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The directors of fast food chain of restaurants based in Barcelona named El Mejicanowere considering whether to begin the promotion for their new line of menus than originally planned. “I think we should go ahead with the price cuts,” Pedro Morales said. “After all, it couldn’t hurt! At the very worst, we’ll sell these menus cheap for a little longer than we had planned, and on the other side we could beat Panchito to the punch. Panchito is the most important competitor of El Mejicano in Barcelona and they are also a fast food chain specialized in Mexican food. “That’s really the question, isn’t it?” replied Ana Perales, the marketing manager of the firm. “If Panchito really is planning their own menus promotion, and we start our promotion now, we would beatthem to the punch. On the other hand, we might provoke a price war. And you know what a price war with that company means. We spend a lot of money and resources fighting with each other. There’s no real winner. We both just end up with less profit.” Manuel Pereira, the finance manager for El Mejicano, piped up, “The consumer wins in a menus price war. They get to buy things cheaper for a while. We ought to be able to make something out of that.” Antonia Lozano, CEO for El Mejicano, looked at the finance manager thoughtfully. “You’ve shown good horse sense in situationslike these, Manuel. How do you see it?” Manuel hesitated. He didn’t like being put on the spot like this. “You all know what the sales projections of menus are for the 4-week promotion as planned. Ana Perales tells us to expect sales of 2 million euros. The objective is to gain at least 2 percentage points of market share of the fast food market in Barcelona, but our actual gain could be anywhere from nothing to three points. Profits during the promotion are expected to be down by 10%, but after the promotion ends, our increased market share should result in more sales and more profits.” Pedro Morales, the sales manager, broke in. “That’s assuming Panchito doesn’t come back with their own promotion in reaction to ours. And you know what our report is from Laura Valencia. She says that he figures Panchito is up to something.” “Yes, Laura did say that. But you have to remember that Laura works for our advertising agent. Her incentive is to sell advertising. And if she thinks she can talk us into spending more money, she will. Furthermore, you know, she isn’t always right. Last time she told us that Panchito was going to start a major campaign, he had the dates right, but it was for a different menu line altogether.” Antonia wouldn’t let Janice off the hook. “But Janice, if New Morning does react to our promotion, would we be better off starting it early?”

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