36. Woolworths and Coles often compete on price. For example Coles began a 'price war' selling milk at $1 per litre, an offer that Woolworths quickly matched. The retailers are aware that the cost of their electricity and water, for example, are not negotiable like the costs of many of the products that they buy such as milk and bread. Coles and Woolworths managers understand that:

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The question describes Woolworths and Coles engaging in price competition, noting that some costs (like electricity and water) are non-negotiable, while product costs (milk, bread) can be matched or adjusted. It then asks what managers understand in this context.

Option a: 'price competition is undesirable for a seller unless it has a cost advantage over competitors.' This statement is too absolute. Price competition can be desirable for a seller that has cost advantages or efficient operations, and even without a broad cost advantage, firms may engage in price competition to gain market share or deter entrants. In other words, it’s not inherently undesirable; the outcome depends on relative costs and strategic goals.

Option b: 'an organisation choosing to compete on aspects other than price has greater power to decide on the profit margin per unit sold for its products.' This aligns with typical strategic reasoning: differentiating on non-price factors (quality, service, branding) reduces price elasticity and can give a firm more control over margins, since customers may pay a premium for non-price value.

Option c: 'some government owned monopolies price products below cost.' While there are instances of government involvement in pricing, this statement is a generalization that doesn’t directly reflect how private retailers like Coles and Woolworths think about cost pass-through or non-negotiable input costs in a competitive market. It introduces a separate concept not necessary to the Woolworths/Coles price competition scenario described.

Option d: 'all of the options listed.' To choose this, every previous option would need to be accurate. Since option a is not universally correct as stated, option d would be incorrect.

Option e: 'both a and b.' This option would be correct if both a and b were accurate descriptions. Given the nuanced view of price competition, while b is solid, a’s blanket claim is overly strong. Therefore, selecting 'both a and b' would rely on treating a as correct, which undermines precision.

In summary, the statement in option b captures the core strategic idea that competing on non-price attributes can grant greater control over margins, while option a’s claim is too categorical and not universally valid in real-world pricing strategy. Options c and d extend beyond the scope or conflict with the given context, making them less appropriate interpretations of the managers’ understanding in this scenario.

24109 Marketing and Customer Value - Spring 2025 MCV Quiz Spring 2025

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