In 2004, Mack Mitchell, Owner of Mitchell Helicopters, Decided He

question 13

Multiple Choice

In 2004, Mack Mitchell, owner of Mitchell Helicopters, decided he needed marketing research conducted before he made a decision that would change the total strategic direction of his company. Mack was convinced that the future market was not for the large, very expensive helicopters the industry had been providing the market for more than 50 years. Rather, he envisioned a significant market of small, single-seat helicopters that would be used by high-income business executives to commute in large cities where commuting was becoming increasingly difficult. To be successful, Mitchell knew that this involved much more than designing and building a small helicopter. It also meant that buyers would have to make infrastructure changes by installing safe-landing pads at home and at work. If he was right, Mitchell would be embarking on a major change for the company; a change that would put the financial stability of the company at risk. Because it was such a major decision, Mitchell wanted research to confirm or disconfirm his decision. Remember we are assuming this situation occurred several years ago in 2004. In 2004, Mitchell would have been hampered in deciding which marketing research to hire for this important decision because:

• A) there are no marketing research firms that are market segment specialists in the demand for small, commuter helicopters
• B) the larger, more reputable marketing research firms have skills that are focused on providing standardized information, such as syndicated data or standardized services
• C) due to the fact that there was no certification program in the marketing research industry in 2004, it would be more difficult for Mitchell to evaluate whether or not the individual researchers have the business knowledge and marketing expertise to conduct an appropriate marketing research study
• D) by identifying the nature of the desired research, Mitchell would have made his commuter-copter idea public
• E) Mitchell has not conducted enough secondary data research to enable him to determine if the value of the research will outweigh the costs of the research

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Definitions:

Initial Franchise Fee

An upfront cost that a franchisee pays to a franchisor for the rights to use the brand and operate under the franchise agreement.

Recorded as Revenue

The recognition of income when earned by the company, typically upon delivery of goods or completion of services.

Installment Sales Method

The installment sales method is an accounting technique used to recognize revenue and expenses for sales made on credit, wherein income is recognized as installment payments are received.

Recognizing Profit

The process of formally acknowledging and recording income on the financial statements when it is earned, regardless of when the cash is received.