This class is: MARKETING STRATEGY Pretend that you own an automobile manufacturi

Question

This class is: MARKETING STRATEGY

Pretend that you own an automobile manufacturing company. You made some updates to your vehicle and you also changed the price.

1.       If it turned out that change in margin was not sufficient to cover the cost of the to upgrade at the current volume, why might it still strategically make sense do the upgrade.

2.       Conversely, if the change in the margin exceeded the cost of the upgrade at the current volume, why might it not make strategic sense to purse the upgrade at this time?

Explanation / Answer

Answer: (1) The upgrade may result in the increase in demand for the vehicles as people may like the upgrade and this may increase the sales of the vehicles. The increased sales will result in the increase in the sales volume of the vehicle and at the same profit margin the increased volume may cover up the costs.

(2) Going for the upgrade will increase the price. The price and sales are inversely related. Therefore there are chances that with the upgrade, the sales volume may decrease and this may result in the decrease of the overall revenues and the company may no t be able to cover up the cost of upgrade.

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