Question

1.6 An automobile manufacturer observes the demand for its brand increasing as per capita income increases. Sales increases also follow low interest rates, which ease credit conditions. Buyer purchase behavior is seen to be dependent on age and gender. Other factors influencing sales appear to fluctuate almost randomly (competitor advertising, competitor dealer discounts, introductions of new competitive models). a If sales and per capita income are positively related, classify all variables as dependent, independent, moderating, extraneous, or intervening. b Comment on the utility of a model based on the hypothesis.

Answer 1

A.

Other than sales and per capita being positively related, there are many types of classifications that be used to relate the over variables of demand the manufacturer is seeing for its brand. The variable of sales increases following low-interest rates, which ease credit conditions, would be classified as extraneous variables. This is because the increases sales seen, are coming credit conditions that are not being controlled by the auto manufacturer. In regards to the buyer purchase behavior being dependent on age and gender variable, this particular variable would be a moderating variable due to the fact the variable can have a significant contributory effect to the independent-dependent variables observed by the automobile manufacturer. In addition, there are many different age groups within the two gender groups that can affect the independent and dependent variables that are being manipulated by the automobile manufacturer.

In regards to the variables/factors of sales that appear to fluctuate randomly such as competitor advertising, competitor dealer discounts, and intros of new competitive models, all of the variables listed would be consider extraneous variables. This is due to the variables listed most of the time tend to be random in their effect of sales overall for the automobile manufacturers. These variables might affect the dependent variable of the auto manufacturers’ sales and would seem to have a smaller effect overall due to the random nature in how these variables are introduced. However, in a study conducted by Peng, Zhang, Zhang, Dai & Li, (2014) on the effectiveness of both search and non-search online advertising, and their effect on sales trends within a particular Chinese Auto Manufacturer. The research conducted found that online sales advertising tends to have direct positive sales increase overall. If the auto manufacturer in the hypothesis given did not implement the same advertising as their competitors, the extraneous variables discussed could have a much more significant impact on sales.

B.
In regards to the hypothetical question given the utility of the model that is being utilized by the auto manufacturer is the predictive model. The auto manufacturer is forecasting/analyzing multiple variables such as low interest/ease of credit, age and gender, and competitor tactics. The auto manufacturer is also trying to forecast future events that may affect sales. By being able to utilize this particular utility of the model, the auto manufacturer is also able to characterize present and future variables that can affect sales. In addition, according to a study done by Risso, Shearin, Ionova, Khavaev& Borrego, (2008), on pioneering scientific price customization in the automobile industry. It was found that within the US automobile industry ‘Pricing is a critical component in the marketing-mix plans of automobile manufacturers. Because they tend to keep their manufacturer's suggested retail prices (MSRPs) and wholesale prices fixed throughout the model year, they customize pricing to reflect supply and demand by using incentives; in the US market, they represent approximately $45 billion per year.’

Biblical Integration
“Poor is he who works with a negligent hand, but the hand of the diligent makes rich.” Proverbs (10:4). Any business who is trying to forecast sales or profits should try to run their business with these guiding words, and remember that the Lord will reward good faith and hard work. The lord will not reward negligent companies who don’t work diligently and honestly.