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Automobile manufacturers often offer incentive programs

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Automobile manufacturers often offer incentive programs [#permalink] New post 24 Jul 2010, 16:06
00:00
A
B
C
D
E

Difficulty:

  65% (medium)

Question Stats:

23% (02:26) correct 76% (01:22) wrong based on 96 sessions
Automobile manufacturers often offer incentive programs through which they discount the price of a car to their dealers for a promotion period when the product is advertised to consumers. Such incentive programs often result in a dramatic increase in the amount of product sold by the automobile manufacturers to dealers but may hurt the manufacturers' profitability.
Which of the following, if true, most strongly supports an argument for the incentive programs?

A. The amount of discount generally offered by manufacturers to dealers is carefully calculated to represent the minimum needed to draw consumers' attention to the product.
B. For many consumer products, the period of advertising discounted prices to consumers is about a week, which is not sufficiently long for consumers to
become used to the sale price.
C. More prestigious auto makers do not use incentive programs because they dilute the company's brand name.
D. During such a promotion, retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular
price.
E. If a manufacturer fails to offer such promotion but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer's
product.
[Reveal] Spoiler: OA

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Last edited by WaterFlowsUp on 24 Oct 2013, 12:37, edited 1 time in total.
Corrected OA
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Re: Automobile manufacturers [#permalink] New post 24 Jul 2010, 18:42
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I think you got the wrong OA. Answer should be D.

Conclusion : Such incentive programs often result in a dramatic increase
in the amount of product sold by the automobile manufacturers to dealers but may
hurt the manufacturers' profitability.

A does not explains how manufacturer's profitability is impacted. But it explains dramatic increase in sales.

D supports both the parts of the conclusion. Since the dealers buy most of the sales, the manufacturer's sales goes up during the promotion. Since they sell the items from the warehouse after the promotion - the stock's price now is MRP, they end with huge margins which definitely cut the manufacturer's bottom line. I think this is illegal. But that's besides the point. D is correct.
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Re: Automobile manufacturers [#permalink] New post 24 Jul 2010, 23:36
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This is the reason I am going back to the OG, its the best book ever written. I am not gonna focus on any other source. First the argument is a copy of the one in the OG. Second OA is E.

This is such a subtle question. There are TWO parts of the conclusion. The question wants to strengthen just the first part (increased product sales) Not the second (how the manufacturer's profitability is impacted) part.

Which of the following, if true, most strongly supports an argument for the incentive programs? -----> means tick on the answer which strengthens the "incentive program" of the MANUFACTURER. (in favor of the manufacturer)

D is NOT in favor of the manufacturer. It works in favor of the dealers. Dealers cut the profitability. It strengthens the second part of the conclusion.

E says there is a risk by not offering the promotion. E works in favor of the manufacturer - increased sales - increased profits.

E. If a manufacturer fails to offer such promotion but its competitor offers them,
that competitor will tend to attract consumers away from the manufacturer's
product.
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Re: Automobile manufacturers [#permalink] New post 24 Jul 2010, 20:28
noboru wrote:
Automobile manufacturers often offer incentive programs through which they discount
the price of a car to their dealers for a promotion period when the product is
advertised to consumers. Such incentive programs often result in a dramatic increase
in the amount of product sold by the automobile manufacturers to dealers but may
hurt the manufacturers' profitability.
Which of the following, if true, most strongly supports an argument for the incentive
programs?
A. The amount of discount generally offered by manufacturers to dealers is
carefully calculated to represent the minimum needed to draw consumers'
attention to the product.
B. For many consumer products, the period of advertising discounted prices to
consumers is about a week, which is not sufficiently long for consumers to
become used to the sale price.
C. More prestigious auto makers do not use incentive programs because they
dilute the company's brand name.
D. During such a promotion, retailers tend to accumulate in their warehouses
inventory bought at discount; they then sell much of it later at their regular
price.
E. If a manufacturer fails to offer such promotion but its competitor offers them,
that competitor will tend to attract consumers away from the manufacturer's
product.


