As the Holland Sweetener Company, how do you expect NutraSweet to respond to your entering the European and Canadian markets? Is it more likely to be an accommodating response (normal competition) or aggressive response (price war)? In considering your response, you should list both the reasons for NutraSweet to adopt an accommodating response (normal competition) AND an aggressive response (price war).
The Holland Sweetener Company versus NutraSweet
The market for the sweetener is not a highly competitive market. The reason for this is that apart from NutraSweet and HSC, there are no other major players in the current market scenario. Searle which is the parent company of NutraSweet had gone on to develop patents for aspartame as a food and beverage additive. The company had got its patents extended for the US markets but still the patents for the European and the Canadian markets were going to get expired. So it was a huge opportunity for HSC to make an entry into this market where NutraSweet had developed a monopoly of its own. The product that was produced by NutraSweet had its usage in many food and beverage products like the food items and the cold drinks which was a highly competitive market in itself. This market was dominated by two players majorly – Coca Cola and Pepsi, who were giving tough competition to each other. However still both of these companies were using NutraSweet in their diet beverage forms, as they did not have another option. So the company Searle had become a very profitable entity with a tremendous market share and almost a monopoly in the Canadian and the European markets.
So now when the markets were opening up, the company can be expected to not let go of its market share to the competitors in an easy way. It would fight tough with its competitors in every aspect. The reason would be that the company already has its manufacturing and distribution channels in place, and also the customers who have been using the product have gotten used to their quality. So it would not be easy for any competitor to come and disperse the brand from the market so easily. The company doesn’t have any need to engage itself in a price war with its competitors in any form and can go ahead with a normal competition method. The company can go ahead and directly attack its competitors on the quality front itself. It can easily convey a message to its audience and the end users that it has got a better product in place, and the trust factor associated with their brand would be much more than that with HSC in the first place.Hence the target segment would not be ready to accept HSC as the major player in the industry in the beginning itself. So the accommodating strategy would work fine for Nutrasweet in the initial phase of the HSC launch. Also HSC doesn’t have the backing of being a local company in the Canadian market; this is something that can work in favor of Nutrasweet in the initial stages as well. Initially also if Nutrasweet engages in a price war with HSC, it would be providing unwarranted credibility to the HSC product in the market. As the consumers would feel that Nutrasweet fears its competition and hence is trying to get into a price war with HSC. Also the consumers might end up feeling that the rival brand is good enough to compete with an old and a trusted brand like Nutrasweet and might want to give it a shot as a result of this. This would lead to a unnecessary situation on the front of the Nutrasweet, where in the company itself would end up promoting the rival brand like HSC. This is absolutely not what Nutrasweet would want to do. The company can go for a pricing war and cut rates and not allow any of its competitors to settle in the market from the beginning itself. This would prove to be the best and the most fruitful strategy for the company. If the company ends up making losses in the process, then so be it. But however, if the company can eliminate one or two or all of its competitors from the market in this process, it would turn out to be very beneficial to the company in the long run. So the company would want to implement this strategy of going head on and competing with the competition before they are able to settle in the market and influence the customers.