GMAT Essays (AWA)

Q773/2:
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 remain 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 Coffe.

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The argument in concluding that general pattern suggests increasing consumption of Coffee and decreasing consumption of cola one should transfer their investment from Cola Loca to Early Bird Coffe left several holes that might have strengthen the argument. In following discussion I shall point out these flaws.

First, an average increase in consumption doesn't mean the total quantity will change in certain ways. It depends on current quantity being consumed. For example, if currently average consumption of coffee per person is 1kg a month and average consumption of cola is 10 liter, an 10% increase in coffe means 100gm and that of 10% in cola means 1 liter. So in absolute terms even though cola will decrease by a liter it still means 9 liter while the coffee will be only 1.1 kg. The point I am trying to make is just given an average increase/decrease we can not conclude what significance it will have on total consumption of wither substance.

Second, it is true that average age will increase and given the trend the consumption of coffee will increase while consumption of Cola will decrease. But how many people uses each product will determine the actual impact. If total population is 35 million and only 1% drinks coffee the number of people will be much less and so the actual total increase will be much less. Compare to it when out of 35 million 99% drinks coffee then the actual increase in consumption will be multi fold. As the number of people consuming either products is not mentioned, one can not accurately predict the actual increase in consumption of Coffee or actual decrease in consumption of Cola.

Third, one important aspect missing here is profit per unit? What is the average profit per unit on Coffee and Cola. If the profit margin will be very less on Coffee it will not impact in actual profit which is necessary for an investment to grow. Similarly if profit margin is much more in Cola even a slight decrease in sale could not impact much.

Fourth, what is the likely supply of each product. It is mentioned that demand of Coffee is likely to increase and that of Cola is likely to decrease but what about supply of these products. Coffee is an commodity that may or may not increase in future. Assuming the supply of Coffee is remain same or reduced it will keep an upward pressure on pricing and so it will be beneficial in terms of profit. But if supply of Coffee is likely to increase at similar or better pace then it will keep downwards pressure on pricing. So profit per unit will be kept in check. Similar arguments can be given about the Cola. And so mention of supply of both Cola and Coffee should have been mentioned.

Finally, if a given sector is likely to do good or bad does't necessarily means every company in that sector will perform accordingly. Normally leading companies with moat of operational efficiency are likely to extract maximum benefits from any upsurge in sector and similarly well equipped to weather the downturn in the sector. But nothing has been mentioned about Cola Loca or Early Bird Coffe. And so one can not conclude to what extent these companies will be impacted due do demand impact in their sector. And so no decision can be made about switching funds from one to another.

In summary, the points as raised above should have been mentioned in the argument to strengthen that the one should consider transferring their investmen's from one company to other.

Kindly rate my essay and provide inputs

maihuna,

i liked your points. points 1,3,4 are good dude.

I would give a five.

Keep posting.

aj5105 wrote:maihuna,

i liked your points. points 1,3,4 are good dude.

I would give a five.

Keep posting.

Thanks AJ. Appreciate your valuable input.

Regards,
maihuna

Thanks for sharing this essay. I would also score it a 5.

The writing is clear and you worked diligently to put forth a strong argument.

The essay would not earn a 5.5 or a 6 for the following reasons:

1) Introduce your supporting points in the thesis paragraph. Touch on the flaws in the intro paragraph, before you head into your body paragraphs.

2) Same thing with the conclusion. I realize it's not easy to restate your supporting points -- especially since you've just gone into such detail in the preceding paragraphs -- but your conclusion should be at least three sentences.

3). This paragraph is a little choppy:

Third, one important aspect missing here is profit per unit? What is the average profit per unit on Coffee and Cola. If the profit margin will be very less on Coffee it will not impact in actual profit which is necessary for an investment to grow. Similarly if profit margin is much more in Cola even a slight decrease in sale could not impact much.

Try to stay from asking rhetorical questions in your essay. Answer questions -- don't put any forth.

Again, thanks for sharing. You're clearly on the right track to getting a great score on the essay.

Best of luck!

Jose

Respected Jose,

Great, thank you for the great insight and valuable info for further improvement. I will try to follow all your points.

Best Regards,

Hi Stacey,
Many thanks. Grateful insight. I will try to follow them. Thanks again for finding time out of your busy schedule and providing the great analysis and feedback o improve.

Best Regards,