Connor Company

The situation in this case describes a cheaper competitor invading the market. This is a price war and the competitor has lower prices because of the 25% lower variable costs in its specialized production facility. Even with additional importing and transporting costs the advantage is still important.
We can assume that products are very similar and there is no difference in products.
The first way to run forward from the competition is innovation. Making the product better than competitors reducing its weaknesses: Difficult assembly for an average “do-it-yourselfers”, heat loses, or develop new unique features of that product.
The company sold some skylights to California – that is a potential market, which could be profitable when reducing some costs, cause it is close to break-even now.
Pacific could decrease its smallest order from 500 to 144 - one package shipping amount. The competitor from Canada is selling minimum order size of 1000 units. So concentration on smaller customers could make additional Pacific Plastics competitive advantage.
Pacific Plastic could develop also additional services for small customers – example assembly consulting – what could be another competition advantage.

Pacific is now selling 10 000 to small customers for $200 what almost covers the fixed costs (unit contribution is $80, fixed costs are $840000, so the required amount for break-even is 10500 units). The costs should be reduced to $800000 or the amount of units sold to small customers should raise by 500 units.
With fixed costs covered the extending amount of production must cover the variable costs only. So any price above $120 will keep Pacific Plastics profitable.

The real issue is how far Vancouver Lightning will lower its prices. Is there a technology advantage? This is what Pacific should really investigate and change