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You are an economist for a u. S. Manufacturer, who is considering expanding sales into europe. Your market research has identified the market potential in france, italy, and spain as described next: success level france italy spain probability units probability units probability units big 0. 3 1,000,000 0. 4 900,000 0. 4 700,000 mediocre 0. 3 600,000 0. 4 700,000 0. 3 300,000 failure 0. 4 0 0. 2 0 0. 3 0 the product sells for $12 and has unit costs of $10. If you can enter only one market, and the cost of entering the market (regardless of which market you select) is $300,000, should you enter one of these markets? if so, which one? if you enter, what is your expected profit?.

Respuesta :

As an economist for a US Manufacturer, using the market potential research data, I will propose to the company to expand the market  into Italy market since it has expected profit around $980,000.

Market Potential represents the size of the market for a specific product at the specific time. Market potential of a product is measured by its sales volume.  

From the case, we got some informations regarding the market potential for our products in 3 countries with 3 scenarios, such:

                                                   Success Level

                                                    Big           Mediocre          Failure

France  Probability                      0.3                 0.3                 0.4

            Unit                             1,000,000      600,000              0

            Probability Unit sold  300,000          180,000             0

Italy     Probability                        0.4                 0.4                  0.2

           Unit                               900,000          700,000            0

           Probability Unit sold     360,000         280,000            0

Spain  Probability                          0.4                0.3                  0.3

           Unit                                 700,000         300,000             0

           Probability Unit sold       280,000          90,000             0

The probability unit sold represents the potential units of products in each scenarios by multiplying the scenario's probability and unit data.

Price = $12 per unit

Production cost = $10 per unit

Entry cost = $300,000 (equal for all markets)

We could find the revenue and production cost of each country by using revenue and production cost formula:

Revenue = Price x Unit sold

Production Cost = Unit cost x Unit sold

Based on the data we got, we could find the total probability units sold for each country:

               Total Prob. Unit Sold  Revenue  Prod. Cost  Entry Cost  Profits

France             480,000            5,760,000 4,800,000  300,000   660,000

Italy                  640,000            7,680,000 6,400,000   300,000  980,000

Spain               370,000             4,440,000   370,000    300,000  440,000

From the calculation above, we know that Italy is the most promising market to be the next market of our product expansion plan.

Learn more about Market Potential here: https://brainly.com/question/18958933

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