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

OA: A


Simplifying the argument:

  • Deeply discount => attract buyers away from rival manufacturers’ cars => loyal customers

Type: Evaluating

POE:

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

=> Correct. If competitors respond by discounting => the company cannot drive customers away from its competitors
B. Whether the advertisements will be created by the manufacturer’s current advertising agency

=> Have no effect on number of customers/ loyal customers
C. Whether some of the automaker’s models will be more deeply discounted than others

=> But in general, they will discount => categorizing into smaller groups=> out of scope
D. Whether the automaker will be able to cut costs sufficiently to maintain profit margins even when the discounts are in effect

=> The argument already claimed that “The discounts will cut into profits” and they focus more on loyalty of customer in long – term => have no effect on the argument
E. Whether an alternative strategy might enable the automaker to enhance its profitability while holding a constant or diminishing share of the market

=> mention relation between profitability and share of market of another plan => out of scope => eliminate

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