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A manufacturer of workstations for computer-aided design seeks

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A manufacturer of workstations for computer-aided design seeks  [#permalink]

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New post 10 Aug 2015, 02:11
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  35% (medium)

Question Stats:

72% (01:41) correct 28% (02:02) wrong based on 1066 sessions

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A manufacturer of workstations for computer-aided design seeks to increase sales to its most important corporate customers. Its strategy is to publish very low list prices for workstations in order to generate interest among the buyers for those corporations.

Which of the following, if characteristic of the marketplace, would tend to cause the manufacture’s strategy to fail?

A. The proposed list prices would seem low to a typical buyer for the manufacturer’s most important corporate customers.
B. The capabilities of workstations suitable for given jobs are not significantly different among various manufactures.
C. The manufacturer’s most important corporate customers employ as buyers persons who are very knowledgeable about prices for workstations for customer-aided design.
D. customers differ significantly in the percentage of resources they can devote to computer workstations.
E. Buyers for corporations that purchase workstations for computer-aided design receive bonuses for negotiating large discounts from the list price
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Re: A manufacturer of workstations for computer-aided design seeks  [#permalink]

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New post 16 Sep 2015, 05:09
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Because the buyers get bonuses for negotiating large discounts and since the list price is already low, instead of stimulating sales, buyers will be better off negotiating with other companies and purchase from them, and hence, sales of this company will not increase due to the lowered prices. Quite the opposite intended. Hence answer is E.
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A manufacturer of workstations for computer-aided design seeks  [#permalink]

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New post 04 Nov 2015, 01:43
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Clear E.

Since buyers have a vested interest in negotiating on the LISTED price, it would be foolish to already list products for less. They have to face the bargain from the buyers anyway. Already low list price will definitely hinder the manufacturer's ability to discount further and thus cannot contribute to improved sales.

A is slightly relevant but fails to establish why a LOW price won't improve the sales.


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Re: A manufacturer of workstations for computer-aided design seeks  [#permalink]

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New post 26 Apr 2017, 20:15
There are many subtitles of a bonus component that could affect the purchase decision. Some scenarios include - bonus from buyer or seller, bonus calculation method[a percentage of the sales or savings] and so on.

Since weighing so many options is not possible how is E the correct answer when A has very low scope of digressing from the point raised in the question?

Thanks.
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Re: A manufacturer of workstations for computer-aided design seeks  [#permalink]

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New post 29 Apr 2017, 14:49
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Quote:
There are many subtitles of a bonus component that could affect the purchase decision. Some scenarios include - bonus from buyer or seller, bonus calculation method[a percentage of the sales or savings] and so on.

Since weighing so many options is not possible how is E the correct answer when A has very low scope of digressing from the point raised in the question?

Quote:
A. The proposed list prices would seem low to a typical buyer for the manufacturer’s most important corporate customers.

If the plan is "to publish very low list prices for workstations in order to generate interest among the buyers for those corporations," the fact that those proposed list prices actually would seem low to a typical buyer is consistent with the manufacturer's plan. This is evidence that the strategy will succeed, not fail.
Quote:
E. Buyers for corporations that purchase workstations for computer-aided design receive bonuses for negotiating large discounts from the list price

True, the buyers' compensation may be affected by several other factors, but choice E only discusses the specific bonus received for "negotiating large discounts from the list price." All else equal, if the list prices are already low and the buyers have no room to negotiate, the buyers will most likely NOT be able to earn those specific bonuses. This would REDUCE the buyers' interest in those listings and potentially cause the strategy to fail. Also, the question does not ask us for a characteristic of the marketplace that would DEFINITELY cause the strategy to fail; rather it asks for one that "would TEND to cause the manufacturer’s strategy to fail." E is the best choice because it most clearly works against the strategy of the manufacturer.
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A manufacturer of workstations for computer-aided design seeks  [#permalink]

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New post 29 Apr 2017, 23:23
GMATNinjaTwo wrote:
Quote:
There are many subtitles of a bonus component that could affect the purchase decision. Some scenarios include - bonus from buyer or seller, bonus calculation method[a percentage of the sales or savings] and so on.

