Question

An article is released detailing how Tech Company A has created software that is currently the best on the market. Tech Company A is expected to gain a major portion of market share for this type of software. One of your clients reads the article and buys a sizeable amount of the stock of Tech Company A. Six months later, an article is released which details a new form of software released by Tech Company Z. The new software may revolutionize the industry currently dominated by Tech Company A. As a result, Tech Company A's stock drops significantly.

Which best describes this scenario?

A) This is an example of event risk.
B) This is an example of market risk.
C) This is an example of competitive risk.
D) This is an example of business risk.

Answer 1

C) This is an example of competitive risk.

Step-by-step explanation:

Competitive risk is the possibility that a company in terms of technology, products, or general competition would not stay competitive with other businesses.

The technology company expects a majority of market share here and becomes the victim of a new technology.

It is also the possibility you will be prevented from achieving a goal by competitive forces. Due to a competitor's actions, it is often associated with the risk of declining business income or margins.