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28 May 2017, 13:38
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Hi everyone,
I just completed my first GMAT CAT without any studying. This is my first attempt on AWA. Please rate it.
I look forward to hearing your comments and feedback.
Thanks!
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AWA ESSAYS: Analyze Argument
ESSAY QUESTION:
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.
YOUR RESPONSE:
The corporate memorandum of a beverage manufacturing company presents an argument that promotional price reductions for energy drinks has resulted in increased sales and favorable consumer perceptions of the product. The author goes on to argue that similar price reductions should continue to be made in order to increase the profitability and consumer perceptions of the brand and energy drink products. This definitely is a complex issue and careful decision needs to be made by the executives of the beverage manufacturer whether or not similar price reductions should be offered on all drinks produced by the firm.
First, the author of the above argument has made a critical flaw by stating that reduced prices leading to increased sales will lead to an overall increased profitability. In fact, by lowering the prices of the energy drinks, the profit margins on each unit sold will decrease. Even though the overall number of units sold had increased due to the previous price reductions, it is possible that the net profit made by the beverage manufacturer remained the same. Hence, we cannot assume that increased sales are correlated with increased profitability.
Second, the author claims that the perceptions of the consumers towards the energy drinks and manufacturing company was enhanced due to the price reductions. However, there is no data presented in order to back this claim. There is no information on consumer perception before and after the price reductions. It is very well possible that the consumer perception was high towards the energy drink product and that they decided to buy more units due to the price reduction. Therefore, in order to make such a claim, a study needs to be conducted where consumer perceptions towards the energy drinks and the company is measured before (baseline perception) and later remeasured after the price reduction.
Third, the author mentions that in order to continue to increase profitability and consumer perception, the beverage company needs to continue with its practice of reducing prices. However, there is a fundamental logical flaw in such an argument since we cannot assume that what has worked in the past will continue to work well in the future. For instance, price reductions might have been an effective strategy used by the company in the past, however there is no guarantee that similar tactics will continue to work in the future. There may very well be several other factors that can influence the profitability, levels of sales, market share and consumer perception of the energy drinks. For example, if a new energy drink company starts up and offers innovative flavors and attractive packaging, it might take away some of the market share from this beverage manufacturer in question.
Fourth, the author makes an extreme conclusion that similar price reductions need to be offered on all drinks produced by the firm. However, we cannot assume that consumers will purchase all varieties of drinks manufactured by the firm. Perhaps, it is possible that consumers don't like other drinks or flavors manufactured by the firm. In this case, consumers may not change their purchasing habits and may not buy more units of the other drink types even if a price reduction is offered. Thus, the author has failed to take into consideration baseline sales amounts, profit margins and consumer preferences for the different types of drinks manufactured by the firm.
In conclusion, even though there is some merit to the argument made by the author above, there are several flaws that must be considered before making the crucial decision to continue to drop prices in an effort to increase profitability and consumer perceptions.
I just completed my first GMAT CAT without any studying. This is my first attempt on AWA. Please rate it.
I look forward to hearing your comments and feedback.
Thanks!
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------
AWA ESSAYS: Analyze Argument
ESSAY QUESTION:
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.
YOUR RESPONSE:
The corporate memorandum of a beverage manufacturing company presents an argument that promotional price reductions for energy drinks has resulted in increased sales and favorable consumer perceptions of the product. The author goes on to argue that similar price reductions should continue to be made in order to increase the profitability and consumer perceptions of the brand and energy drink products. This definitely is a complex issue and careful decision needs to be made by the executives of the beverage manufacturer whether or not similar price reductions should be offered on all drinks produced by the firm.
First, the author of the above argument has made a critical flaw by stating that reduced prices leading to increased sales will lead to an overall increased profitability. In fact, by lowering the prices of the energy drinks, the profit margins on each unit sold will decrease. Even though the overall number of units sold had increased due to the previous price reductions, it is possible that the net profit made by the beverage manufacturer remained the same. Hence, we cannot assume that increased sales are correlated with increased profitability.
Second, the author claims that the perceptions of the consumers towards the energy drinks and manufacturing company was enhanced due to the price reductions. However, there is no data presented in order to back this claim. There is no information on consumer perception before and after the price reductions. It is very well possible that the consumer perception was high towards the energy drink product and that they decided to buy more units due to the price reduction. Therefore, in order to make such a claim, a study needs to be conducted where consumer perceptions towards the energy drinks and the company is measured before (baseline perception) and later remeasured after the price reduction.
Third, the author mentions that in order to continue to increase profitability and consumer perception, the beverage company needs to continue with its practice of reducing prices. However, there is a fundamental logical flaw in such an argument since we cannot assume that what has worked in the past will continue to work well in the future. For instance, price reductions might have been an effective strategy used by the company in the past, however there is no guarantee that similar tactics will continue to work in the future. There may very well be several other factors that can influence the profitability, levels of sales, market share and consumer perception of the energy drinks. For example, if a new energy drink company starts up and offers innovative flavors and attractive packaging, it might take away some of the market share from this beverage manufacturer in question.
Fourth, the author makes an extreme conclusion that similar price reductions need to be offered on all drinks produced by the firm. However, we cannot assume that consumers will purchase all varieties of drinks manufactured by the firm. Perhaps, it is possible that consumers don't like other drinks or flavors manufactured by the firm. In this case, consumers may not change their purchasing habits and may not buy more units of the other drink types even if a price reduction is offered. Thus, the author has failed to take into consideration baseline sales amounts, profit margins and consumer preferences for the different types of drinks manufactured by the firm.
In conclusion, even though there is some merit to the argument made by the author above, there are several flaws that must be considered before making the crucial decision to continue to drop prices in an effort to increase profitability and consumer perceptions.
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