Note on Racing to Acquire Customers Case Solution
The factors that motivate firms race to acquire customers in new markets and examines the conditions under which race strategy is likely to yield attractive returns. Provides the definition of racing behavior, the concept of an optimal level of investment in an effort to attract customers, and examines the reasons why firms may invest more or less than the optimal number, including financial constraints and the impact of budgets and compensation. Explains why firms may be motivated to race for the acquisition of companies, when they are faced with increasing returns to scale due to network effects and / or high fixed, up-front costs and / or the high cost of switching customers. Describes how the relative strength of the first and late mover advantage determines whether the firm should strive to pioneer. New market opportunities often spark speculative bubbles and the case discusses why such bubbles can lead to excessive investment firms in an effort to attract customers. Presents a framework for decision-making. 1) whether to enter a new market, where rivals are likely to race to get customers, and 2) how a company should respond when a competitor escalating race “Hide
by Thomas R. Eisenmann 35 pages. Publication Date: January 15, 2003. Prod. #: 803103-PDF-ENG
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