Price wars have racked industry after industry in recent years: from personal computers to airlines, from grocery retailing to computer software, from cigarettes to frozen diet dinners, from automobile tires to disposable diapers. All too often, there are no winners—and few healthy survivors. The destruction such battles cause can be so severe and linger so long that the only reliable way to come out ahead is to avoid them altogether.

No company, however well run, is immune from price wars

The threat is real—and universal. No company, however well run, is immune. Even companies with superior overall strategies and exceptional execution can destroy themselves by not managing this make-or-break issue effectively. After all, most price wars start by accident, through some apparently trivial misreading or misjudgment of market conditions. Rare is the price war that is initiated as a deliberate competitive tactic—and rarer still the one that achieves a satisfactory outcome.

Recent price wars raise four topics that we want to explore:

• Why companies should do everything they can to avoid them;
• What has been causing their spread in recent years;
• How to stay out of a price war; and...