GMAT Verbal & Essays

The following appeared as part of a recommendation from the business manager of a department store:

" Local clothing stores reported that their profits decreased, on average, for three-months period between August 1st and October 31st, stores that sell products for the home reported that, on average, their profits increased during this same period. Clearly, consumers are choosing to buy products for their homes instead of clothing. To take advantage of this trend, we should reduce the size of our clothing departments and enlarge our home furnishings and household products departments."

Discuss how well reasoned you find this argument. In your discussion be sure to analyse the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound and what, if anything, would help you better evaluate its conclusion.

The author's argument, that reducing the size of the clothing department and enlarging household products departments will increase profit, is flawed. In drawing this strong conclusion, the author not only fails to take into account the basic fundamentals of supply and demand, but also draws a strong conclusion based on vague evidence. Furthermore, the author assumes that an increase in profits for local household products between August and October is valid enough to implement strategic business changes without considering the costs that will incur accordingly.

First of all, in the argument, the author bases the conclusion on a perceived demand for household products without considering or establishing the supply for household products already established in the market. If, for example, the demand for household products is already met by a large number of household stores operating in the local market, then working in this sector of activity might not be profitable due to competition and probably a market saturation. Conversely, if the supply of stores working in clothing is limited, then it could be advantageous to continue working in this sector of activity even if the demand for clothing is not as high as the demand for household products. Since the author does not provide any information regarding the supply of household products, it is not possible to determine whether working in household products is as advantageous as the author concludes.

Second, the author assumes a very strong conclusion by taking the local stores' profit increase in household and furniture products as a sample to represent and draw such a general conclusion. The author has only mentioned the LOCAL stores and did not mention whether other stores in the whole region are making the same profits during that specific period. If, for example, the increase in demand for household products and furniture is due only to massive sales promotions from August to October that uniquely local household stores are marketing, then the author's evidence to make the business changes is not valid. Conversely, keeping the same business structure and focusing on marketing clothes sales might be a possible option to access more clients and thus increase profits. Since the author does not provide valid evidence based on market research statistics, it is impossible to establish that working in household products would be as profitable as the author concludes.

Third, the author accepts that reducing the clothing department and enlarging the household and furniture departments will increase the profit. The author has not provided detailed information about his plan's costs and its impact on the aspired business profit. If, for example, implementing the changes will incur more costs in the long run and the business current financial status is not ready for this change, then staying in the clothing activity might be more adequate. Since, the author does not provide financial analysis detailing the costs of the plan and the profit it will engender, then there is not enough clear ground data to support the author's above-mentioned decision.

Finally, the argument could be strengthened if the author provided information substantiating an insufficient supply of household and furniture products. The argument could also be strengthened if the author were to acknowledge the importance of a market research highlighting the valid factors behind his business decision.