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Hoping to increase his company's market share, the CEO of QuikFashion

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Hoping to increase his company's market share, the CEO of QuikFashion  [#permalink]

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New post 26 Jun 2018, 23:16
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Hoping to increase his company's market share, the CEO of QuikFashion has decided to hold a month-long sale in which all of the clothing in QuikFashion's stores will be discounted by at least 50 percent. Although this discount will mean that the company is selling clothing at cost, the CEO hopes that this broadly advertised sale will attract repeat buyers to QuikFashion, who will return to buy clothing at full price after the month of sales.

In assessing the CEO's ability to achieve his goals with this plan, it would be most useful to know which of the following?


A. Whether following a different plan might allow QuikFashion to maintain its current market share but increase profits.
B. Whether QuikFashion can cut the cost of production sufficiently to still make profits from its discounted clothing.
C. Whether some items of clothing will be discounted more than others.
D. Whether a sale lasting a different length of time would prove more profitable in the long run.
E. Whether QuikFashion's competitors would respond by discounting their own clothing.

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Re: Hoping to increase his company's market share, the CEO of QuikFashion  [#permalink]

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New post 27 Jun 2018, 01:51
If competitors also implement the same strategy, then the expected # of users may not show up at Quickfashions sales.Hence repeat users might not show up after prices come back to normal after one month.

Answer is E

Note :- Also, All other options talk about profits, but the argument is not concerned about profits.
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Re: Hoping to increase his company's market share, the CEO of QuikFashion  [#permalink]

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New post 27 Jun 2018, 02:47
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Hoping to increase his company's market share, the CEO of QuikFashion has decided to hold a month-long sale in which all of the clothing in QuikFashion's stores will be discounted by at least 50 percent. Although this discount will mean that the company is selling clothing at cost, the CEO hopes that this broadly advertised sale will attract repeat buyers to QuikFashion, who will return to buy clothing at full price after the month of sales.

Type - Evaluate
Boil it down - Although this discount will mean that the company is selling clothing at cost, the CEO hopes that this broadly advertised sale will attract repeat buyers to QuikFashion, who will return to buy clothing at full price after the month of sales.


In assessing the CEO's ability to achieve his goals with this plan, it would be most useful to know which of the following?


A. Whether following a different plan might allow QuikFashion to maintain its current market share but increase profits. -- Irrelevant -- profit is not relevant
B. Whether QuikFashion can cut the cost of production sufficiently to still make profits from its discounted clothing. -- Irrelevant -- profit is not relevant
C. Whether some items of clothing will be discounted more than others. -- Irrelevant - we already know this - all of the clothing in QuikFashion's stores will be discounted by at least 50 percent
D. Whether a sale lasting a different length of time would prove more profitable in the long run. -- Irrelevant -- the duration of sale is not relevant
E. Whether QuikFashion's competitors would respond by discounting their own clothing. - Correct -- Applying variance test --If the competitors respond with similar discounts, then advertised sale may not attract buyers to QF at all ; If the competitors DON'T give similar discounts , then our faith in the conclusion increases

Answer E
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Re: Hoping to increase his company's market share, the CEO of QuikFashion  [#permalink]

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New post 03 Aug 2018, 23:12
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Official Explanation


Evaluating this situation, we have a company that is willing to lose potential short-term profits in the hopes of creating a greater market share in the long-term. Note that the terms of the argument are not focused on long-term PROFITS, per se, but rather on market share. (E) brings up the issue of QuikFashion’s competitors, for even if QuikFashion earned more money in both the short term and long term, this would not help the company achieve its goal of a greater market share if its competitors also did so. Whatever competitive edge QuikFashion was hoping to gain by discounting its own products would likely be neutralized when its competitors made the same move.

(A) ignores the market-share goal and focuses exclusively on profits, which are not, in this scenario, the CEO’s ultimate goal as stated by the stimulus.

The stimulus has told us that the company will essentially be selling clothing at cost during the sales, foregoing short-term profits for long-term market share growth. The creation of profits during the short-term sale (B) is thus not a serious issue in this scenario.

The discount is, generally, not as important as what the CEO hopes that proposed discount will do in the long term. Therefore, the discount applied to different products is not of concern in evaluating the strategy’s effectiveness on the whole (C).

While (D) finally returns us to the question of short term versus long term, it also erroneously focuses on profits, which are not the main terms with which this CEO is currently concerned.

Answer = (E)
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Re: Hoping to increase his company's market share, the CEO of QuikFashion &nbs [#permalink] 03 Aug 2018, 23:12
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