Final answer:
Alex's belief that switching strategic groups might not be advisable is supported by the notions that expansion in response to competition can lead to less competitive markets, where executives prefer monopoly-like situations for higher profits, and the real possibility that heightened competition could threaten a firm's continued operations.
Step-by-step explanation:
When considering whether a CEO like Alex should switch strategic groups, it is important to weigh the potential benefits against the challenges and risks.
One statement that might support Alex's belief in not changing strategic groups is the recognition that firms often aim to expand output in reaction to their competitors' actions. If a competing firm B decides to hold down output, firm A might see an opportunity to expand and fill the gap.
Conversely, if firm B increases output, firm A might still expand output to maintain market share, leading both firms into a potential expansion cycle. However, such expansions can lead to a monopoly or oligopoly situation, where fewer firms dominate the market, reducing competition.
The idea that top executives prefer markets with less competition because it increases the chance of higher profits strengthens the argument against switching strategic groups, as moving into a more competitive group could reduce profitability and increase operational challenges.
Moreover, the strategic decision might involve the firm's realization that sometimes the most sensible financial decision may be to close operations rather than struggling in a highly competitive environment with diminishing returns. Therefore, the belief that intense competition could in fact threaten the firm's viability supports Alex's hesitance in switching strategic groups.