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Why does buying an installation require longer negotiations than other business purchases?
AIt is a large commitment against future earnings
BIt is used up within the first year of purchase
CIt is bought in very large quantities each month
DIt is built into the product that the firm sells
Answer & Solution
Correct answer: A. It is a large commitment against future earnings
1. Installations are large, expensive capital items that set the nature, scope and efficiency of a company.
2. Such a purchase is a big commitment against future earnings and profitability.
3. That is why buying one requires longer negotiations and more planning.
4. It also requires the judgments of more people than any other type of purchase.
5. Installations last for years, so they are not used up within the first year.
6. They are bought rarely rather than monthly, and they are not built into the end product.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 11 "Creating Products and Pricing Strategies to Meet Customers' Needs", section 11.6 What Is a Product?_
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