How do ASX investors protect themselves against inflation? A common response is to buy companies with pricing power – companies that can raise their prices to offset higher operating costs. This sounds simple enough, yet exercising pricing power in practice is often much harder.

Companies need to balance their long- and short-term considerations: raise prices too much and customers may switch to alternatives; keep a lid on prices, at the expense of profits or cash, and risk diminishing your operating base while the cost of future capital expenditure may rise substantially. This risk is heightened if competitors grow their operating base and take your customers.