Consider a company that manufactures and sells personal computers (let’s call the company Bell Computers). Recently the company lowered its prices dramatically. The company is very efficient and needs only five days of inventory, collects its receivables within 30 days, and has suppliers who are willing to wait 59 days for payment. A competitor commenting on the aggressive pricing stated/’we’re in a commodity business, and a price war in a commodity business is really dumb.”
Discuss the competitor’s comment that lowering prices is a dumb move by Bell Computers.