Strategic Response to Rising Costs
In a monopolistically competitive industry, all firms anticipate a sharp, industry-wide increase in raw material costs. Which of the following strategic moves would best mitigate the risks associated with this cost increase?
Eliminate some differentiated features to reduce expenses, hoping cut-backs go unnoticed by fickle buyers.
Raising final goods’ prices immediately upon anticipating cost hikes, expecting competitors to follow suit and maintaining profit margins.
Invest heavily in stockpiling materials, attempting to secure current rates and prolonging inevitable cost adjustments.
Adopting advanced production efficiencies technologies before rivals do, thereby gaining an edge through lower long-run average costs despite rising input prices.
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