Bubble-Up, Inc., is a small manufacturer of educational toys for children under age 10. It has co-existed with three other competitors in the educational toy industry for over 20 years, each of them maintaining a stable market share. There is a wide-spread rumor that Mega-Toy, Inc., the market leader in the broad children's toy market, has decided to target educational toys. Which one of these statements is most likely TRUE?

Question

Quizplus · Accepted Answer

Bubble-Up's smaller size may make it more flexible in introducing innovations than Mega-Toy. As a smaller company, Bubble-Up may be able to adapt more quickly to changes in the market and introduce new and innovative educational toys to compete with Mega-Toy's entry into the market. The other options are less likely to be true. The owners of Bubble-Up may be concerned about Mega-Toy's entry, even if there is resource dissimilarity between the firms, as Mega-Toy is still the market leader in the broader children's toy market. While having greater organizational slack may allow for more aggressive attacks, it does not necessarily mean that Bubble-Up will be successful in competing with Mega-Toy. And while Mega-Toy may not be dependent on the educational toy market, its entry into this market will likely increase competitive rivalry for all players, including Bubble-Up.