Reference no: EM13223282
Acme Fragrance, a maker of fine perfumes, has a pricing problem. It makes perfumes in France, and the quality of perfume that it makes costs $40 per oz. to produce. Acme sells its product in two markets, France and the U.S. Extensive research and analysis of its competitors has led Acme to believe that women in France are choosier about fragrances than their American counterparts, in part because there are so many more products to choose from. Also, they are less sensitive to price than American women.
Currently you observe that your perfume is selling for $80 an oz. in France, and for $58 an oz. in the U.S. In France you sell 800 oz. annually at a total cost of $32,000, while in the U.S. you sell 2,200 oz. annually at a cost of $88,000. Pricing and production decisions are made by the two regional managers, one for France (Henri) and one for the U.S. (Elle). You need to promote one of these individuals to Master of the Universe, and you would like to promote the most able one, the one who comes closest to maximizing profits for the company. So you decide to have each manager sell an additional 100 oz. of perfume - i.e., current sales will now be 900 in France and 2,300 in the U.S. Henri reports back that he had to lower the price to $78 in order to move the 900 units. His total costs were $36,000. Elle reports that she had to slash price to $57 to move the 2,300 units. Her costs were $92,000.
Based on this information, who do you promote and why?
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