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Running Head: Building and Sustaining a Competitive Advantage1Building and Sustaining a Competitive AdvantageNameInstitutionDate
Building and Sustaining a Competitive Advantage2Building and Sustaining a Competitive AdvantageWhat is the key to profitable pricing in the context of a competitive environment?In the context of a competitive environment, it is important that the business sets the rightprice which can enable it to realize the right volumes of sales and profitability levels. The challenge the business faces in trying to have a good price is the reaction of the competition. To begin with, in a competitive environment, the elasticity of demand tends to be elastic (Nagle, Hogan & Zale, 2011). Therefore, a price differential is likely to displace a huge portion of a firm’s sales either for or against the competition. Thus, if the business prices are higher than the competition, then it runs a risk of losing sales. On the other hand, a lower price guarantees more sales, especially if the competition is unable to respond.