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A certain automaker aims to increase its market share by

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A certain automaker aims to increase its market share by [#permalink] New post 07 Aug 2012, 14:26
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82% (01:56) correct 17% (01:08) wrong based on 9 sessions
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
[Reveal] Spoiler: OA
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Re: A certain automaker aims to increase its market share [#permalink] New post 07 Aug 2012, 14:30
A.

If the rival manufacturers also discount their vehicles prices then the plan fails.
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Re: A certain automaker aims to increase its market share [#permalink] New post 07 Aug 2012, 14:42
(A) vs (D)
(A) wins because the plan of acquiring more customers will fail if the competitor starts similar program.
(D) fails because,it is already mentioned that the .."The discounts will cut into profits,...."
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Re: A certain automaker aims to increase its market share [#permalink] New post 10 Aug 2012, 08:12
for D the discounts cut into profits is mentioned agreed . . but what if company starts making loss and get closed before reaping advantages of loyal customers later on . .

Whether the automaker will be able to cut costs
sufficiently to maintain profit margins . .thats the question which is not mentioned in the stimulus. .
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Re: A certain automaker aims to increase its market share by [#permalink] New post 14 Sep 2012, 04:20
I have selected option "E" which thinks of alternative strategy of profits. Reason bein
1. It is said that "Discounts cut io profits" , so if the discounted customers do not turn out to be loyal customers
then company may get into losses.
2. For "Option A" , even if the competitor discounts more, situation doesnot improve due to point 1.
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Re: A certain automaker aims to increase its market share by [#permalink] New post 14 Sep 2012, 12:08
(A) Whether the automaker's competitors are likely
to respond by offering deep discounts on their
own products

The plan is to offer such low prices as to lure customers
away from competitors. However, if competitors counter
by also lowering the prices of their cars, then consumers
no longer have an incentive to switch to the 'certain
automaker'. Thus (A) is the answer.


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

We are only focusing on the strategy of lowering
the price of cars. Will it work or not? Saying that an
alternative strategy may be more effective does not
answer this question.
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Re: A certain automaker aims to increase its market share by [#permalink] New post 14 Sep 2012, 22:11
(A) Whether the automaker's competitors are likely to respond by offering deep discounts on their own products

Options were pretty straight forward.
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Re: A certain automaker aims to increase its market share by [#permalink] New post 27 Oct 2012, 04:19
Pls help in eliminating E.

It talks of an alternative strategy. But I think the effectiveness of it is not discussed.
Am i true
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Re: A certain automaker aims to increase its market share by [#permalink] New post 27 Oct 2012, 09:48
Archit143 wrote:
Pls help in eliminating E.

It talks of an alternative strategy. But I think the effectiveness of it is not discussed.
Am i true


Hi Archit

The question asks you to assess the plan's chances of achieving its AIM. What is the aim? The aim is that customers initially attracted by the discounts may become loyal customers.

Do you think option E affects the aim in anyway?

:-D
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Last edited by getgyan on 27 Oct 2012, 10:36, edited 1 time in total.
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Re: A certain automaker aims to increase its market share by [#permalink] New post 27 Oct 2012, 10:32
getgyan wrote:
Archit143 wrote:
Pls help in eliminating E.

It talks of an alternative strategy. But I think the effectiveness of it is not discussed.
Am i true


Hi Archit

The question asks you to assess the plan's chances of achieving its AIM. What is the aim? The aim is that customers initially attracted by the discounts may become loyal customers.

Do you think option C affects the aim in anyway?

:-D


I was not asking to eliminate C... I know thats not affecting the plan but i had confusion with E
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Re: A certain automaker aims to increase its market share by [#permalink] New post 27 Oct 2012, 10:36
Archit143 wrote:

I was not asking to eliminate C... I know thats not affecting the plan but i had confusion with E


Sorry I mistakenly wrote C where I intended to write E
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Re: A certain automaker aims to increase its market share by [#permalink] New post 01 Apr 2013, 01:55
This is an evaluate type of a question.

The OA comes down to option A.
Re: A certain automaker aims to increase its market share by   [#permalink] 01 Apr 2013, 01:55
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