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31 Jul 2020, 19:56
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The following appeared as part of the business plan of an investment and financial consulting firm:
“Studies suggest that an average coffee drinker’s consumption of coffee increases with age, from age 10 through age 60. Even after age 60, coffee consumption remains high. The average cola drinker’s consumption of cola, however, declines with increasing age. Both of these trends have remained stable for the past 40 years. Given that the number of older adults will significantly increase as the population ages over the next 20 years, it follows that the demand for coffee will increase and the demand for cola will decrease during this period. We should, therefore, consider transferring our investments from Cola Loca to Early Bird Coffee.”
Discuss how well reasoned you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counter examples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.
My Response:
This argument suggests that investments should be placed in Early Bird Coffee opposed to Cola Loca because of the stated study. This study while compelling in theory does not provide the proper justification to justify a significant investment. While it may be true that coffee consumption increases from ages 10 through 60, no statistical data is provided in stating that this increase in investment will result in a marginal growth or a return on investment.
Additionally, the business plan states the the consumption of cola declines with age, but there is no data behind by what percent it decreases and how high the initial consumption per individual was. Thus, the firm cannot determine if the decline in cola decreases its returns below that of coffee. If cola sales, while decreasing with age, still surpass that of coffee, Cola Loca is still the logical investment and offers the most growth potential.
This argument is dependent on the fact that as consumers increase in age they purchase more coffee than they do cola. While consumption can increase or decrease, the revenue and intake could be higher than a small decline in margin decline. Additionally, the argument fails to take into account the fact that birth rates are not stated as declining so the younger individuals that consume more cola and less coffee will still remain and impact the statistics.
In conclusion, while the transfer of investments from Cola Loca to Early Bird Coffee may seem logical based on the consulting firms reasoning, it fails to address the top-line revenue growth and only address the marginal analysis. Additionally, it is holding the population as a constant, assuming no new individuals will be born and only those in the study will purchase from either company. Furthermore, before any investment can be made one must consider the financial impacts of their investments and how well the money will be put to use. While a large investment in Early Bird Coffee may help them to produce more coffee, if they are producing beyond the demand, they will lose potential revenue and have to decrease their prices.
“Studies suggest that an average coffee drinker’s consumption of coffee increases with age, from age 10 through age 60. Even after age 60, coffee consumption remains high. The average cola drinker’s consumption of cola, however, declines with increasing age. Both of these trends have remained stable for the past 40 years. Given that the number of older adults will significantly increase as the population ages over the next 20 years, it follows that the demand for coffee will increase and the demand for cola will decrease during this period. We should, therefore, consider transferring our investments from Cola Loca to Early Bird Coffee.”
Discuss how well reasoned you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counter examples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.
My Response:
This argument suggests that investments should be placed in Early Bird Coffee opposed to Cola Loca because of the stated study. This study while compelling in theory does not provide the proper justification to justify a significant investment. While it may be true that coffee consumption increases from ages 10 through 60, no statistical data is provided in stating that this increase in investment will result in a marginal growth or a return on investment.
Additionally, the business plan states the the consumption of cola declines with age, but there is no data behind by what percent it decreases and how high the initial consumption per individual was. Thus, the firm cannot determine if the decline in cola decreases its returns below that of coffee. If cola sales, while decreasing with age, still surpass that of coffee, Cola Loca is still the logical investment and offers the most growth potential.
This argument is dependent on the fact that as consumers increase in age they purchase more coffee than they do cola. While consumption can increase or decrease, the revenue and intake could be higher than a small decline in margin decline. Additionally, the argument fails to take into account the fact that birth rates are not stated as declining so the younger individuals that consume more cola and less coffee will still remain and impact the statistics.
In conclusion, while the transfer of investments from Cola Loca to Early Bird Coffee may seem logical based on the consulting firms reasoning, it fails to address the top-line revenue growth and only address the marginal analysis. Additionally, it is holding the population as a constant, assuming no new individuals will be born and only those in the study will purchase from either company. Furthermore, before any investment can be made one must consider the financial impacts of their investments and how well the money will be put to use. While a large investment in Early Bird Coffee may help them to produce more coffee, if they are producing beyond the demand, they will lose potential revenue and have to decrease their prices.
Abi1995
Joined: 23 May 2020
Last visit: 12 Jun 2022
Posts: 201
Given Kudos: 82
Location: India
Schools: IIMA PGPX "21 INSEAD Jan '20 ISB '21 Booth '22 Kellogg '24 (II) LBS '24 HEC Sept 23 Intake (A)
GMAT 1: 710 Q49 V37
GPA: 4
Products:
Schools: IIMA PGPX "21 INSEAD Jan '20 ISB '21 Booth '22 Kellogg '24 (II) LBS '24 HEC Sept 23 Intake (A)
GMAT 1: 710 Q49 V37
Posts: 201
31 Jul 2020, 20:10
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This is good, you can easily get 4.5+
Posted from my mobile device
Posted from my mobile device
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