Take the following situation:

• There are two major manufacturers of computers in a particular market. One specializes in making high quality, high feature computers (this company has 40% of the market). The other specializes in making high-value computers (lower cost, lower features), assuming this company has 60% of the market. The low-cost competitor realizes some cost savings and decides to pass that on to the consumer (they lower the price by 10%).

One competitor has lowered their price. Assume you are a business consultant and that you have been consulted by the competition on what would be the best reaction to the price decrease. What should they do  and why? Your recommendation should discuss the competitive situation and justify your recommendation.