Answer to Question #150501 in Economics of Enterprise for risha

Question

Many U.S. households still do not have Internet access. Suppose 25 out of 80 households in a small southern town do not have Internet access. A company that provides high-speed Internet has recently entered the market. As part of the marketing campaign, the company decides to randomly select ten households and offer them red laptops along with a brochure that describes their services. The aim is to build goodwill and, with a free laptop, tempt nonusers into getting Internet access.

Answer 1

Solution to question 150501

The strategy of entering in to the unexploited market will work well for the new entrant company because the people without internet access will know their brand first. Again, it will be costly to entice nonusers to change or agree with the company on using internet. the percentage of households without internet access is 31.25% meaning that 68.75% of the households have already subscribed to the other competitors. Depending on how many companies are competing for the households, the new company must also invest in convincing the already subscribed households to also use their high speed internet. In simpler terms, as much as the new market entrant would want to tap the nonusers, it must also consider the already subscribed households to other internet companies. Additionally, the cost of laptops should also be taken in to consideration but the strategy is worth trying if there is room to expand and attract the already subscribed internet users.