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Pricing is one of the Ps of marketing. A company fixes the price of its products with the goal of increasing revenue in the long run. The pricing objective of increasing market share and ultimately achieving market share leadership can be adopted in a industry where economies of scale exist.
For example, a company manufacturing cars has to make substantial investments in fixed assets to be able to manufacture cars. To recover the investments made, it is essential for the company to increase sales so that the fixed cost per car is reduced. A company in this case could set the price of its cars at a lower level that increases demand and allows its market share to increase. It is essential here that the company is able to sell a large number of cars and to do this it would have to sell at a reduced price in order to attract more buyers.
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