When you are battling with the business competitors regarding the price wars, you should analyze your competitors based on their supporting companies or parties. Yes, it is important to monitor other players in the industry whose self-interest or profiles may affect outcomes. Suppliers, distributors, providers of complementary goods and services, customers, government agencies, and so on contribute significantly to the consumption experience, including product quality, the sales pitch, and after-sales service. They often wield considerable influence on the outcome of a price war—directly or indirectly. Sometimes these contributors may provide the impetus for, or may indirectly start, a price war.

Motorola discovered as much when it introduced low-priced cellular phones in China and Brazil. Soon Motorola observed that the street price for its phones had dropped substantially in the United States. Distributors were diverting products bound for China and Brazil to the profitable U.S. and European markets; sometimes the products never even left the dock. Motorola’s distributors had created a “gray market” because Motorola had given them a reason to believe that prices in the United States were too high.

Sometimes contributors can help reduce price competition by enhancing the product’s value, as Intel does for computer manufacturers; assisting with marketing, as airline frequent-flyer programs do for credit-card companies; and limiting the exposure to competing products, as MITI has done for Japanese companies facing international competition at home. Smart managers must carefully consider other players and their interests (profit margins for suppliers and distributors, commissions for sales representatives, and so on) before starting a price war or joining one.

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