Which Hidden trap applys to the following example? In the 1970’s, the third larg

Question

Which Hidden trap applys to the following example?

In the 1970’s, the third largest beer manufacturer, Schlitz Brewing, decided to use a cheaper brewing process. For this reason, the company had done market research which concluded that consumers could not differentiate between the more or less expensive brewed beers. The company went forward with the plan. However, the market reaction was opposite to the prior research, since the consumers did not like the new beer. Despite the evidence of lower sales, Schlitz Brewing continued manufacturing with the cheaper brewing process. As a result, the company lost its position on the market and was acquired by one of its competitors, Stroh, in 1982 (Horn, Lovallo, & Virguerie, 2006). In this case, the Schlitz Brewing management ignored the information about declining sales which did not fit to their low-cost strategy and continued to heavily depend on the original market research.

Horn, J.T., Lovallo, D.P., & Virguerie, S.P. (2006, May). Leaning to let go: Making better exit decisions. Retrieved from http://www.mckinsey.com/insights/strategy/learning_to_let_

            go_making_better_exit_decisions

a.

Anchoring

b.

Status-quo

c.

Framing

d.

Overconfidence

e.

Recallability

f.

Sunk Cost

g.

Confirming Evidence

h.

Prudence

a.

Anchoring

b.

Status-quo

c.

Framing

d.

Overconfidence

e.

Recallability

f.

Sunk Cost

g.

Confirming Evidence

h.

Prudence

Explanation / Answer

Anchoring is the hidden trap here.

Anchoring is defined as common human tendency to rely too heavily on the first piece of information offered (the "anchor") when making decisions

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