The client is an integrated oil company and controls the entire suppl ychain from oil wells to gas stations.
They have discovered a newautomobile fuel that will increase mileage by 30%. It will also cost 10% more to produce the fuel. The fuel is similar to the old fuel inevery other way. What should they do with the new fuel?
Additional information: There are 5 players in the industry (including our client). They all have equal market share. The interviewer asked to guesstimate what the demand would be like. No special environment concerns or advantages from the new fuel.
Under no circumstances can the client capture more than 10% of the market due to capacity constraint. Margins on old fuel are 10%