Strawline, Inc. has purchased a new production technology and plans to reduce prices with the goal of driving smaller, low-tech competitors out of the market. According to Porter’s model, which of the following is most likely? A) Driving small competitors out of the market may attract the attention of larger, stronger competitors who can adopt the same new technology. B) Driving small competitors from the market will attract the attention of government regulators, risking anti-trust legal action. C) Smaller competitors will join together to improve their market size and strength.
A, price reduction will hurt the entire industry, even dominant players creating rivalry, drawing attention of larger players
Driving out too much competition is very risky because it attracts more competitors in the now-fragmented market. - “A”
A is correct.