Suppose you are the manager of a company that produces a specialized product. The market for this product is characterized by a few dominant firms, and you are currently the price leader in the industry. Your firm has been enjoying above-average profits for several years.

Recently, a new competitor has entered the market, introducing a product that is similar but not identical to yours. This competitor has adopted an aggressive pricing strategy, offering their product at a significantly lower price than yours. As a result, you have seen a decline in your market share and a reduction in your profits.

Explain how your company can respond to this new competitive threat using microeconomic principles. Consider factors such as price elasticity of demand, cost structures, and pricing strategies. Provide a detailed analysis of the options available to your company and the potential consequences of each option.

 

It should include the following components:
1. Table of contents

2. Abstract
3. Introduction
4. Financial analyses(including graph or table or pie chart need to be shown and explained the content and context)
5. Conclusion
6. Reference list
7. Appendix