A new company named Far Reach Inc. entered the radio retail business, which is a fairly consolidated industry. In response, two large incumbent radio retailers, Smooth Waves and Clear Signal, lowered the price of their radios. Also, they spent more money to improve their radios and on additional marketing. By doing this, Smooth Waves and Clear Signal

Question

Quizplus · Accepted Answer

Potential new entries in an industry decrease profit potential in two major ways. Incumbent firms may lower prices to make entry appear less attractive to the potential new competitors. Incumbent firms also may spend more to satisfy their existing customers.

A New Company Named Far Reach Inc