21The following appeared in a memo from the new vice president of Sartorian, a company that manufactures men's clothing.
"Five years ago, at a time when we had difficulties in obtaining reliable supplies of high-quality wool fabric, we discontinued production of our deluxe alpaca overcoats. Now that we have a new fabric supplier, we should resume production. This coat should sell very well: since we have not offered an alpaca overcoat for five years and since our major competitor no longer makes an alpaca overcoat, there will be pent-up customer demand. Also, since the price of most types of clothing has risen in each of the past five years, customers should be willing to pay significantly higher prices for alpaca overcoats than they did five years ago, and our company profits will increase."
From the above statement in a memo from the new vice president of Sartorian, resuming the production of deluxe alpaca overcoats is treated as a good solution to increase the company’s profits. Two main reasons are summarized in the statement: their major competitor no longer makes an alpaca overcoat and the price of most types of clothing has risen in each during the past five years. With more closely scrutiny, we will find out that these two reasons are unconvincing to come to the conclusion of resuming the production of deluxe alpaca overcoat.
In the first place, the fact that the company’s major competitor no longer makes an alpaca overcoat should not be taken as an indication to the pent-up customer demand for this kind of clothing. The reason for no longer making an alpaca overcoat of their major competitor may be that this kind of clothing had been unpopular and not trendy since some time ago. It is possible that customers had no interest in dressing in alpaca overcoat and are not willing to spend on it. In this case, it might bring Sartorian failure when it continues to produce alpaca overcoats since they have had a new fabric supplier. Furthermore, five years is enough time for customers to forget a certain kind of clothing such as deluxe alpaca overcoat. With the rapid development and changing of the clothing industry, there are such a good number of new styles of clothing appeared. The deluxe alpaca overcoat, which had not been sold in the market for five years, would encounter so many difficulties when it comes into the market again. The situation the company might encounter is not the pent-up customer demand as the vice president wishes, but the disregard of them.
In addition, the fact cited by the speaker in the title statement that the price of most types of clothing has risen in each during the past five years can not promise to the rise of deluxe alpaca overcoat. Although it is true that the price of most types of clothing has risen, the judgment that the deluxe alpaca overcoat would follow this trend to be sold in a higher price is also questionable. As a consistent rule in a fully competitive market, we can not make sure that the price of one kind of clothing would be higher some days later. As a consequence, it is too optimistic to think that customers should be willing to pay significantly higher prices for deluxe alpaca overcoats than they did five years ago.
Overall, the speaker in the title statement ignored some other possible reasons why his or her company’s main competitor no longer makes an alpaca overcoat and made a too optimistic prediction about the price of their coats. All potential causes and possibilities should be carefully considered before any final decisions are made.