OA is A. However, if the minimum discount needed to attract consumers' attention to the product is such that the profit is going to decrease, tue program is not supported.

Could anybody clarify?



Can you re-check the OA? I belive it should be D as well. Profitability factor is not explained in A at all.
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Re: Automobile manufacturers [#permalink] New post 25 Jul 2010, 10:45
nusmavrik wrote:
This is the reason I am going back to the OG, its the best book ever written. I am not gonna focus on any other source. First the argument is a copy of the one in the OG. Second OA is E.

This is such a subtle question. There are TWO parts of the conclusion. The question wants to strengthen just the first part (increased product sales) Not the second (how the manufacturer's profitability is impacted) part.

Which of the following, if true, most strongly supports an argument for the incentive programs? -----> means tick on the answer which strengthens the "incentive program" of the MANUFACTURER. (in favor of the manufacturer)

D is NOT in favor of the manufacturer. It works in favor of the dealers. Dealers cut the profitability. It strengthens the second part of the conclusion.

E says there is a risk by not offering the promotion. E works in favor of the manufacturer - increased sales - increased profits.

E. If a manufacturer fails to offer such promotion but its competitor offers them,
that competitor will tend to attract consumers away from the manufacturer's
product.


completely missed it!
good catch nus! +1

i chose D as well initially..

E is absolutely perfect..strongly supports the need for incentive programs.!
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Re: Automobile manufacturers [#permalink] New post 25 Jul 2010, 11:48
Why is E not the answer...if we are to argue for the Incentive program...this seems to be the best option..
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Re: Automobile manufacturers [#permalink] New post 25 Jul 2010, 21:55
nimma1 wrote:
Why is E not the answer...if we are to argue for the Incentive program...this seems to be the best option..


manufacturers' failure to offer such promotion is irrelevant. Info in E is beyond the facts given in the argument. E can be easily ruled out.

A infact kind of weakens the claim. The tone is such that such incentive programs may not hurt manufacturers profitability, although A openly does not talk about manufacturers profitability.

D is precise :wink:
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Re: Automobile manufacturers [#permalink] New post 26 Jul 2010, 11:12
D is talking about retailers which is not what the argument is focusing on.

OA should be E because only E talks in support of the incentive programs.
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Re: Automobile manufacturers [#permalink] New post 26 Jul 2010, 12:00
nusmavrik wrote:
This is the reason I am going back to the OG, its the best book ever written. I am not gonna focus on any other source. First the argument is a copy of the one in the OG. Second OA is E.

This is such a subtle question. There are TWO parts of the conclusion. The question wants to strengthen just the first part (increased product sales) Not the second (how the manufacturer's profitability is impacted) part.

Which of the following, if true, most strongly supports an argument for the incentive programs? -----> means tick on the answer which strengthens the "incentive program" of the MANUFACTURER. (in favor of the manufacturer)

D is NOT in favor of the manufacturer. It works in favor of the dealers. Dealers cut the profitability. It strengthens the second part of the conclusion.

E says there is a risk by not offering the promotion. E works in favor of the manufacturer - increased sales - increased profits.

E. If a manufacturer fails to offer such promotion but its competitor offers them,
that competitor will tend to attract consumers away from the manufacturer's
product.


good one, initially i also picked D

GMAT trap :)
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Re: Automobile manufacturers [#permalink] New post 27 Jul 2010, 01:45
I also think D is correct ans....

Argument says that even after dramatic increase in the amount of product sold, the profitability of manufacturer will decrease .

Argument also says that cars are sold to dealers(retailers)...

D fits the bill as it says that Company sells the car to dealers in discounted rate --->Dealers stockpile these discounted cars --->Car is sold by dealers when price rise---->Definitely it harms companies profitability--->Hence, justified.


It dose not matter whether other Companies are giving discount or not.
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Re: Automobile manufacturers [#permalink] New post 27 Jul 2010, 04:11
D provides a reason for discontinuing incentive
E provides a reason supporting incentive. hence E shld be correct
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Re: Automobile manufacturers [#permalink] New post 27 Jul 2010, 11:15
Chose A ..............Since lot of views have come in....let me air mine ......

