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Find weakness - strategy to produce more to increase sales

This topic has 2 expert replies and 1 member reply

Find weakness - strategy to produce more to increase sales

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Sales of telephones have increased dramatically over the last year. In order to take advantage of this increase, Mammoth industries plans to expand production of its own model of telephone, while continuing its already very extensive advertising of this product.

Which of the following, if true, provides most support for the view that Mammoth industries cannot increase its sales of telephones by adopting the plan outlined above?

A. Although it sells all of the telephones that it produces, Mammoth industries' share of all telephone sales has declined over the last year.

B. Mammoth industries' average inventory of telephones awaiting shipment to retailers has declined slightly over the last year.

C. Advertising has made the brand name of Mammoth industries' telephones widely known, but few consumers know that Mammoth industries owns this brand.

D. Mammoth industries' telephone is one of three brands of telephone that have together accounted for the bulk of the last year's increase in sales.

E. Despite a slight decline in the retail price, sales of Mammoth industries' telephones have fallen in the last year.

OA: E

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Utkal

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utkalnayak wrote:
Sales of telephones have increased dramatically over the last year. In order to take advantage of this increase, Mammoth industries plans to expand production of its own model of telephone, while continuing its already very extensive advertising of this product.

Which of the following, if true, provides most support for the view that Mammoth industries cannot increase its sales of telephones by adopting the plan outlined above?

A. Although it sells all of the telephones that it produces, Mammoth industries' share of all telephone sales has declined over the last year.

B. Mammoth industries' average inventory of telephones awaiting shipment to retailers has declined slightly over the last year.

C. Advertising has made the brand name of Mammoth industries' telephones widely known, but few consumers know that Mammoth industries owns this brand.

D. Mammoth industries' telephone is one of three brands of telephone that have together accounted for the bulk of the last year's increase in sales.

E. Despite a slight decline in the retail price, sales of Mammoth industries' telephones have fallen in the last year.
Premise: Sales of telephones have increased dramatically over the last year.
Conclusion: Mammoth industries plans to expand production of its own model of telephone.

Notice the CHANGE IN SCOPE.
The premise is about OVERALL SALES (sales of telephones), while the conclusion is about ONE PARTICULAR COMPANY (Mammoth industries).
To weaken the conclusion, the correct answer choice will BREAK THE LINK between overall sales and Mammoth industries.

E: Despite a slight decline in the retail price, sales of Mammoth industries' telephones have fallen in the last year.
This answer choice indicates a key difference between overall sales and Mammoth industries:
While overall sales have INCREASED DRAMATICALLY , sales of Mammoth's phones HAVE FALLEN, weakening the conclusion that Mammoth industries should expand production of its phones.

The correct answer is E.

Some test-takers might be attracted to A.
A: Although it sells all of the telephones that it produces, Mammoth industries' share of all telephone sales has declined over the last year.
Market share is irrelevant.
Here, Mammoth sells ALL of its phones.
Thus, the conclusion that Mammoth should expand production is STRENGTHENED.
Eliminate A.

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Post
utkalnayak wrote:
Sales of telephones have increased dramatically over the last year. In order to take advantage of this increase, Mammoth industries plans to expand production of its own model of telephone, while continuing its already very extensive advertising of this product.

Which of the following, if true, provides most support for the view that Mammoth industries cannot increase its sales of telephones by adopting the plan outlined above?

A. Although it sells all of the telephones that it produces, Mammoth industries' share of all telephone sales has declined over the last year.

B. Mammoth industries' average inventory of telephones awaiting shipment to retailers has declined slightly over the last year.

C. Advertising has made the brand name of Mammoth industries' telephones widely known, but few consumers know that Mammoth industries owns this brand.

D. Mammoth industries' telephone is one of three brands of telephone that have together accounted for the bulk of the last year's increase in sales.

E. Despite a slight decline in the retail price, sales of Mammoth industries' telephones have fallen in the last year.

OA: E
In this question there is a plan and the answer will somehow support the view that the plan will not work.

The plan is to increase sales by increasing production and continuing what seems to be the same advertising program, all of this somehow taking advantage of generally increasing sales of telephones.

What immediately jumps out is that the only thing they are really changing is production. So that needs to somehow be enough to increase their sales. Otherwise the plan will not work.

Now let's look at the answer choices to see which of them indicates that that will not work.

A) This one is a little tricky, in that it says that their share of all telephone sales has declined, which could mean they are seeing weak demand. At the same time, there could be other reasons for the decline in share, including production constraints. Meanwhile their sales could be going up, just not as fast as overall sales. So decline in share does not necessarily equate to a decline in sales. So this does not tell us the that plan won't work.

B) This is actually makes it seem as if the plan could work, because decreased inventory means they have been selling more than they have been making.

C) This is irrelevant. They plan involves increased production and not changing consumer understanding of the brand.

D) This says nothing that indicates that the plan will not work. They were part of last year's sales increase. If anything that indicates that the plan will work.

E) Of all the choices, only this one seems to indicate that the plan will not work. Overall sales of telephones went up last year and yet even with a price decrease sales of Mammoth Industries' telephones went down. The plan is to increase production to take advantage of industry wide sales growth, and but even with the industry wide sales growth, their sales have been decreasing and increased production does nothing to solve that. While there could be some reason that the plan would still work, what is said in choice E does call the logic of the plan into question and supports the view that the plan won't increase sales.

One takeaway from this question is that in order to get some of these trickier CR questions right, one really needs to see clearly the logical relationships between various moving parts. In this case, there were increasing overall sales, production, brand, price, market share and the company specific sales trend. There is no strategy or trick that will substitute for clear, organized thinking about how these things interact to affect levels of sales.

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Hi utkalnayak,

This CR question is based on a plan by Mammoth Industries. In these types of prompts, it's common for you to be asked to find a way to strengthen (prove that the plan will work) or weaken (prove that the plan won't work) the logic.

The Facts:
-Sales of telephones have INCREASED DRAMATICALLY over the LAST YEAR.
-To take advantage of the increase, Mammoth Industries is planning to do 2 things:
1) Expand its production of its model of telephone
2) Continue with its already extensive advertising of the telephone

The Plan:
-The first sentence tells us that sales of telephones (all telephones, not specifically the ones produced by Mammoth Industries) have increased dramatically. Mammoth clearly thinks that the trend will continue, so to take advantage, Mammoth is going to produce MORE of its telephone and continue with its extensive advertising of the telephone. Mammoth's idea is that since telephone sales are UP, then Mammoth should be able to sell more of its telephones.

We're asked to find an answer that offers a reason why Mammoth CANNOT INCREASE ITS telephone sales with this plan. The first thing I notice is the first sentence - just because telephone sales are up doesn't mean that Mammoth sold more of ITS telephones (or would sell more in the future), so I'd be looking for an answer that focused on THAT idea. If Mammoth is selling fewer telephones (for any reason over this last year), then the sales trend wouldn't likely help Mammoth to sell more telephones in the future. The only answer that addresses this issue is Answer E

GMAT assassins aren't born, they're made,
Rich

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Contact Rich at Rich.C@empowergmat.com

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