Price War?

What do we when a competitor reduces its price drastically? Will you go into a price war? We should always build our business on a speed, flexibility, cost, service level combination frontier right.  If not, one way is to try to buy from the supplier that is offering the drastically low price and resell it :)  Another approach is to look at the other costs involved even if the product or service is cheaper. Higher inventory holding cost due to longer lead time? Higher quality inspection cost? The total cost for the customer may be in your favour.