I understood incentive as discount......

Automobile manufacturers often offer incentive programs through which they discount
the price of a car to their dealers for a promotion period when the product is
advertised to consumers. Such incentive programs often result in a dramatic increase
in the amount of product sold by the automobile manufacturers to dealers but may
hurt the manufacturers' profitability.
Which of the following, if true, most strongly supports an argument for the incentive
programs?
A. The amount of discount generally offered by manufacturers to dealers is
carefully calculated to represent the minimum needed to draw consumers'
attention to the product.

D. During such a promotion, retailers tend to accumulate in their warehouses
inventory bought at discount; they then sell much of it later at their regular
price.
E. If a manufacturer fails to offer such promotion but its competitor offers them,
that competitor will tend to attract consumers away from the manufacturer's
product.


A........discount is just minimum offered to dealers in order to catch customer attention...Since only minimum is lost it may be more than adjusted by increased sales

D......is good but the profit is for retailers......not to Manufacturer....so no use

E.......Competitor will offer them but what about his profitability ??..........

So A addresses better ...
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Re: Automobile manufacturers [#permalink] New post 27 Jul 2010, 13:55
Le tme repeat the question-
Which of the following, if true, most strongly supports an argument for the incentive
programs
?
The question is indicating the argument as a whole - it does not intend to say - which of the following if ture, strongly supports that the incentive program will be successful?
So the answer should be D.
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Re: Automobile manufacturers [#permalink] New post 28 Jul 2010, 09:36
agreed on D.
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Re: Automobile manufacturers [#permalink] New post 28 Jul 2010, 10:11
OA should be E.

@Noboru,
What is the score of the question?
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Re: Automobile manufacturers [#permalink] New post 28 Jul 2010, 12:04
-- To support the argument for incentive program means- the program should be able to sell more cars as well as with some profits to the manufacturer. If this is justified, then that should be the correct answer choice.

A. The amount of discount generally offered by manufacturers to dealers is
carefully calculated to represent the minimum needed to draw consumers'
attention to the product.
-- Since this answer choice exactly says - discount offered is carefully calculated to attract customers. It means it results in more sell with some profit to the manufacturer. Thus A supports the incentive program and should be a correct answer choice.

B. For many consumer products, the period of advertising discounted prices to
consumers is about a week, which is not sufficiently long for consumers to
become used to the sale price.
-- Irrelevant, hence not a correct answer choice.

C. More prestigious auto makers do not use incentive programs because they
dilute the company's brand name.
-- Irrelevant, hence C not a correct answer choice.

D. During such a promotion, retailers tend to accumulate in their warehouses
inventory bought at discount; they then sell much of it later at their regular
price.
-- This is an opposite answer. It is going exactly opposite to the incentive program. Thus though the sales will increase, profitability for the manufacturers will get hurt. Hence D cannot be a correct answer choice.

E. If a manufacturer fails to offer such promotion but its competitor offers them,
that competitor will tend to attract consumers away from the manufacturer's
product.
-- This is a new information and taking us away from the main argument of incentive program. Hence E cannot be a correct answer choice.

I hope this helps. Thank You.

Thanks,
Akhil M.Parekh
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Re: Automobile manufacturers [#permalink] New post 05 Aug 2010, 19:06
Good trap!!! I too fell for D! :(
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Re: Automobile manufacturers [#permalink] New post 31 Aug 2010, 11:19
Hi all,

This one has not been clarified yet. According to my source (GMATPrep), OA is A.

It is between A and E, and I could justify both.

D is wrong. Becareful! manufacturer is not a retailer!

Plase clarify between A and E.
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Re: Automobile manufacturers [#permalink] New post 06 Sep 2010, 10:43
It has to be A
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Re: Automobile manufacturers [#permalink] New post 06 Sep 2010, 19:11
I got A for this one. With just over a minute, not bad.
Re: Automobile manufacturers   [#permalink] 06 Sep 2010, 19:11
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