A pricing strategy must be conceived in relation to overall business objectives and marketing strategy. The success of any business depends upon a blend of long run profit, growth and survival objectives. Price, because of its influence on unit sales volume and profit margins, affects long run profit objectives. And maintaining profitability through sound pricing practices is necessary to ensure the firm is survival over time .The pricing strategy adopted by Tata Steel is the Market Penetration Strategy This strategy is based on the assumption that demands for the product is highly elastic. By setting relatively low price Tata Steel has managed to obtain large market share. The advantage of this kind of pricing is that it discourages competition since there is less opportunity to reap unusual benefits on investment. Since Tata Steel is in control of large iron ore deposits it has increased its capacity manifold and so enjoys economies of scale. It has thus maintained prices of its products lower than of its competitors and has increased the scale and efficiency of operations, since it has lower production costs.
Existing and potential competition inevitably affects pricing strategy by setting an upper limit. The amount of latitude a firm has in its pricing decision largely depends on the degree to which it can differentiate its products in the minds of buyers. Pricing strategy is also influenced by the anticipated reactions of competitors to...