They could be trying to buy a market share, and unless they have very deep pockets, their price cutting tactics will not last very long. Do they even have a pricing strategy?
It could be that they have a significant cost advantage over you or that your cost structures are bulging at the seams. All is not lost as Competitive Intelligence can help you understand what’s going on so you can decide what you are going to do about it.
Find out what their headcount, distribution, materials and other overheads applicable to your industry. Understand their business strategy and production process. Assess how much money do they have to play with, do they have any debt and are they able to manage it?
Who are their suppliers and are they getting a better deal than you? Are they sharing costs with other parts of their business etc? and be honest, what are they doing better than you?