How do companies make money by selling products at a low price and competing with other companies?

Question

Like for example if it is like a tech company like maybe HP, DELL, ASUS, ACER and they make laptops cheaper then how do they make money because they lower the price of their computers

In: 6

Answer 1

Let’s say 4 competitors all have 25% of market, selling laptops for $500 that cost them $300 to make. Now one cuts price to $460 so they’re making $160 instead of $200 per unit. But if they can boost their share to 32% of sales instead of the 25% they had, they’ll make more money overall.

Or even better, they’ve developed some sort of manufacturing advantage (efficient custom made to order rather than prebuilt configs, for example) that allow them to build each computer for only $270 instead of $300 so they’re not even losing per-unit margins.