V10-30

Official Solution:


Company Executive: Ten years ago, we held about 80% market share in Japan in terms of revenue, even though we are a U.S.-based company. At that time, Japanese consumers overwhelmingly preferred our product to those locally produced in Japan. Over the past ten years, our market share in Japan has decreased to about 40%. However, our revenue from the Japanese market has actually increased.

Which of the following best helps to explain the above discrepancy?


A. The size of the Japanese market for the company’s product segment has significantly grown over the past ten years.
B. The population of Japan has remained the same over the past ten years.
C. The company has increased its selling price for the product over the past ten years in line with the average price increase for the product in the Japanese market.
D. Over the past ten years, local Japanese manufacturers have introduced a number of low-cost products that compete with the company’s product line.
E. Consumer sentiment in Japan has shifted away from imported goods and towards domestically produced goods.


(A) CORRECT. If the size of the market increased significantly then even after losing market share in terms of % revenue, the company could still increase its absolute revenue. For example, suppose the market grew from 100M JP¥ to 300M JP¥. 80% of 100M € is lower than 40% of 300M €.

(B) This does not explain why revenue increased while market share was lost.

(C) Increasing price in line with the market would not help in increasing the absolute revenue when the market share is halved - a much higher price increase compared to the average is required in order to reach the result mentioned in passage.

(D) This option suggests a reason for the drop in market share, but not for the increase in revenue.

(E) This option simply restates the fact that the U.S. company has lost market share.


Answer: A