Why do Chinese enterprises always engage in price wars as part of their competitive strategy?

Price war is a means of market competition, but also one of its results.

When products or services lack obvious differences in the market, or consumers do not have high requirements for quality, function, etc., price becomes the main consideration for purchase.

In this case, in order to compete for market share, enterprises often reduce prices to attract consumers, resulting in a price war.

Why do Chinese companies often get into price wars?

One of the main reasons is that the vast majority of Chinese enterprises are in the middle and low end of the industrial chain, lacking independent technology and innovation capabilities, unable to provide unique, valuable and high-quality products or services, and can only rely on low prices to compete.

This kind of competition not only damages the profit margin and brand image of enterprises, but also affects the shopping experience of consumers and the healthy development of the market.

Observing the situation of some industries in China, we will find the widespread existence of price wars.

The automotive industry is one of them: since the beginning of 2023, the price war between car companies has continued unabated. Byd was the first to announce a price cut, followed by other car companies.

Experts pointed out that the competition between car companies will continue to be fierce in 2024, and the price war may continue, while the decline in battery costs will further promote the reduction of car prices.

The chip industry also faces a similar situation: China's chip industry is "big but not strong", lacks independent innovation and core technology, and mainly relies on imports or foreign cooperation.

The ornamental shrimp industry is facing the challenge of homogenization and price war: lack of variety innovation and quality control, China's ornamental shrimp market is full of low-end products, prices are falling.

The above examples all show a problem, that is, enterprises lack independent technology and innovation ability, can not provide unique, valuable, high-quality products or services, can only compete through low prices.

In order to get rid of the dilemma of price war, enterprises must strengthen independent innovation and core technology research and development, enhance the differentiation and added value of products or services, in order to win the recognition and respect of the market.