L6M9 practice question 8 of 15

XYZ Ltd is a perfume manufacturer based in France. They have created a new perfume and research has shown that demand for the perfume will outstrip…

XYZ Ltd is a perfume manufacturer based in France. They have created a new perfume and research has shown that demand for the perfume will outstrip supply. The Chief Operating Officer (COO) and the Chief Financial Officer (CFO) are meeting to discuss this. The COO believes that the organisation needs to reallocate resources in order to meet demand. Are there any exceptions to when this may be the case?

Answer options

A: No - organisations should always aim to meet customer demand or resources will be underutilised

B: No - this would negatively affect the profit the organisation could make

C: Yes - there are occasions when an organisation would choose not to fulfil customer demand Correct answer

D: Yes - there are exceptions, but these are always outside of the organisation's control

Correct Answer:

C. Yes - there are occasions when an organisation would choose not to fulfil customer demand

Explanation

While organisations generally try to fulfil customer demand, there are times when they strategically choose not to. A common reason is maintaining a premium image—limiting supply can increase desirability and justify a higher price. For example, luxury brands often limit product availability. (See p.169)

Keep practicing

Take the free L6M9 practice test

Ten exam-style questions with answers and explanations, plus the exam facts and study guides.

Start the free practice test