(Miami, Florida) Too many competitors fighting for a piece of the pie.
The result of Week 2 was out, the price we charged in Market A was about 25% high than our closest competitor. They undercut us and produce more beyond their capacity, resulting in us losing some sales and storing some in the inventory. It is still a pretty good week because we are taking advantage of the capacity constraint in the market to sell at high price to recoup some of the initial investment.
The duopolistic approach taken was no longer applicable in Week 3 because there are now more participants in the market A. However, due to the previous capacity investment, my team is still the dominant power around in market A. However, the new players really shook us, and we decided to price much lower than anyone would expect to scare them off, where we cut off almost half of our initial price to wage a price war with the other firms. We still decided to invest more in our capacity to take in more market share.
In Market B, we opted to enter in small capacity because of resource constraint but also to see the economic environment in Market B. We price it low, slightly lower than the lowest competitor in the previous period. For this period, it’s not about recouping our investment, but more to the point of “We’re here, and you guys better watched out for us!” We made another investment, almost doubling what we invested last time to show our commitment to stay in this market.
Market C and D are not in our concern yet. Each market has two firms in it, making it very enticing to enter, but we want to established our dominance in Market A and B before entering others. It would be even better if the other competitors would forgo their Market A and B, and just enter the other markets.