Since weighing so many options is not possible how is E the correct answer when A has very low scope of digressing from the point raised in the question?

Quote:
A. The proposed list prices would seem low to a typical buyer for the manufacturer’s most important corporate customers.

If the plan is "to publish very low list prices for workstations in order to generate interest among the buyers for those corporations," the fact that those proposed list prices actually would seem low to a typical buyer is consistent with the manufacturer's plan. This is evidence that the strategy will succeed, not fail.
Quote:
E. Buyers for corporations that purchase workstations for computer-aided design receive bonuses for negotiating large discounts from the list price

True, the buyers' compensation may be affected by several other factors, but choice E only discusses the specific bonus received for "negotiating large discounts from the list price." All else equal, if the list prices are already low and the buyers have no room to negotiate, the buyers will most likely NOT be able to earn those specific bonuses. This would REDUCE the buyers' interest in those listings and potentially cause the strategy to fail. Also, the question does not ask us for a characteristic of the marketplace that would DEFINITELY cause the strategy to fail; rather it asks for one that "would TEND to cause the manufacturer’s strategy to fail." E is the best choice because it most clearly works against the strategy of the manufacturer.



Thanks for responding, however I still am not convinced.

Option A - "list prices would seem low to a typical buyer "-> Indicates that the typical buyer is aware of the fair prices so wouldn't anything lower arouse suspicion that other product attributes such as quality, warranty, post sale services and so on might have been compromised resulting in a purchase decision against the manufacturer?

Option E - How do we know that the buyers receive the bonus from their corporation?
Couldn't the buyers receive bonus from seller in a scenario where although a large discount was negotiated, a large volume purchase resulted in considerable profits for the seller in addition to making up for the discount offered?

I hope I am not stretching the reasoning to much !!

Thanks again.
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Re: A manufacturer of workstations for computer-aided design seeks  [#permalink]

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New post 30 Apr 2017, 18:43
Quote:
Thanks for responding, however I still am not convinced.

Option A - "list prices would seem low to a typical buyer "-> Indicates that the typical buyer is aware of the fair prices so wouldn't anything lower arouse suspicion that other product attributes such as quality, warranty, post sale services and so on might have been compromised resulting in a purchase decision against the manufacturer?

Option E - How do we know that the buyers receive the bonus from their corporation?
Couldn't the buyers receive bonus from seller in a scenario where although a large discount was negotiated, a large volume purchase resulted in considerable profits for the seller in addition to making up for the discount offered?

I hope I am not stretching the reasoning to much !!

Remember that the strategy of the manufacturer is "to publish very low list prices for workstations in order to generate interest among the buyers for those corporations"--the manufacturer WANTS the prices to seem low to a typical buyer, so choice A is consistent with that strategy. True, we don't know for sure if that strategy will succeed, and if one of the answer choices were something like, "Most buyers are suspicious of very low prices...", that could certainly be a characteristic of the marketplace that would tend to cause the strategy to fail; however, without being given that information, we can't make assumptions about the thought process of the buyers.
As for choice E, again, we can only go by the information in the passage--all we know is that the buyers receive bonuses for negotiating large discounts from the list price. If the list prices are already low, then there is little to no room to negotiate discounts; thus, the buyers cannot earn those specific bonuses. This alone is a factor that works AGAINST the strategy (ie "would tend to cause the manufacture’s strategy to fail"). Yes, we can come up with scenarios in which the lost bonuses referred to in choice E are offset by other means of compensation, but we cannot assume that will happen if it is not included in the answer choice.

We only need to find an answer choice that would tend to cause the manufacturer's strategy to fail; we don't need it to be something that will DEFINITELY cause the strategy to fail. Solely based on the information in the passage and the answer choices, choice E is the best fit.

I hope that helps!
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Re: A manufacturer of workstations for computer-aided design seeks  [#permalink]

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New post 19 Sep 2018, 19:18
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

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Re: A manufacturer of workstations for computer-aided design seeks &nbs [#permalink] 19 Sep 2018, 19:18
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