When the market for photo film negatives declined with the arrival of digital cameras, Momento Films Inc., a manufacturer of film negatives, bought out most of its rivals that were planning to exit.This allowed the company to get rid of all the excess capacity and acquire a monopolistic market power in the declining industry.Which of the following strategies has Momento Films adopted in this scenario?

Question

Quizplus · Accepted Answer

In the scenario, Momento Films has adopted the consolidation strategy. Although market size shrinks in a declining industry, some firms may choose to consolidate the industry by buying rivals (those who choose to exit). This allows the consolidating firm to stake out a strong position-possibly approaching monopolistic market power, albeit in a declining industry.

When the Market for Photo Film Negatives Declined with the Arrival