Critical Reasoning

Company X experienced a significant loss of market share over a number of years. To strengthen its market position, the company decided two years ago to increase the percentage of total revenue devoted to research and development. The following year, the company's market share increased by 10 percent. In response, company management further increased the amount of money devoted to research and development.

Which of the following investigations is most likely to yield significant information that would help evaluate whether the company's decision to further increase the research and development budget was warranted?


Determining how many new products the company has created over the past year

Determining the percentage of revenue that other companies devote to research and development

Determining whether any of the company's competitors have withdrawn from the market in the past two years

Determining the maximum percentage of revenue that the company can devote to research and development without affecting the company's production budget

Determining whether all of the company's new products have fared equally well in the marketplace

OA is C

In the above premise, gain in market share is being related to the increase in R&D.

Option A : R&D is not solely about new products. Even if it is, not all new products translate into higher revenues. It will not yield significant info.

Option B : Irrelevant. Comparing company X's R&D percentage in revenue with other companies will not provide info about sufficient info about company X's market share.

Option C : This will provide adequate info about Company X's current standing in terms of market share.

Option D : Irrelevant info.

Option E : Also irrelevant info.

Option C

What is important to evaluate is whether investing in R&D during the previous year was solely responsible for increase of market share or were there any other factors at play.

A irrelevant since it provides no info about market share changes.

B irrelevant since it provides no info about market share changes.

C relevant since it talks about market share changes.

D irrelevant since it provides no info about market share changes.

E irrelevant/vague since it doesn't discuss impact of new products on market share