Your monthly spreadsheets confirm what you had suspected: neither New York nor Chicago is big enough for both you and your competition. Chicagoans clearly prefer the rich heartiness of your deep-dish pizza, whereas New Yorkers go for the light, flaky crust of your chief rival. In time, you feel that the battle for New York could be won, but you are pretty sure the competition feels the same way about Chicago. You can save transportation and assorted costs by pulling out of New York completely and concentrating on the Windy City, but you don't want to give up a marginally profitable operation in the Big Apple unless you get some concessions. Should you ... A) Expand your Chicago operations and gradually withdraw from New York

Question

Business

Julissa Hardy

15 March, 14:45

Your monthly spreadsheets confirm what you had suspected: neither New York nor Chicago is big enough for both you and your competition. Chicagoans clearly prefer the rich heartiness of your deep-dish pizza, whereas New Yorkers go for the light, flaky crust of your chief rival. In time, you feel that the battle for New York could be won, but you are pretty sure the competition feels the same way about Chicago. You can save transportation and assorted costs by pulling out of New York completely and concentrating on the Windy City, but you don't want to give up a marginally profitable operation in the Big Apple unless you get some concessions. Should you ... A) Expand your Chicago operations and gradually withdraw from New York

+5

Answers (1)

Know the Answer?

Ari Skinner · Answer 1

Answer:it is advisable for the firm to expand their Chicago operations and gradually withdraw from New York.

Explanation:

The market share is the percentage of the market sales that a firm control than their competitors in the market. When a firm wants to expand their operations to new market, it means they want to compete for a share of the market with other firm in the market. What they have to do in order to succeed is that, they have to put in place new strategies that will enable them to take control of the market away from their competitors.

In a perfectly competitive market, profit is maximized when MC = MR, marginal profit can be used to either expand or reduce business operations. In the sense that, a firm should put a stop to their desire for expansion when the marginal cost is reducing profit. As a business is expanding it's cost structure will also experienced an increase. Therefore, in this case transportation cost and assorted cost is a marginal cost which they can save by pulling out of New York completely and concentrating on the Chicago city operation. It is however advisable for the firm to expand Chicago operations where Chicagoans prefer their product than the product of their competitors and gradually withdraw from New York where their competitors have a larger share of the market than them.