Routinely compete against each other for the same customers

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Reference no: EM131791023

Rawlings and Spalding are sports equipment firms that routinely compete against each other for the same customers. Rawlings has a goal of increasing market share in the proprietary sports clothing market. Last quarter, Rawlings indeed expanded its market share, but noted that the prices of inputs used to make its proprietary clothing increased. As a result, Rawlings may have to increase prices for its proprietary clothing line by 2 to 5 percent. Rawlings believes that these price increases could undermine their market share gains if Spalding does not also raise prices. Rawlings wants to maintain its newly gained market share in proprietary sports clothing. Therefore, Rawlings plans to keep prices on its clothing line low by raising prices on other products it sells. Evaluate this strategy. Why might this pricing approach actually decrease Rawlings’ profits and earnings per share?

Reference no: EM131791023

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