Final answer:
Exis Inc. and Stelma Inc. are experiencing below-average performance with their -5 percent return on invested capital compared to the industry average of 2 percent. Sustainable competitive advantage and competitive parity are not applicable here. Their situation is reminiscent of historical industry shifts where firms struggle or exit due to inadequate demand to cover costs.
Step-by-step explanation:
In the scenario where Exis Inc. and Stelma Inc. are both experiencing an average return on invested capital of approximately -5 percent, whereas the industry average is 2 percent, these companies would most likely have below-average performance. A sustainable competitive advantage would typically be demonstrated by returns higher than the industry average, while competitive parity could reflect similar returns to the industry average. Since both firms are faring worse than the industry average, they are neither outperforming their competitors nor achieving competitive parity.
The secretarial firm example using production functions, Q = f[L, K], demonstrates that when demand cannot sustain multiple firms at the bottom of the average cost curve, some firms may exit the industry, leading to a situation where other firms may struggle to survive, akin to the typewriter manufacturers' situation.
Moreover, the example implies that with a fixed amount of capital, a firm may experience diminishing marginal productivity when additional labor is added, reflecting a less efficient production process, which might also contribute to the below-average performance of Exis Inc. and Stelma Inc.