MARKETS & ECONOMIES Case Study Analysis
Question 1
The Brompton bikes are considered a classic good, which adds luxury to their life, as the bike is especially made in London with modern technology and engineering. The bike if foldable and it is considered be to least competitive. It is because the classic design and value delivered by the bike has attracted loyal customers, which has removed the competition.
From research, it has been observed that the brands which enjoy customer loyalty, have a low price elasticity of demand (Raj, 1991)i.e. a certain change in the price would not cause much change in the demand of the product, from the customers.
Similarly, the demand for Brompton bikes has a low price elasticity, as the customers are very loyal towards the company product. No matter what the prices be, the customers will prefer Brompton bikes for their classic design, high quality, convenient and durable product.
Due to Brexit, British pound has reduced its value as compared to Euro and Dollar, which means that the products from UK will become cheap for US and other nations with currency appreciation. From this, we can conclude that the price of the Brompton Bike should not be reduced because of the following reasons, such as
The bike has a low price elasticity of demand, reducing the price would not affect the demand, as the demand would still increase due the British products becoming cheap for other nations, as a result of Brexit. Rather, it would be wise to increase the prices, as comparedto other industry players, because the product has owned a brand reputation and loyalty from the customers. If the prices increase, the customer will still prefer to purchase form Brompton....................
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