The competitor 's ability to adapt to change is critical. Firms should
examine the competitor's ability to respond to external events such as technological advances, inflation, and greater governmental intervention. The ability to adapt to changes relative to each functional area must also be examined . For example, can the competitor ad apt to an escalation in marketing activity or manage a more complex product line? The competitor' s ability to adapt to change will be influenced by (I) fixed versus variable costs, (2) cost of unused capacity, (3) existence of exit barriers, and shared manufacturing or other facilities or personnel such as sales force with other unit s of its corporate parent.