18. Impact of Eastern European Growth. The managers of Loyola Corp.

recently had a
meeting to discuss new opportunities in Europe as a result of the recent integration among
Eastern European countries. They decided not to penetrate new markets because of their
present focus on expanding market share in the United States. Loyolas financial managers
have developed forecasts for earnings based on the 12 percent market share (defined here as
its percentage of total European sales) that Loyola currently has in Eastern Europe. Is 12
percent an appropriate estimate for next years Eastern European market share? If not, does it
likely overestimate or underestimate next years actual Eastern European market share next
year?
ANSWER: It would likely overestimate its market share because the competition should
increase as competitors penetrate the European countries.