Question

Kimba Inc. is a manufacturer of smart watches that track the wearer's heart rate and sleep patterns. Which of the following is most likely an implication of new firms entering this industry?

A. The industry's overall profit potential and sales will increase.
B. The incumbent firms will spend more to satisfy their existing customers.
C. The rivalry among existing competitors will reduce.
D. The bargaining power of buyers will reduce.

Answer 1

Answer: B. The incumbent firms will spend more to satisfy their existing customers.

Step-by-step explanation:

With new firms coming into the market, there is now a greater amount of supply and more manufacturers to choose from with different features to enable them penetrate the market.

The incumbent firms such as Kimba Inc. will have to spend more to ensure that these new firms do not take their customers. They will have to advertise more as well as spend more on Research and Development in order to produce new products that will keep customer loyalty.