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Price and Mercedes

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xCASE: MERCEDES GOES AFTER YOUNGER BUYERS

Mercedes and BMW have been competing head-to-head for market share in the luxury-car market for more than three decades. Back in 1959, BMW (Bayerische Motoren Werke) almost went bankrupt and nearly sold out to Daimler-Benz, the maker of Mercedes-Benz cars.BMW was able to recover to the point that in 1992 it passed Mercedes in worldwide sales. Among the reasons for BMW’s success was its ability to sell models that were more luxurious than previous models but still focused on consumer quality and environmental responsibility.

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In particular, BMW targeted its sales pitch to the younger market, whereas Mercedes retained a more mature customer base. In response to BMW’s success, Mercedes has been trying to change their image by launching several products in an effort to attract younger buyers who are interested in sporty, performance-oriented cares.

BMW, influenced by Mercedes, is pushing for more refinement and comfort. In fact, one automotive expert says that Mercedes wants to become BMW, and vice versa.

However, according to one recent automotive expert, the focus is still on luxury and comfort for Mercedes while BMW focuses on performance and driving dynamics. Even though each company produces many different models, two relatively comparable coupe automobiles are the BMW 330ci and the Mercedes CLK 320. As of 2006, the average manufacture’s suggested retail price for a 330ci was $37,600 as compared to $45,750 for a CLK 320. Gas mileage for the 330ci is 30 mpg on the highway and 20 mpg in the city as compared to 28 mpg on the highway and 19 mpg in the city for the CLK 320. Discussion

1.Suppose Mercedes is concerned that dealer price of the CLK 320 are not consistent and that even though the average price is $45,750, actual prices are normally distributed with a standard deviation of $2,981.Suppose also that Mercedes believes that at $44,000, the CLK 320 is priced out of the BMW 330ci market. What percentage of the dealer prices for the Mercedes CLK 320 is more than $ 44,000 and hence price out of the BMW 330ci is market? The average price for a BMW 330CI IS $ 37,600. Suppose these prices are also normally distributed with a standard deviation of $2,367. What percentage of BMW dealers are pricing the 330ci at more than the average price for a CLK 320? What might this mean to BMW if dealers were pricing the 330ci’s at this level? What percentage of Mercedes dealers are pricing the CLK 320 at less than the average price of a330ci? Suppose a BMW dealer is selling a 330ci for $40,000. What percentage of Mercedes dealers price the CLK 320 less than his price? In terms of the CLK 320 competing with the 330ci by price, what do these data tell you?

Solution:
1. a.)Prob(x > 44,000μ = 45,750 and σ = 2981):
= -0.59
From Table A.5, the area for z = -0.59 is .2224.
Prob(x > 44,000) = .5000 + .2224 = .7224 = 72.24%
Over 72% of Mercedes dealers would be priced out of competition with this BMW model.
b.) Prob (x > 45,750μ = 37,600 and σ = 2367):
= 3.44
From Table A.5, the area for z = 3.44 is .4997.
Prob(x > 45,750) = .5000 – .4997 = .0003 = 0.03%
Virtually none of the BMW dealers are pricing the 330ci more than the average price of the Mercedes CLK320.

c.) Prob(x < 37,600μ = 45,750 and σ = 2981):
= -2.73
From Table A.5, the area for z = -2.73 is .4968.
Prob(x < 34,990) = .5000 – .4968 = .0032 = 0.32%
About .3% of the Mercedes dealers are pricing CLK320 less than the average price of the BMW 330ci.

d.) Prob(x < 40,000μ = 45,750 and σ = 2981):
= -1.93
From Table A.5, the area for z = -1.93 is .4732.
Prob(x < 40,000) = .5000 – .4732 = .0268 = 2.68%
Less than 3% of the Mercedes dealers price the CLK320 less than $40,000. Conclusion: There is little overlap in the prices of the two cars and it could be concluded that they are not really competing with each other pricewise.

Cite this Price and Mercedes

Price and Mercedes. (2016, Oct 16). Retrieved from https://graduateway.com/price-and-mercedes/

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