Question

Suppose there are 10 companies, including your company and other 9 competitors, in the market, deciding one segment as their target segment between Segment A and Segment B. The total market value of Segment A is $250 million dollars, and the total market value of Segment B is $180 million dollars. Assume their revenue from segmentation decisions will be determined as follows:______.

(i) all the companies choosing segment A equally split $250 millions, i.e., 250 millions each firm gets the total number of companies choosing segment A
(ii) all the companies choosing segment A equally split $180 millions, i.e., 180 millions each firm gets the total number of companies choosing Seg. B* Suppose a predicted survey indicates that 4 of your competitors plan to choose segment A, and the other 5 plan to choose segment B. Which segment is more attractive to your company?
a. Segment B
b. A and B are equally attractive
c. Segment A

Answer 1

The more attractive segment to my company is:

c. Segment A

Step-by-step explanation:

a) Data and Calculations:

Number of companies in the market = 10

Segments in the market = A and B

Total market value of Segment A = $250 million

Total market value of Segment B = $180 million

Total market value = $430 million

When Segment A and B are equally shared, each firm gets = $43 million ($430 million/4).

If 4 firms choose Segment A only, each firm gets $62.5 million

If the remaining 5 firms choose Segment B only, each firm gets $35 million ($180 million/5)

Therefore, the more attractive segment is Segment A.