GMAT Essays (AWA)

fit4life wrote:The following is part of a business plan created by the management of the Megamart grocery store:

"Our total sales have increased this year by 20 percent since we added a pharmacy section to our grocery store. Clearly, the customer's main concern is the convenience afforded by one-stop shopping. The surest way to increase our profits over the next couple of years, therefore, is to add a clothing department along with an automotive supplies and repair shop. We should also plan to continue adding new departments and services, such as a restaurant and a garden shop, in subsequent years. Being the only store in the area that offers such a range of services will give us a competitive advantage over the other local stores."

ANSWER:

Megamart grocery store has seen a increase of 20 percent in sales since the addition of the new pharmacy section. They now suggest opening up other such departments in their stores as a sure way to increase profits since they claim customers find convenience in a one-stop shopping experience. This argument is seriously flawed as the company hasn't taken into consideration the demographics of their customers, the economic standing of the pharmacy industry during the time of when the increase occurred, and if they will make a substanle amount of profits to warrant the openings of new departments over the next couple of year.

An argument that seriously weakens Megamart's claim is the non consideration of the demographics. For example, Megamart could be in an area where they manily accompany to senior citizens who require more medication and access to pharmacies. With an addition of the pharmacy this could have been beneficial to the senior citizens as a one-stop shop, however, these same citizens may have not have an interest in the addition of a clothing department, automotive supply and repair shop, and/or a restaurant and garden shop. If Megamart is basing its justification to add other departments because of an assumed profit from the pharmacy section, then it may not have that competitive advantage over the other local stores it is hoping for.

This arugument also leaves another unanswered question, how was the economy over the year Megamart witnessed it's increase in sale. Say the pharmacy industry had a spike in sales across the nation due to a new drug or new regulations. With the new pharmacy section at the store, along with other neighboring pharmacies, this increase could have directly affected profits of all pharmacy stores. With the lack of insight into other possible reasons as to why Megamart experienced the increase in sale, they may open these other departments under false statistics thus failing in their business.

Lastly, has Megamart taken into consideration the amount of profits needed from each new department to stay afloat in their business? Based on the argument, they haven't. Megamart needs to consider the cost/benefit of the openings of all these departments. Just because they witnessed an increase in profits doesn't mean they have the funds to continue opening up new departments.

In conclusion this argument is seriously flawed and would be considerably stronger if Megamart properly analyzed why they had a 20% increase in sales versus assuming it was due to the addition of the pharmacy section of the grocery store.