Profits for one of Company X's flagship products have been declining slowly for several years. The CFO investigated and determin
ed that inflation has raised the cost of producing the product but consumers who were surveyed reported that they weren't willing to pay more than the current price. As a result, the CFO recommended that the company stop producing this product because the CEO only wants products whose profit margins are increasing. The answer to which of the following questions would be most useful in evaluating whether the CFO's decision to divest the company of its flagship product is warranted?
a. Does the company have new and profitable products available with which to replace the flagship product?
b. Will the rest of Company X's management team agree with the CFO's recommendation?
c. Are there additional features that could be added to the product and for which consumers might be willing to pay a higher price?
d. Is there a way to alter the manufacturing or distribution processes in order to reduce the cost to produce the flagship product?
e. What percentage of Company X's revenues is represented by sales of the flagship product in question?
Are there additional features that could be added to the product and for which consumers might be willing to pay a higher price? is the correct answer.
Explanation:
A chief financial officer (known as CFO) is the person in charge of finances in a company; sometimes, the CFO is also in charge of data analysis. In the question, this person has decided to stop producing the flagship product (also known as core product, is defined as the major product of a company) under the given situations (CEO recommended stop producing anything that which profit margins are not increasing), so, it is necessary to find out if there is an option to add features so the consumers pay more. It would be different if it weren't the flagship product, but since this made the company or gave it some popularity, it is not easy to get rid of it.
