Question

Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural ingredients and organically raised lamb. This brand has a strong following and is recommended by veterinarians who practice in affluent neighborhoods. Wholesome's main supplier of lamb has announced that the price for lamb will be 15 percent higher next year. Which of the following statements is true?A. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer.B. Companies pursuing Wholesome’s business strategy are especially vulnerable to this risk.C. If Wholesome raises its pet food prices, customers will turn to less expensive brands such as Purina.D. Wholesome probably operates on very thin margins, and a cost increase will threaten its ability to earn average returns.

Answer 1

Answer:

A. Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer

Explanation:

From the information provided about Wholesome Pet Food; a few statements stand out:

1.The Years of operation (20years)

2.The Standard of Pet Food (high quality: natural ingredients & organically raised lambs)

3.The followership of the Brand (Strong)

4. The Brand endorsement (from leading Veterinarians)

5. Finally the most important element; the Customers Wholesome Pet Food serve are from the affluent neighborhoods

Although more information would have given us a full understanding of the Pet food business e.g the Competitive advantage of Wholsome Pet food over close rivals, the elasticity of its brand, the % of its Customer base that are affluent, middle class or Poor, it's Business profitability proposition etc

However, considering the 5 items listed above it will be a safe argument concluding that Wholesome will probably be able to pass the cost on to its customers because they are less sensitive to price increases than the average buyer