Mini Case discussion-VW invasion of north America When Volkswagen entered the US market with their basic no-frills automobile. the Beetle, W was experiencing little success in Europe. Excess inventory had stockpiled at ports and road terminals awaiting export to a new market. Consequently. vw focused for a time on any demand stimulus that would increase revenue. In the US market. VW had no dealer network and initially provided sales and service only at the docks in New Jersey, Charleston, SC and Houston, TX. General Motors and Ford were developing compact cars as well. so VW decided to enter the market at a ridiculously low promotional price of $800. Two years later a 25 percent price increase was introduced. Although VW lost some potential customers at $1000 who were willing to pay between $800 and $999. the extra $200 per car on all the cars they continued to sell easily offset the revenue loss at old $800 prices from a few lost sales. The price elasticity of demand was in the inelastic range of demand. By 1960. VW had raised the price another 20 percent to $1200. and again revenue rose. Finally. in 1964 at $1350, the extra receipts from the $150 price increase across all remaining sales were just sufcient to offset the loss in revenue from the lost sales. At $1350. price elasticity had reached the unit elastic price point. In order to increase sales. Volkswagen then proceeded to build a US dealer network. At 1350 with a dealer network and a larger quantity base, Volkswagon was again in a position to raise price. In 1968. 562.000 Beetles were sold at a price of $1500. and revenue again increased to $843 million. Although the product remained very inexpensive. the Highway Safety Act of 1996. plus Ralph Nader's crusade against small rea r-engine cars. plus low gasoline prices caused consumers to begin losing interest in Beetles and start buying large numbers of Mustangs. Cama ros. and a new more powerful Super Beetle. In 1969. revenue and price of the Beetle increased one last time. At $1800. revenue was $968 million ($1800*538,000 units sold). Case discussion questions 1 . Before 1964. why VW can increase sales revenue every time when it increase its price? 2. WV built sales networkafter 1964. what is its influence on the demand of Beetles in the US ma rket? wer Why VW can increase its revenue through increasing price again