PowerAir Inc., a subsidiary of a successful multinational manufacturing firm, supplies a key component in the assembly of residential air conditioning units. At this current stage, there are only five suppliers of this particular component, with these suppliers accounting for close to 80 percent of worldwide industry sales. On the retail side of the equation, well-known residential air conditioning units like Carrier and Trane retain a strong foothold in terms of retail sales. However, some newer Asian manufacturers have signaled an interest in more aggressively pursuing the lucrative international market. PowerAir Inc. is presently considering a $300 million dollar investment in a new plant, which will create a component that is much quieter, more efficient, and is likely to satisfy future regulatory standards. While the core technology for the new component is very old, PowerAirs engineering and design skills have allowed them to retain their low cost advantage, even though the component will represent a significant improvement over products currently provided by its competition.

Question 1 (5 marks) Assume that you are a consultant and have been asked by the management at PowerAir Inc. whether it should be a first mover with the new component technology. PowerAir is leaning toward being a first mover (ie. moving ahead with the investment). As the consultant, PowerAir has asked you to provide at least three reasons or benefits as to why PowerAir should make the investment, thus being a first mover with the new technology? Explain your reasoning in full (bullet point answers are not acceptable).