Final answer:
The example provided about Samantha Toller's restaurant evolution aligns with the Wheel of Retailing theory, demonstrating the cycle of entering with low prices, adding services, and raising prices, making the business vulnerable to new competitors with lower prices.
Step-by-step explanation:
The scenario described where Samantha Toller started a small fast-food restaurant, initially offered low prices, added services, and became vulnerable to new low-price competitors, exemplifies the Wheel of Retailing theory. This theory suggests that new retail businesses often enter the market with low prices and limited services. As they become more established, they add services and raise prices, thus becoming susceptible to competition from newer entrants who can offer lower prices. This can be contrasted with the airline industry where larger existing companies may engage in predatory pricing to preserve their market share against new entrants, as was the case with ValuJet, Frontier, and Reno Air. In both scenarios, the competitive strategies center around price adjustments, with consumer behavior and market entry as key factors.
The Wheel of Retailing theory suggests that retailers often start with low prices and limited services to gain a competitive foothold in the market. As they grow and expand their services, they gradually increase their prices to cover the costs of these additional services. However, this leaves them vulnerable to new, low-price competitors.