In the following case, assume that the company is a manufacturerof sports watches and other wearable electronic sports technology.A new entrant from China has just entered the market. The newcompetitor offers low prices, good quality, and good service. Youdetermine that the brand could start to become very wellestablished internationally with one year. Although the breadth ofthe new entrant’s product line is small (four products at fourdifferent price points), it will be possible for it to offer a fullline of products (about 8, ranging from low-end to luxury products)within two to three years. Clearly, the new entrant has upset thebalance of your firm and those of your competitors. (In thisexample, you could understand the product as anything from perfumeto automobiles, from jewelry to athletic shoes.)

The new entrant offers prices that are about 20% lower than themarket currently sees. You believe that its operating expenses arelower and that it wishes to recover a lower profit than iscustomary in this industry. The company’s strategy is to “buy in”to the market and then recover over time through volume. It is asimilar strategy that your firm used 10 years ago to enter intothis market.

So, the question is: how do you respond strategically? Whatareas of the firm must be cut? How do you prioritize the elementsof the company and retain current operations in one area and cut inothers? To say, we need to reduce our costs by X% across the boardis not an answer, because it means nothing without details behindit.

In considering your response to this problem, identify anyproduct that you are familiar with and try to analyze what youcould do without: do you need after-sales service? Do you put ahigh value on customer relations? Is quality always important?

Please note, answer may vary. All products have different mixesof activity and are perceived differently by consumers.