which is what the article points out as the expectations of Mitsubishi regarding its increase in sales. In the automobile industry where the market dictates the selling price, this price cut is imperative of Mitsubishi.
Baker, M 2000, Marketing Theory: A Student Text, Thomson Learning, London.
Wilmshurst, J & Mackay, A 2002, The Fundamentals and Practice of Marketing, Butterworth-Heinemann, Jordan Hill, Oxford.
Yadin, D. (2002). The International Dictionary of Marketing, Kogan Page Limited, London.