PDF800 SET8 question12

zozo123 · Posted: Sat Jul 28, 2007 4:47 am Post subject: PDF800 SET8 question12

A certain automaker aims to increase its market share by deeply discounting its vehicles’prices for the next several months. The discounts will cut into profits, but because they will be heavily advertised the manufacturer hopes that they will attract buyers away from rival manufacturers’ cars. In the longer term, the automaker envisions that customers initially attracted by the discounts may become loyal customers.

In assessing the plan’s chances of achieving its aim, it would be most useful to know which of the following?

A. Whether the automaker’s competitors are likely to respond by offering deep discounts on their own products

B. Whether the advertisements will be created by the manufacturer’s current advertising agency

C. Whether some of the automaker’s models will be more deeply discounted than others

D. Whether the automaker will be able to cut costs sufficiently to maintain profit margins even when the discounts are in effect

E. Whether an alternative strategy might enable the automaker to enhance its profitability while holding a constant or diminishing share of the market

I failed to answer this question, I answered E, I need explanations, thank you.

RM · Posted: Sat Jul 28, 2007 10:42 am Post subject:

Automaker aim is to enhance his market share. He plans to do it by offering discounts and luring customers from rival automakers.

If rival automakers by some means are able to retain their customers then his plan will fail. Choice A helps to answer this.

Choice E talks about retaining customers rather increasing customers(automakers aim) therefore is incorrect.