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small orchard

by eshwarjayanth » Mon Oct 17, 2011 11:30 am
A small orchard specializing in citrus fruits has been receiving fewer orders for oranges in the off season. Orchard owners expect demand to pick up in the coming weeks as harvest begins, but they are concerned about a neighboring orchard nearly three times their size. The neighboring orchard has announced plans to sell cases of oranges for 20% less than regular price in order to jump-start the season by attracting new business.

Which of the following, if true, points to the most serious flaw of the small orchard's plan to attract business by matching the prices of the competing orchard?

A) The small orchard has a dozen customers under contract to purchase the first oranges of the season and may anger them by not extending the discount to them.

B) The small orchard does not have time to advertise its oranges at lower prices.

C) The small orchard will reduce the number of oranges in each case to minimize losses incurred by matching prices.

D) The large orchard has a larger inventory and is more able to take losses on initially discounted oranges.

E) The large orchard will target a different market than the small orchard.



OA - D

pls provide explanations for [spoiler]D & E[/spoiler]
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by pemdas » Mon Oct 17, 2011 6:34 pm
very tricky one

initially i've narrowed the answer choices to B and E, but then OA is D

what may pause in approaching this CR is that at one hand we are suggested to ignore price discount factor at all for the small orchard, but then we may consider this not just an idea, but the forced intention ... If small orchard cannot lower its prices at all without going default (the big orchard can incur some losses because their inventory levels are high), then for small orchard it will be pointless to decrease prices.

options B and E are equally good in that B suggests advertisement constraint per price decrease (any decrease may go unnoticed without advertisement) and E hints about customer segmentation constraint or not even constraint but opportunity (in the text it says "to attract new business" - so we are legitimate to consider this choice too).

But choice D is much stronger because it says that decreasing prices is out of question for small orchard at all. Indeed an iron logic here! bravo, excellent question.
eshwarjayanth wrote:A small orchard specializing in citrus fruits has been receiving fewer orders for oranges in the off season. Orchard owners expect demand to pick up in the coming weeks as harvest begins, but they are concerned about a neighboring orchard nearly three times their size. The neighboring orchard has announced plans to sell cases of oranges for 20% less than regular price in order to jump-start the season by attracting new business.

Which of the following, if true, points to the most serious flaw of the small orchard's plan to attract business by matching the prices of the competing orchard?

A) The small orchard has a dozen customers under contract to purchase the first oranges of the season and may anger them by not extending the discount to them.

B) The small orchard does not have time to advertise its oranges at lower prices.

C) The small orchard will reduce the number of oranges in each case to minimize losses incurred by matching prices.

D) The large orchard has a larger inventory and is more able to take losses on initially discounted oranges.

E) The large orchard will target a different market than the small orchard.



OA - D

pls provide explanations for [spoiler]D & E[/spoiler]
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by mukgera » Mon Oct 17, 2011 9:46 pm
Hi Pemdas,
I am still not able to grasp the logic behind D as OA.Can yoy please explain a bit further about the logic here.

Thanks in advance.

pemdas wrote:very tricky one

initially i've narrowed the answer choices to B and E, but then OA is D

what may pause in approaching this CR is that at one hand we are suggested to ignore price discount factor at all for the small orchard, but then we may consider this not just an idea, but the forced intention ... If small orchard cannot lower its prices at all without going default (the big orchard can incur some losses because their inventory levels are high), then for small orchard it will be pointless to decrease prices.

options B and E are equally good in that B suggests advertisement constraint per price decrease (any decrease may go unnoticed without advertisement) and E hints about customer segmentation constraint or not even constraint but opportunity (in the text it says "to attract new business" - so we are legitimate to consider this choice too).

But choice D is much stronger because it says that decreasing prices is out of question for small orchard at all. Indeed an iron logic here! bravo, excellent question.
eshwarjayanth wrote:A small orchard specializing in citrus fruits has been receiving fewer orders for oranges in the off season. Orchard owners expect demand to pick up in the coming weeks as harvest begins, but they are concerned about a neighboring orchard nearly three times their size. The neighboring orchard has announced plans to sell cases of oranges for 20% less than regular price in order to jump-start the season by attracting new business.

Which of the following, if true, points to the most serious flaw of the small orchard's plan to attract business by matching the prices of the competing orchard?

A) The small orchard has a dozen customers under contract to purchase the first oranges of the season and may anger them by not extending the discount to them.

B) The small orchard does not have time to advertise its oranges at lower prices.

C) The small orchard will reduce the number of oranges in each case to minimize losses incurred by matching prices.

D) The large orchard has a larger inventory and is more able to take losses on initially discounted oranges.

E) The large orchard will target a different market than the small orchard.



OA - D

pls provide explanations for [spoiler]D & E[/spoiler]
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by pemdas » Mon Oct 17, 2011 10:57 pm
choice D puts an end to price reduction as a possibility
it does so in illustrating an example of thrice huge orchard company which will incur losses but may survive because of its high inventory levels - small orchard company may not survive or at least will suffer thrice more

choice D leads us to correct answer by illustrating its parallel reasoning
it's more stronger among others, possibly B and E (see previous explanations)

Q.: Which of the following, if true, points to the most serious flaw of the small orchard's plan to attract business by matching the prices of the competing orchard?

1st translation of Q.: which of the following choices invalidates the possibility of small orchard's following competitor's price, as small orchard is concerned with price discount 20%

to be concerned=to be involved in idea elaboration, thinking, consideration, etc.

2nd translation of Q.: which of the following choices points to the flaw and calls to quit small orchard's concerns (ideas, consideration, thinking) about its competitor's price price discount 20%

choice D.: The large orchard has a larger inventory and is more able to take losses on initially discounted oranges.

translation of choice D: Small orchard has less inventory and is less able (possibly, unable) to take on the discounts

choices B and E

The small orchard does not have time to advertise its oranges at lower prices ~ even if small orchard makes discount no time to advertise and benefit from the discount, so better not to discount and quit concerns (this is good, but choice D is stronger)

The large orchard will target a different market from that of the small orchard ~ we know that a big orchard wants to attract new business (different market with new customers, etc.) hence no need for small orchard to follow on the discount <<< this was actually my answer not D, but then OA is much stronger

in choice E small orchard may want to expand too, but all new markets will be furnished by the big orchard then. Hence small orchard may or may not follow the discount - depending on expansion assumptions...

in any case this question shows how tricky OA can be on GMAT
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by GmatKiss » Tue Oct 18, 2011 1:06 am
IMO: D, less than 1:50.

neighboring orchard nearly three times their size---> Iventory is more (this one stands out)
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by pemdas » Tue Oct 18, 2011 2:03 am
are you trying to apply formal logic here? if so, then 1:3 OR 100%:300%, the percentage change is 200% from small orchard to big orchard, but we do not know their inventory levels, correct?

the fact that the size (only) is more than 50%, i.e. 200% doesn't specify neither inventory levels nor their pricing. Moreover, to be able to apply formal logic here (as in LSAT) we need to locate the logical command "MOST" or its opposite "LEAST". Not in any place we locate these words in the stimulus.
GmatKiss wrote:IMO: D, less than 1:50.

neighboring orchard nearly three times their size---> Iventory is more (this one stands out)
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