The vice president of Sartorian, a company that manufactures men’s clothing, asserts that the company should resume production of its alpaca overcoat. He bases his argument on the fact that the company’s major competitor no longer manufactures an alpaca overcoat and that, therefore, there will be pent-up customer demand. He also argues that customers should be willing to pay significantly higher prices for an alpaca overcoat than they did five years ago. These arguments are not strong enough to convince the vice president of Sartorian to produce alpaca overcoats. The first fact that the vice president of Sartorian mentions is that in five years, the company’s major competitor discontinued the alpaca overcoat. Unless Sartorian has exclusive rights to produce alpaca coats in the U.

S.

A., then this company’s action may have undermined Sartorian’s ability to market its products. If another company can produce and market an alpaca coat at a lower price, customers may switch to this coat rather than spending more money on alpaca coats from Sartorian. In addition, Sartorian’s competitor may have less control over pricing than Sartorian, so there is no guarantee that the company’s prices will remain high. Therefore, it is more likely that customers will switch to a less-expensive coat than they will pay more for an alpaca coat from Sartorian.

The second fact that the vice president of Sartorian mentions is that the price of most types of clothing has increased in each of the past five years. This may be true, but customers can easily substitute products if they are becoming more expensive. For instance, customers may substitute a more expensive coat for a less expensive coat from Sartorian if they believe they can get the same warmth or protection with a less expensive coat. Therefore, the vice president’s assumption that customers will pay more for an alpaca coat than five years ago should be questioned. Again, if another company produces and markets an alpaca coat at a lower price, customers may switch to this coat rather than paying more for Sartorian’s product. It is also important to note that the price of most types of clothing has increased during the same time period, which might have encouraged customers to buy less expensive coats. If the price of alpaca coats from Sartorian were to remain steady, then the company may be forced to raise its prices. Therefore, even if customers are willing to pay more for an alpaca coat, they may not do so if Sartorian increases its prices.

The vice president of Sartorian also assumes that the alpaca coat will “sell very well.” He does not provide any evidence that would support this assertion. Sales data, market share data, or demographic information about customers’ reasons for purchasing an alpaca coat would be helpful. Without this information, the vice president cannot determine whether there is a demand for an alpaca coat. Even if the company’s competitors do not currently produce alpaca coats, customers may still want to purchase one. Therefore, the vice president should collect this information before making the manufacturing decision.

The vice president of Sartorian’s memo expresses several valid points, but unless Sartorian can prove that there is a demand for an alpaca coat, then the company should refrain from producing one.