ITPEC FE Morning October 2021 Question 68

Topic: Business Strategy Management

Company T sells three (3) products: A, B, and C. Currently, products A, B, and C have 10,000, 20,000, and 80,000 purchasers every month, respectively. There is a plan to change the product line and sell four (4) new products, P, Q, R, and S, from next year. Accordingly, a trial calculation was made on the proportion of existing customers that will purchase the new products and the number of new customers. Which of the following is an appropriate conclusion from the trial calculation? Here, numerical values up to one (1) decimal point in each line of the table below represent the proportion of people who will change to the new product from the corresponding old product.

Number ofpeoplePQRSA10,0000.50.30.10.1B20,0000.10.60.10.1C80,0000.10.10.30.3Number of existingcustomers15,00023,00027,00027,000Number of newcustomers5,0007,00013,00023,000

Explanation

New customers of S (23,000) are fewer than the product C purchasers who switch to S (24,000) — multiply each old product's purchasers by its proportion, then compare.

The existing-customer row is the sum down each column; for example, P gets 10,000 × 0.5 + 20,000 × 0.1 + 80,000 × 0.1 = 15,000, which confirms how the table is read.

  • •C to S: 80,000 × 0.3 = 24,000
  • •New customers of S: 23,000
  • •23,000 < 24,000, so statement (c) holds

Answer (c)

Why not others:

  • •(a) — A to Q is 10,000 × 0.3 = 3,000; 1,000 is what A sends to R or to S (proportion 0.1)
  • •(b) — all purchasers of P are 15,000 + 5,000 = 20,000, of whom 10,000 × 0.5 = 5,000 come from A, which is 25%; 50% is the share of A's purchasers who move to P, the proportion read in the wrong direction
  • •(d) — B's proportions add up to 0.1 + 0.6 + 0.1 + 0.1 = 0.9, so 10% of B's purchasers (2,000 people) buy none of the new products

Key rule: In a transition table, a row proportion is a share of the old product's customers, not of the new product's; convert to head counts before comparing, and a row summing to less than 1 means customers lost.

Business Strategy Management · AI-written, may contain errors

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