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PDF800 SET8 question12

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zozo123 Senior | Next Rank: 100 Posts Default Avatar
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PDF800 SET8 question12

Post Sat Jul 28, 2007 3:47 am
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.

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komal Legendary Member
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Post Thu Feb 11, 2010 8:42 pm
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.

This question is in OG - 12 and the explanation given is as follows :

A Correct. If the answer to this question were yes, the plan would probably not achieve its aim of increasing market share. If the answer were no, the plan would have a good chance of succeeding.

B Since there is no information about the effectiveness of the automaker's current advertising, it would not be useful to know whether the same advertising agency will produce the ads publicizing the discount.

C Knowing whether some models will be more deeply discounted than others might help in, assessing which of the automaker's models will sell best, but it would not help in assessing the overall chance of the automaker increasing its market share.

D The discounts the automaker plans to offer will cut into profits, according to the information given, so the question of whether the automaker can maintain profit margins while the discounts are in effect has already been answered.

E While it might be useful to the automaker to know about alternative strategies, such knowledge does not help in assessing the likelihood that the plan under discussion will achieve its aim.

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RM Senior | Next Rank: 100 Posts Default Avatar
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Post Sat Jul 28, 2007 9:42 am
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.

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