XYZ firm, the leading producer of leather goods in its country is planning to expand its business. Industry experts identify Asia as a potential target market. They report that substitute products, particularly in India, are highly priced. Darren, the operational head, feels that exporting their product to India is a good idea. According to him, their price advantage alone will ensure good sales. However, his colleague, Mark, who is also the head of product development, feels that Darren is too optimistic, and that this venture may not turn out to be as profitable as Darren expects it to be. Darren's view is based on which of the following assumptions? A. Imports in India usually exceed exports from the country. B. XYZ's product is a close substitute for the locally available goods. C. Consumers in India are extremely loyal to national brands. D. India has high import tariffs. E. The quality of the domestically produced substitutes is not as good as XYZ's product.

Question

Rolex

Business

4 November, 04:30

XYZ firm, the leading producer of leather goods in its country is planning to expand its business. Industry experts identify Asia as a potential target market. They report that substitute products, particularly in India, are highly priced. Darren, the operational head, feels that exporting their product to India is a good idea. According to him, their price advantage alone will ensure good sales. However, his colleague, Mark, who is also the head of product development, feels that Darren is too optimistic, and that this venture may not turn out to be as profitable as Darren expects it to be. Darren's view is based on which of the following assumptions? A. Imports in India usually exceed exports from the country. B. XYZ's product is a close substitute for the locally available goods. C. Consumers in India are extremely loyal to national brands. D. India has high import tariffs. E. The quality of the domestically produced substitutes is not as good as XYZ's product.

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Answers (1)

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Nathan Wall · Answer 1

The answer is: B.) XYZ's product is a close substitute for the locally available goods.

Explanation:

A substitute product can be defined as a good a consumer perceives as similar or comparable to another good (e. g. cow and chicken meat). Generally speaking, when the price of one of these goods increases, the demand for its substitute good increases.

In this case, Darren believes that since XYZ's product is cheaper it should sell better than its competition (close substitute goods).