One particular battle you should consider avoiding is a price war. Price wars leave the market drained of profits and customers looking not for differentiation but for the lowest price. For example, between 1989 and 1993 the airline industry had numerous price wars, leading to 120 airline bankruptcies, $12 billion in losses and 100,000 employees laid-off. Another example; K-Mart took on Wal-Mart in a price war in the early 1990's, attacking Wal-Mart's strength - it's low-cost business model. K-Mart's sales per square foot dropped, it's market share fell from 35% to 23% and it's stock price fell. Eventually, K-Mart's CEO was forced to resign. As Sun Tzu said, "Now an army may be likened to water, for just as flowing water avoids heights and hastens to the lowlands, so an army avoids strengths and attacks weakness."

What should you do if you are forced by a competitor into a price war? A recent article in Harvard Business Review by Ashkay Rao, Mark Bergen, and Scott Davis provides some excellent ideas. For example, one small company that supplied commodities to its customers found that its larger competitor had lowered its priced below the smaller company's costs. Had the small company matched its larger competitor on price it would have suffered huge losses. Instead, the CEO of the small company took two smart actions; first, the CEO called his customers to tell them that the larger company was offering even better deals in other markets. He also told them that, should he be forced out of the market, they would be at the mercy of the larger company. With a monopoly position, the CEO warned, the customers would find their short-terms price cuts transform into long-term price increases. The small company's customers choose to stay with him.

It is clear that one should avoid a price war if at all possible. Fighting for fighting's sake makes no sense. As Sun Tzu states, "War is a grave matter; one is apprehensive lest men embark upon it without due reflection."