Company Euronappy sells disposable diapers in Europe. It would like to expand into the Middle East. After some preliminary market research, four countries put on the short list, namely: Bahrain, Kuwait, Saudi Arabia, and the United Arab Emirates (UAE). Given its limited resources, the company can only enter two of these countries. Your assignment is to come up with a market size estimate for each one of them so that Euronappy can decide which one to enter. You decide to run a regression using data from Euronappy's European market. Three variables are presumed to predict the sales of disposable diapers: population size, per capita GDP, and the birth rate. Data were collected on all three variables (source: www. cia.gov/cia/publications/factbook/) for the 19 European countries where Euronappy operates. However, the birth rate did not seem to be a factor. The estimated regression model is:
Y¼ = - 630.6 + 0.015X1 + 47.15X2
Y = annual sales of diapers in millions of units
X1 = population in thousands
X2 = per capita Gross Domestic Product (GDP- Purchasing Power Parity Basis) in thousands US$.
a. Collect data on the population and per capita GDP for the four countries on the list (Bahrain, Kuwait, Saudi Arabia, and the UAE).
b. Now use the estimated regression model to predict the yearly sales of disposable diapers for these four countries. Which of these two would you choose?
c. Suppose the company is also looking at North Africa, in particular: Egypt, Morocco, and Tunisia.Would you advise them to use the same estimated regression model? Why, or why not?