GMAT Essays (AWA)

Hi All

Started my first prep.. So i wrote in on first essay without any practice.. It must be flawed.. So can u help and tell me my mistakes.

The following appeared in a corporate memorandum of a beverage manufacturer:

“Our promotional price reductions on energy drinks have been highly successful, as we have seen a dramatic increase in unit sales. Further, surveys of our consumers indicate that this promotion was favorably received by the majority of our customers. Therefore, to improve our company’s profitability and enhance its perception in the eyes of consumers, similar price reductions should be offered on all drinks produced by our firm.”

Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound.

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Generally when we tend to talk about price reductions and increase in sales, we tend to see a wrong graph being drawn. Price and demand are two different factors which management tends to combine. There could be various factors to which such an increase or rate is found. I would be listing down a few factors.

Before we get into the factors, lets take a look at a few assumptions made in the above argument. First which comes to sight is that, just because the price reduction worked for the energy drinks, it would tend to work same for the other drinks. This is a major assumption as we know that not all drinks are marketed in the same way. Second, the factor for the increase in the sales is only due to the reduction in prices and there is no other cause which has contributed to the increase in sales. Third, the management presents that with a decrease in price, it actually enhances its perception in eyes of customer.

Now on to the factors which highlight the flaws in the argument. Firstly, the argument present above takes into consideration only two factors. They are price and sales. The basis on which this statement is made is that the consumers received the price reduction very well and hence it tends to be a profit for the company. There could also be that in the particular zone where the analysis was made tends to be more concerned with health and energy drinks. While this fact supports the statement of promotional price reduction in energy drinks, it tends to flaw the conclusion of the argument. Not all drinks which the company produces tend to be health and energy conscious. Hence by applying the same strategy to the other drinks will decrease the perception of the company and hence it would be eying on losses.

Secondly, in order to sustain the increase in sales, the company cannot provide the price reductions. With this price reductions, the company might also invest on lower quality of energy drinks. With the quality getting depreciated and the quantity rising, there could be a loss in the customers. With the loss in customers, the company's inventory would rise which is always not a good sign. The customers tend to drive the organization and this particular organization with falling customer numbers would tend to go into doldrums. Hence this price reduction is completely not justified.

hence with the above assumptions and factors, it could be concluded that the argument is seriously flawed and doesnt not hold good.