Assessment Task 4

MERCEDES GOES AFTER YOUNGER BUYERS

Mercedes and BMW have been competing head-to-head for market share in the luxury-car
market for more than four decades. Back in 1959, BMW (Bayerische Motoren Werke) almost
went bankrupt and nearly sold out to Daimler-Benz, the maker of Mercedes-Benz cars. BMW
was able to recover to the point that in 1992 it passed Mercedes in worldwide sales. Among
the reasons for BMW’s success was its ability to sell models that were more luxurious than
previous models but still focused on consumer quality and environmental responsibility. In
particular, BMW targeted its sales pitch to the younger market, whereas Mercedes retained a
more mature customer base. In response to BMW’s success, Mercedes has been trying to
change their image by launching several products in an effort to attract younger buyers who
are interested in sporty, performance-oriented cars. BMW, influenced by Mercedes, is
pushing for more refinement and comfort. In fact, one automotive expert says that Mercedes
wants to become BMW, and vice versa. However, according to one recent automotive expert,
the focus is still on luxury and comfort for Mercedes while BMW focuses on performance
and driving dynamics. Even though each company produces many different models, two
relatively comparable coupe automobiles are the BMW 3 Series Coupe 335i and the
Mercedes CLK350 Coupe. In a recent year, the national U.S. market price for the BMW 3
Series Coupe 335i was $39,368 and for the Mercedes CLK350 Couple was $44,520. Gas
mileage for both of these cars is around 17 mpg in town and 25 mpg on the highway.

1. Suppose Mercedes is concerned that dealer prices of the CLK350 Coupe are not
consistent and that even though the average price is $44,520, actual prices are
normally distributed with a standard deviation of $2,981. Suppose also that Mercedes
believes that at $43,000, the CLK350 Coupe is priced out of the BMW 3 Series
Coupe 335i market. What percentage of the dealer prices for the Mercedes CLK350
Coupe is more than $43,000 ?
2. The average price for a BMW 3 Series Coupe 335i is $39,368. Suppose these prices
are also normally distributed with a standard deviation of $2,367. What percentage of
BMW dealers are pricing the BMW 3 Series Coupe 335i at more than the average
price for a Mercedes CLK350 Coupe?
3. What percentage of Mercedes dealers are pricing the CLK350 Couple at less than the
average price of a BMW 3 Series Coupe 335i?