Question

The Small-A Corporation is currently competing with a first mover which owns 90% of the market share. An aggressive
marketing strategy is expected to entice 10% of the competitor’s market share to shift to Small-A every month while the
remaining 90% will not. As a new firm, Small-A expects 30% of his market share to shift back to the competitor every
month.What would Small-A’s market share be after one month?

Answer 1

We suppose there are 1000 consumers in the market. (i.e. 1000 represents 100 %market share)

Let us assume the first mover competitor is B and it has 90% of market share i.e. 900 consumers.

Which means Small- A corporation already has the rest 10% of market share i.e. has 100 consumers.

After one month of aggressive marketing strategy:

10 % of 900 consumers (from B) = 90 shifts to small-A. Now, small - A has 100 + 90 = 190 consumers

And B is left with 900 - 90 = 810 consumers.

But it is stated in question that as a new firm, Small-A expects 30% of his market share to shift back to the competitor every month. So, 30% of 190 consumers from A i.e. (57 consumers shift back to B) after one month.

Now, B has 810 + 57 = 867 consumers.

And small - A's has 1000 - 867 = 133 consumers. Which represent (133/1000) x 100 =13.3 % market share after one month (Answer)