Category Conditions
The category factors discussed in Chapter 4 also give product managers some ideas about the kind of pricing environment there is in the product category.
Threat of new Entrants
The likelihood of new entrants into a category has an important effect on price. If the likelihood is low (barriers to entry are high), higher price levels can be sustained. If new entrants are possible either from within the industry or from outside, lower price help to protect the market possible from potential erosion and make the profit potential of the market look worse for new product entries.
Power of Buyers/Suppliers
High buyer power obviously tends to depress prices, as it puts more pressure on the product to deliver a good value/price ratio. If suppliers have power, they will often charge higher prices for goods or services supplied, whether raw materials, labor, or anything else. High supplier power thus raises the floor beneath which prices cannot be set.
Rivalry
This concept is also relatively straightforward: High industry rivalry tends to be manifested in strong price competition. One industry factor that should be examined in this context is the level of exit barriers, that is, how difficult it is to withdraw a product from the market. Sometimes the exit barriers, that is, how difficult it is to withdraw a product from the market. Substantial investment in plant and equipment is one example of an exit barrier . Sometimes the exit barrier, is emotional, such as when the product has a long history in the competition is likely to be fierce.