Group 6 Question 26: In order for next year to be a profitable...

I think the question construct is a little weak.

In the question, increasing sales at japan is presented to be critical to increasing profits. Then later in the stimulus we are presented that despite opening new dealerships in japan, the profit will not increase.

A major assumption here is that opening dealerships = increase in sales which should have been among the answer choices.

As we do not know whether the initial estimate for the required increase in sales in Japan was based after considering the substantial decline in sales in other geographies or not.

Increase in distribution is not equal to increase in sales would have been a better assumption.



quote="EMPOWERgmatVerbal"]Official Explanation:

In order for next year to be a profitable one for Lance Automotives, the car manufacturer must increase its sales in Japan. Six new car dealerships that only sell Lance vehicles will open in Japan by March of next year, but a number of industry observers have stated that Lance will still not make a profit next year.

Which of the following, if true, most helps to explain the statements of the industry observers?

(A) Lance faced unusually stiff government regulations in securing the right to open the new dealerships in Japan.
(B) In another two to three years, several other automakers will be opening new dealerships close to the ones that Lance will open next year in Japan.
(C) Four of the new dealerships that Lance will open in Japan are located in cities in which tourism is the biggest industry.
(D) Lance has a new chief executive with no experience selling goods in the Japanese market.
(E) Sales projections for Lance vehicles outside of Japan are expected to drop substantially next year.

Question Type: Strengthen
Boil It Down: To make a profit = Lance Automotives must increase sales in Japan. So they will open 6 new dealerships in Japan. Industry observers say they still won’t make a profit if they do this.
Goal: Find the best reason why industry observers are correct.

Analysis:
The question asks for information that would strengthen the assertion that Lance will not have a profitable year despite opening the new Japanese dealerships.

Conclusion: Lance will not make a profit next year.

Evidence: None is provided.

(A) Lance faced unusually stiff government regulations in securing the right to open the new dealerships in Japan.
This only provides background information; it does not deal with future profitability. Remember to be on the lookout for past information which has no bearing on a future outcome.

(B) In another two to three years, several other automakers will be opening new dealerships close to the ones that Lance will open next year in Japan.
Since these other dealerships won’t open for at least two years, this has no known effect on next year’s sales for Lance.

(C) Four of the new dealerships that Lance will open in Japan are located in cities in which tourism is the biggest industry.
Tourism’s effect on car sales is not evident. This is clearly out of the scope of the argument.

(D) Lance has a new chief executive with no experience selling goods in the Japanese market.
Simply because the new chief executive has no experience in the Japanese market does not lead to the conclusion that things will go poorly at the new dealerships. One cannot make assumptions about the effect the executive’s lack of experience will have.

(E) Sales projections for Lance vehicles outside of Japan are expected to drop substantially next year.
This is the correct choice. This directly suggests that Lance could well have problems making a profit. The conclusion, remember, was about the company as a whole, even if the information provided had to do with Japan in particular.

Don’t study for the GMAT. Train for it.[/quote]

Premise: Six new car dealerships that only sell Lance vehicles will open in Japan by March of next year
Conclusion: Lance will still not make a profit next year

It is easy to be mistaken that the conclusion means the opening of new dealerships in Japan will not bring the company profits next year in Japan. However, this is not the conclusion. The conclusion is rather general and as direct as it is - "Lance will still not make a profit next year". The conclusion does not limit the region to Japan.

Some may think that E is out of scope because it talks about regions other than Japan. However, the conclusion is not limited to sales in Japan.

(E) Sales projections for Lance vehicles outside of Japan are expected to drop substantially next year.

This choice is indeed relevant because it suggests that Lance Automotives is facing a broader challenge with declining sales projections outside of Japan. Here's how this choice could explain the skepticism of the industry observers:

If Lance is expecting a substantial drop in sales for its vehicles in markets outside of Japan, it implies that the company may be facing overall financial difficulties or challenges, which could affect its ability to invest in and support its Japanese operations effectively. For example, if Lance is experiencing financial strain due to declining sales elsewhere, it might have limited resources to allocate to marketing, product development, or after-sales support in Japan, making it less likely to succeed in the Japanese market.

Additionally, a drop in sales projections outside of Japan could indicate that Lance is dealing with issues that are not specific to the Japanese market but rather reflect broader problems with its products, competition, or economic conditions. This could lead industry observers to question whether Lance's Japanese expansion can offset or reverse these larger issues, making them skeptical about the company's profitability in Japan despite the new dealerships.

In summary, choice (E) is the answer because it suggests that Lance's overall financial situation and challenges outside of Japan could impact its ability to succeed in the Japanese market, aligning with the skepticism of industry observers about its profitability in Japan.

In order for next year to be a profitable one for Lance Automotives, the car manufacturer must increase its sales in Japan. Six new car dealerships that only sell Lance vehicles will open in Japan by March of next year, but a number of industry observers have stated that Lance will still not make a profit next year.

Which of the following, if true, most helps to explain the statements of the industry observers?

(A) Lance faced unusually stiff government regulations in securing the right to open the new dealerships in Japan.
(B) In another two to three years, several other automakers will be opening new dealerships close to the ones that Lance will open next year in Japan.
(C) Four of the new dealerships that Lance will open in Japan are located in cities in which tourism is the biggest industry.
(D) Lance has a new chief executive with no experience selling goods in the Japanese market.
(E) Sales projections for Lance vehicles outside of Japan are expected to drop substantially next year.


A. "still government regulations" don't necessarily mean Lance cannot open new dealerships. Even though it is hard, the firm can still do so to make a profit.
B. Out of scope. THe passage mentions "next year".
C. No impact on the conclusion. Even if C is true, there is no guarantee that the new dealerships will make a profit.
D. "no experience" doesn't necessarily mean the executive is bad that he will cause the firm to lose money. Perhaps, he is very competent even without experience.
E. best choice. E tells us that sales are likely to drop. E is better than the questionable D and A.