Joe Sullivan and Mark Holland, Members of the Top Management

question 35

Multiple Choice

Joe Sullivan and Mark Holland, members of the top management at EuAir, an European airlines, were preparing for a meeting to discuss strategies to combat the recent rise in fuel prices. Before the meeting began, Joe and Mark were discussing how oil prices significantly impact the health of the world economy. Joe spoke of how higher oil prices since 1999, partly the result of OPEC supply management policies, contributed to the global economic downturn in 2000-2001. Mark agreed but added that the right kind of strategy can help them overcome, and even profitably use, this opportunity for hiking fares. Which of the following statements, if true, would denote the occurrence of groupshift in Mark's opinions during the meeting?

• A) Mark proposed that the prices be hiked and additional customer service measures be included so costumers have the best experience flying with EuAir.
• B) Mark encouraged the top-management team to consider laying off surplus employees and rightsizing EuAir to enhance its efficiency and lower costs.
• C) Mark agreed with Joe's opinion that providing the best service possible, even if it meant incurring a loss in the short run, would be the best strategy.
• D) Mark felt that EuAir should suspend some of its less profitable flights in the short run in favor of the routes that have greater demand among consumers.
• E) Mark proposed that this was an opportunity for EuAir to use its brand name effectively and diversify into other products and services.

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Definitions:

Diversifiable Risk

A type of investment risk that can be reduced or eliminated through diversification, including risks specific to an industry, company, or region.

Unsystematic Risk

The risk that is specific to a company or industry, which can be reduced through diversification.

Individual Investor

An individual investor is a non-professional private investor who buys and sells securities for their personal account.

Systematic Risk

The risk inherent to the entire market or market segment that cannot be mitigated through diversification.