Prompt:
The following appeared as part of the business plan of an investment and financial consulting firm:
"Studies suggest that an average coffee drinker's consumption of coffee increases with age, from age 10 through age
60. Even after age 60, coffee consumption remains high. The average cola drinker's consumption of cola, however,
declines with increasing age. Both of these trends have remained stable for the past 40 years. Given that the number
of older adults will significantly increase as the population ages over the next 20 years, it follows that the demand for
coffee will increase and the demand for cola will decrease during this period. We should, therefore, consider
transferring our investments from Cola Loca to Early Bird Coffee."
My answer:
The argument concludes that the demand for coffee will increase over the next 20 years and the demand of cola will decrease during that period; hence, the firm should consider transferring its investments from Cola Loca to Early Bird Coffee. This argument is flawed due to its selective data interpretation, ignorance of supply-demand fundamentals and lack of information on the benefits of transferring the investment.
Firstly, the argument is based on the premise that the number of older adults will significantly increase in the next 20 years. It ignores a similar increase/decrease in the younger age group for the same period. As the time passes, adoloscenets will move to teenage and new children will be born. The argument completely ignores this information. The argument is selectively interpreting data which could have a negative impact on the decision.
Secondly, though the argument suggests there will be an increase in the demand of coffee, it does not quantify this increase. The increase in demand could range from 10 tons a year to 10000 tons a year. Without this information, the firm cannot take an informed decision on the investment. The argument also ignores the fundamentals of supply and demand. While there is an increase predicted in the demand for coffee, if there is no simultaneous increase in supply of coffee the investment will not bear the requried results. The argument, also, doesn't quantify the reason for transferring the investment. It could be to increase profits or to gain market leadership or to maintain its presence in the FMCG industry.
Thirdly, the argument suggests that the firm should move its investment to the Early Bird Coffee without elaborating on the type of coffee that is preferred by the average coffee drinker. Type of preferred coffee could be de-caf, instant coffee or black coffee to name a few. If the preferred type of coffee doesn't match the type of coffee made at Early Bird Coffee, the company could loose its investment.
Thus, the conclusion that the firm should transfer its investments from Cola Loca to Early Bird Coffee is falwed. In order to make the argument more sound and persuasive, the author should include more information on the types of coffee preferred by the average coffee drinker, the change expected in the younger population in the next 20 years and the end goal of the investment. As it stands however, in its current form the argument is flawed for the reasons stated.
The following appeared as part of the business plan of an investment and financial consulting firm:
"Studies suggest that an average coffee drinker's consumption of coffee increases with age, from age 10 through age
60. Even after age 60, coffee consumption remains high. The average cola drinker's consumption of cola, however,
declines with increasing age. Both of these trends have remained stable for the past 40 years. Given that the number
of older adults will significantly increase as the population ages over the next 20 years, it follows that the demand for
coffee will increase and the demand for cola will decrease during this period. We should, therefore, consider
transferring our investments from Cola Loca to Early Bird Coffee."
My answer:
The argument concludes that the demand for coffee will increase over the next 20 years and the demand of cola will decrease during that period; hence, the firm should consider transferring its investments from Cola Loca to Early Bird Coffee. This argument is flawed due to its selective data interpretation, ignorance of supply-demand fundamentals and lack of information on the benefits of transferring the investment.
Firstly, the argument is based on the premise that the number of older adults will significantly increase in the next 20 years. It ignores a similar increase/decrease in the younger age group for the same period. As the time passes, adoloscenets will move to teenage and new children will be born. The argument completely ignores this information. The argument is selectively interpreting data which could have a negative impact on the decision.
Secondly, though the argument suggests there will be an increase in the demand of coffee, it does not quantify this increase. The increase in demand could range from 10 tons a year to 10000 tons a year. Without this information, the firm cannot take an informed decision on the investment. The argument also ignores the fundamentals of supply and demand. While there is an increase predicted in the demand for coffee, if there is no simultaneous increase in supply of coffee the investment will not bear the requried results. The argument, also, doesn't quantify the reason for transferring the investment. It could be to increase profits or to gain market leadership or to maintain its presence in the FMCG industry.
Thirdly, the argument suggests that the firm should move its investment to the Early Bird Coffee without elaborating on the type of coffee that is preferred by the average coffee drinker. Type of preferred coffee could be de-caf, instant coffee or black coffee to name a few. If the preferred type of coffee doesn't match the type of coffee made at Early Bird Coffee, the company could loose its investment.
Thus, the conclusion that the firm should transfer its investments from Cola Loca to Early Bird Coffee is falwed. In order to make the argument more sound and persuasive, the author should include more information on the types of coffee preferred by the average coffee drinker, the change expected in the younger population in the next 20 years and the end goal of the investment. As it stands however, in its current form the argument is flawed for the reasons stated.
