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Company X experienced a significant loss of market share over a number

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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?

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

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

(C) Determining whether any of the company's competitors have withdrawn from the market in the past two years

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

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

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Originally posted by blueseas on 09 Jul 2013, 15:56.
Last edited by hazelnut on 16 May 2018, 19:02, edited 2 times in total.
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Re: Company X experienced a significant loss of market share over a number  [#permalink]

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New post 09 Jul 2013, 23:38
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Very good question Shailes. :)

ANALYZE THE STIMULUS:

Fact: Company X experienced a significant loss of market share over a number of years
Fact: two years ago to increase the percentage of total revenue devoted to RnD.
Fact: The following year, the company's market share increased by 10 percent.
Conclusion: company management further increased the amount of money devoted to RnD.

Pre-thinking: Company X considered RnD expenses made market share increase 10% ==> Question: whether RnD expense was the only factor that made company X market share increase? Any other factor contributed to the increase such as competitors, new regulations, customers’ favors, etc?

ANALYZE EACH ANSWER:

A)Determining how many new products the company has created over the past year
Wrong. The number of new products does not guarantee the increase of market share ==> It may or may not affect the market share, we are not sure ==> Hence, A is wrong.

B)Determining the percentage of revenue that other companies devote to research and development
Wrong. The percentage of revenue devoted to RnD is just a “hard” fact. You cannot assume more percentage, more increase of market. We need a reason why the percentage links to the market share ==> B does not help.

C)Determining whether any of the company's competitors have withdrawn from the market in the past two years
Correct. The number of competitors has a direct link to the company X’s market share. If more competitors, company X’s market share may decrease. If fewer competitors, company X’s market share may increase without the help of RnD.

D)Determining the maximum percentage of revenue that the company can devote to research and development without affecting the company's production budget
Wrong. Same as B. You cannot assume: the more percentage, the more increase of market. Thus, determining the maximum percentage of revenue devoted for RnD does not help.

E)Determining whether all of the company's new products have fared equally well in the marketplace
Wrong. The same logic as A’s. The fact that “company’s new products have fared equally well” may or may not affect the market share increase, we are not sure ==> Hence, E is wrong

Hope it helps a bit.
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New post 09 Jul 2013, 21:52
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C

If the market share increased because a competitor dissapeared, then the increase in the market share was not caused by the increase in the research and development budget.

So, it's possible that increasing the budget again won't increase the market share.
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New post 09 Jul 2013, 23:41
hi pghai,

kudos are the best way to appreciate good efforts... :wink:

well anyways thanks :-D
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New post 09 Jul 2013, 23:49
shaileshmishra wrote:
Quote:
hi pghai,

kudos are the best way to appreciate good efforts... :wink:

well anyways thanks :-D


Sorry about that Shailes. +1kudo for you :)
Please keep posting new questions. I really appreciate your posts.
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New post 09 Jul 2013, 23:50
pqhai wrote:
shaileshmishra wrote:
Quote:
hi pghai,

kudos are the best way to appreciate good efforts... :wink:

well anyways thanks :-D


Sorry about that Shailes. +1kudo for you :)
Please keep posting new questions. I really appreciate your posts.


yup sure pghai ...i willl
thanks again :)
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Re: Company X experienced a significant loss of market share over a number  [#permalink]

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New post 10 Jul 2013, 03:13
D)Determining the maximum percentage of revenue that the company can devote to research and development without affecting the company's production budget

Can someone please explain, why is this wrong?
What if the increase in the RnD intrudes in the production budget and hence decreasing the productions..
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Re: Company X experienced a significant loss of market share over a number  [#permalink]

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New post 10 Jul 2013, 03:27
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Hi -

Firstly. The golden rule of GMAT: It's not about the perfect answer, it's about the best answer. C is clearly the best answer here, so whilst we can debate D, it's not the best answer by anyone's assumption.

The issue with D is that you can't assume: the more percentage, the more increase of market. Thus, determining the maximum percentage of revenue devoted for RnD does not help.
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New post 26 Nov 2014, 05:29
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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?

A. Determining how many new products the company has created over the past year
B. Determining the percentage of revenue that other companies devote to research and development
C. Determining whether any of the company's competitors have withdrawn from the market in the past two years
D. Determining the maximum percentage of revenue that the company can devote to research and development without affecting the company's production budget
E. Determining whether all of the company's new products have fared equally well in the marketplace
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Re: Company X experienced a significant loss of market share over a number  [#permalink]

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New post 27 Nov 2014, 11:02
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I felt that B and D were irrelevant. I was picking between A, C and E. Both A and E are based on how products are doing in the marketplace. However, C seems best because it deals with the marketplace. Remember that with evaluate questions, the answer should be a yes or no and that should be the ultimate decider on the answer.

If competitors left the marketplace, there's no need to spend more money on R&D and the exit of companies allowed an increase in marketshare. However, if non left, then maybe it was the increased R&D expenses that let the market share grow.
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New post 27 Nov 2014, 16:54
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Good question.

Clearly it between C and E, other options are not relevant to the argument.

C. does anyone competes with the companies product for past 2 years?
Yes --> lets keep that R&D budget.
No --> Lets reevaluate. maybe we don't need to spend anymore money.
Best Answer.

E. did our products fared well in marketplace?
Yes --> well R&D budget stays
No --> well R&D budget must stay.
Cant decide anything here. Eliminate this choice.

dangngohai wrote:
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?

