Assumptions Gaining an understanding of a competitor's assumptions about itself and other firms in the industry can be quite beneficial to a firm. When these assumptions are not accurate. they can create "blind spots" that make the competitor vulnerable. If a competitor believes, for example, that it has unusually strong customer loyalty, it may be vulnerable to competitive moves such as price cuts and new product introductions. Similarly, a firm can hold inaccurate assumptions about the industry or its environment U.S. automobile firms. for example, had long felt that the demand for small cars was based strictly on economics: this erroneous belief made them vulnerable to foreign competitors whose cars offered more luxury components and were perceived to be of higher quality.