Electronics Company A is recognized as the world leader in the production of radios. They control more than 75% of the radio market, but the market is slowly shrinking. The company also
makes several high-quality audio products, including CD players. The market for CD players is
growing, and currently the company cannot make enough to meet the demand. What choice
should the company make? What is the opportunity cost? Explain your reasoning,

There comes a time when every company must make a decision to evolve because the products that they offer will always become obsolete at some point in the future. This is simply because humans will always strive to make processes more efficient.

Electronics Company A is a leader in the radio market but that market is shrinking. There is a new revenue stream however and that market is growing.

The decision that they should make is to reduce the amount of facilities that are dedicated to radios and channel it to the production of CD players so that they may gain dominance there before the market becomes saturated. Had Kodak have done this when digital cameras were on the rise, their fall from grace might not have happened at all.

The Opportunity Cost of this however is that they may lose dominance in the radio industry which is only slowly declining meaning that there are still profits to be made. The keyword however is that the market is declining. They should therefore evolve and move to an industry that is on the up and up which is the CD player.

Failure to do this would mean that they would become another Kodak or Blockbuster.