Studies suggest that an average coffee drinker’s consumption of coffee

Hi, this is my first try at AWA and my test is on wednesday (bad studdy planning on my side)

However, kindly tell me your opinion on my essay, any input are much appreciated!!!

Questions:

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 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”.


My Response:

The argument proposes that the firm considers moving its current interest in Cola Loca to Early Bird Coffee. The proposal is due to what the argument view as a clear evidence on the relation between age and level of consumption for both cola drinkers and coffee drinkers. While one can see rationale between the assumption of the argument, the argument does not provide adequate explanation to determine the soundness of such proposal. Therefore, the argument is unconvincing, shallow, and rather inconclusive.

First, the argument easily assumes that the consumption of coffee will be higher in the next 20 years because in the next 20 years, there will be a significant increase in the population of older adults, which apparently prefer coffee to cola. As tempting as it sounds, it does not provide information on the whole population growth for the next 20 years, especially on the younger population, who might be more favorable for the cola market. As an example, if the younger population is predicted to tripled in the next 20 years, it will not make any sense to move away from a perfect opportunity. Hence, one cannot make an informed decision with a partial information regarding the population.

Secondly, the argument blatantly assumes that Early Bird Coffee is a better investment than Cola Loca based only on the demand level of both coffee industry and cola industry. The idea seems farfetched and premature, seeing that it the argument fails to provide any commercial information on the company performance. Specifically, Cola Loca might have better market positioning it the cola industry, hence giving a more favorable return on the firm investment. To make this argument stronger, the argument must provides a holistic view on both industries and the two companies should be presented in order to determine whether the firm should proceed with Early Bird Coffee or not

Finally, the argument did not mention important information regarding the strategic fit of Early Bird Coffee to the firm and how will the investment in the coffee companies impact its profitability as opposed to its current interest in Cola Loca. This critical information are absent in the provided argument, which makes it impossible for the firm to take any decisions based on such unsupported claims. It is not clear how Early Bird Coffee will pose as a better investment to the firm compared to Cola Loca. The argument can be strengthened by using a more concise example of how Early Bird Coffee will provide a better return-on-investment. For example, the argument can state that given the more favorable market condition, Early Bird Coffee offer a good deal with lower than average share price than Loca Cola, which deals in an over-saturated industry. Without such evidence, one has to assume that this argument does not provide enough depth to convince anyone.

In conclussion, the argument lacks clarity and convincing support. The investment decision could be improved if the arguments articulate the thinking process as well as relevant facts on all of its assumptions instead of some statistics and assumptions which has no clear evidence. In order for the firm to take an informed decision on the investment, it is essential to have a robust knowledge which take into accounts all relevant factors.


P.S. As it is my first time doing AWA, it took me almost 45 minutes to write all this. I hope I can improve in the next 2 days, any suggestion to improve the timing?