Marketing Analyst: Traditionally, introducing a new consumer product contributes to the diversity of a company’s product mix and results in an overall increase in revenues and profits. However, our launch of a new brand of soft drinks, Cool Breeze, planned for the end of this fiscal year, will almost certainly reduce rather than increase the company’s profits.
Since we already offer a line of chilled refreshments that are very similar to Cool Breeze, the launch of the new drink is likely to cannibalize our current sales rather than attract new customers. Additionally, since the costs of producing Cool Breeze are higher than those of the other chilled refreshments, a large part of our current sales will be replaced with lower-margin revenues. In the argument above, which of the following statements best describes the role played by each portion in boldface?
Since we already offer a line of chilled refreshments that are very similar to Cool Breeze, the launch of the new drink is likely to cannibalize our current sales rather than attract new customers. Additionally, since the costs of producing Cool Breeze are higher than those of the other chilled refreshments, a large part of our current sales will be replaced with lower-margin revenues. In the argument above, which of the following statements best describes the role played by each portion in boldface?