Question

Explain the proportional draw property in detail. When do you think this is likely to be violated? What would you do to fix this possible violation?

Answer 1

Question 1:

The proportional draw property explains the scenario when a new company enters the market with the same product line as existing company in the market. The entering of new company will lead to reduce the market share of other companies. In order to study, the amount of market share captured by the new company, we use the proportional draw property. The study takes the current market trends of companies with the number of products sold and compare it against the new company market prices and the product which is planning to launch

Question 2:

The proportional draw property is likely to be violated in the case, when new company without any customer trust enters into market with bad products (not comparable with existing companies) or with pretty high prices then the existing companies. In this case, there is no change in the market landscape distribution

Question 3:

In order to fix this violation, the new entering company must do a proper market research before fixing the price of products. The new company should provide goods at lesser price than existing rival companies in order to make their name in the market. So, they may start with less profit per product sold, but with the increase in market share, the company will fetch higher amount of profits.

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