A. Determining how many new products the company has created over the past year
B. Determining the percentage of revenue that other companies devote to research and development
C. Determining whether any of the company's competitors have withdrawn from the market in the past two years
D. Determining the maximum percentage of revenue that the company can devote to research and development without affecting the company's production budget
E. Determining whether all of the company's new products have fared equally well in the marketplace

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Re: Company X experienced a significant loss of market share over a number  [#permalink]

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New post 27 Nov 2014, 17:16
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Correct Answer: C

Because if some competitors have left the market then no need to increase the R&D, and if the market structure remains the same in that case the company has to increase the R&D to increase its market share.

pradeepss:

The problem with Option E is the modifier ALL (Very often GMAT plays on this trick 8-) )

How the YES/NO analysis will help over here:

Did ALL of the NEW products of the company fare well? YES....Great, in that case the increase in the R&D budget is totally warranted

However,
Did ALL of the NEW products of the company fare well? NO.....well, in this case we cannot decide whether the increase in the R&D budget was warranted or not. Because even if one product did well, and increased the market share by little as 10% then it would justify increasing the R&D.

Hope that helps!
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New post 06 Dec 2015, 22:49
market share: company's sales/ total industry or market sales

to evaluate whether increase of R&D budget helped increase the companys market share

A.out of scope. new products have no bearing on company market share

B. out of scope. other companies' R&D budget allocation cannot determine if the given company's increased R&D allocation helped improve the market share

D. out of scope. we need to find if the increased R&D
allocation was responsible for the improved market share

E. out of scope.

C-correct, as an "yes' answer to this question identifies an alternate cause for the increase in the company's market share=>improved R&D allocation not responsible. a "no" answer supports company's decision.
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Re: Company X experienced a significant loss of market share over a number  [#permalink]

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New post 03 Jun 2016, 05:03
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?

Market Share is basically your company's Sales in the total industry.

If the Total Industry or Market Size is 1000 and your company has 100 sales in it :- M.S. = 10%

The only 2 ways M.S. Can increase are :- Industry Same and your sales increase - which will also mean the competitors sales decrease

second, any competitor withdraws hence the Industry will go down and even if your sales stay the same or it can degrow as well, your M.S. will increase.


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

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

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

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

E)Determining whether all of the company's new products have fared equally well in the marketplace
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New post 05 Jun 2016, 05:16
There is something that we need to do. We need to weaken the conclusion as we weaken in assumption.

The link is that the investment in r&d leads to the the increase inc market share.
So if we know that there is something else that can lead to the increase in market share. We will have the answer.

A)Determining how many new products the company has created over the past year- New products do not say that there is increase in the marked share. All products might be sell but the share might not increase

B)Determining the percentage of revenue that other companies devote to research and development- Other companies might devote no money still there is share. But other companies are not in scope.

C)Determining whether any of the company's competitors have withdrawn from the market in the past two years- yes this si the answer. If someone withdraws my share increases. it is like eating a pie. When someone says i dont want my share. Distribute equally. my share increases, Simone says u eat it share increase.

D)Determining the maximum percentage of revenue that the company can devote to research and development without affecting the company's production budget- Revenue percentage donation does not help us.

E)Determining whether all of the company's new products have fared equally well in the marketplace
- new products can fare equally but the share may may not increase
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New post 14 Aug 2016, 00:30
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.

2013 2014--------------2015---------------2016
%of total revenue 100 110 120
market share 10% 11%
expected to be more than that or 11%


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?


A)Determining how many new products the company has created over the past year :- even if 1 good product has created and that helped to boost market share, doesn't matter.

B)Determining the percentage of revenue that other companies devote to research and development
whatever % revenue other devoted we don't have their market share. we only that our share has increased because of R&D factor. also we have to check what we have already invested that was beneficial or not.

C)Determining whether any of the company's competitors have withdrawn from the market in the past two years :- if that is so, then instead of R&D, the 10% could be because of lack of competitors.

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


you want to check that further % increase in revenue devoted for R&D is good or not.
Lets assume R&D has helped to increase 10% in the 1st case, at that time Prodn budget is not affected. What if further increase will effect production budget, in that case production will be less and no more increase in market share. So then maximum percentage of revenue that the company can devote to research and development without affecting the company's production budget will help out to evaluate further situation.

I know C is better but how to correct line of reasoning for D.
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New post 03 Jul 2017, 15:10
D is just a strengthener.
question stems often are useless in finding the right answer.
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New post 06 Jul 2017, 11:32
I am a bit confused with the question itself. I think I have read and understood this question incorrectly but aren't we trying to find a statement that justifies the company's reasoning of further increasing the amount of money devoted to research and development? Aren't we trying to find a statement that strengthens this part? C is rather a weakener instead and I am not able to understand how C is the right answer? Please help!
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New post 07 Jul 2017, 08:50
csaluja wrote:
I am a bit confused with the question itself. I think I have read and understood this question incorrectly but aren't we trying to find a statement that justifies the company's reasoning of further increasing the amount of money devoted to research and development? Aren't we trying to find a statement that strengthens this part? C is rather a weakener instead and I am not able to understand how C is the right answer? Please help!


well, since this is an assumption question, you probably find C is the weakener because an assumption often causes most damage to the argument.
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New post 10 Dec 2017, 18:11
Merged topics. Please, search before posting questions!
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Re: Company X experienced a significant loss of market share over a number &nbs [#permalink] 10 Dec 2017, 18:11
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