Final answer:
Amazon should modify its pricing strategies to maintain profitability and competitive advantage. It should continue with cost-based pricing and consider implementing dynamic pricing based on demand and market conditions.
Step-by-step explanation:
Amazon should consider modifying its pricing strategies based on its current success and competition. While it has been able to undercut its competitors' prices, it may need to reassess its pricing structure to ensure profitability without compromising its competitive advantage.
One pricing strategy Amazon should continue is its cost-based pricing. This strategy involves setting prices based on the production costs, such as the cost of inventory, storage, and distribution. Amazon's large-scale operations and efficient warehouses allow it to leverage economies of scale and keep costs low, giving it a competitive edge.
Additionally, Amazon should consider implementing dynamic pricing, which involves adjusting prices based on demand and market conditions. This strategy allows Amazon to maximize revenue by charging higher prices during peak demand and offering discounts during slower periods. By analyzing customer behavior and market trends, Amazon can determine optimal price points to gain a larger market share.