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25 Apr 2018, 13:11
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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... etc.
The recommendation endorsed from the consultant is that the firm should re-allocate its investements from Cola Loca to Early Bird Coffee. The reason is that while the consumption of coffee increases from the age of 10 through the age of 60, the consumption for cola decreases and that the rising population will continue to increase and consume coffee. Though the followed line of reasoning may have some merit, deeper analysis reveals logical fallacies that undermine the conclusion. The lack of evidence, the weak assumptions, and the vague terminology make the argument rather unconvincing, unsubstantiated, and keenly flawed. Three questionable assumptions operative in this argument bear close examination.
The first assumption that the author makes is that a trend that occured for 40 years will continue to happen in the future, which is definetly not true. The fact that coffee drinkers increase their consumption until the age of 60 while the opposite happens for cola drinkers may not be the case in the future. For example the oil industry was the dominant player in the energy production for more than 60 years. With the consulatants reasoning, the firms money should be invested on oil companies since this trend will continue to occur in the future. However, the advent of electric vehicles has decreased dramatically the surge of the oil industry. This analogy presents an example that exposes the weaness of this assumption.
The second assumption is that we will see a dramatic increase in the number of older aduls over the next 20 years. There is clearly an indication that the population on earth increases but that doesn’t mean that we will see an increase in older adults. It is a great possibility that will have an analogous increase on every age. For the suggested forecast to occur, a possibility is that at some point younger generation will stop giving birth. If that happens the population will start decreasing and this problem will be greater than the benefit of the older adults being more in number than the younger age groups.
The third assumption is that if indeed the cited 40-year trend continues in the future and we see a significant increase in the older adults, that those adults will follow the same consumer behaviour as the previous generation. There is no proof but also no record to justify why the future generations will continue to consume coffee or cola. It might as well be the case that the people of the future will stop altogether this drinking behaviour. Furthermore, a new unfounded today drink, may appear that will dominate the market and decrease the consumption of coffee and cola.
In conclusion, this argument unfairly assumes that the the firm should transfer its invesments from coffee to cola. In order to strengthen this argument, the consultant must justify better why the 40-year age related consumption trend will continue in the future, why the population for older adults will indeed increase and finally do extensive research on the forecasted consumption behaviour of coffee an cola for the older adults in the future.
“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... etc.
The recommendation endorsed from the consultant is that the firm should re-allocate its investements from Cola Loca to Early Bird Coffee. The reason is that while the consumption of coffee increases from the age of 10 through the age of 60, the consumption for cola decreases and that the rising population will continue to increase and consume coffee. Though the followed line of reasoning may have some merit, deeper analysis reveals logical fallacies that undermine the conclusion. The lack of evidence, the weak assumptions, and the vague terminology make the argument rather unconvincing, unsubstantiated, and keenly flawed. Three questionable assumptions operative in this argument bear close examination.
The first assumption that the author makes is that a trend that occured for 40 years will continue to happen in the future, which is definetly not true. The fact that coffee drinkers increase their consumption until the age of 60 while the opposite happens for cola drinkers may not be the case in the future. For example the oil industry was the dominant player in the energy production for more than 60 years. With the consulatants reasoning, the firms money should be invested on oil companies since this trend will continue to occur in the future. However, the advent of electric vehicles has decreased dramatically the surge of the oil industry. This analogy presents an example that exposes the weaness of this assumption.
The second assumption is that we will see a dramatic increase in the number of older aduls over the next 20 years. There is clearly an indication that the population on earth increases but that doesn’t mean that we will see an increase in older adults. It is a great possibility that will have an analogous increase on every age. For the suggested forecast to occur, a possibility is that at some point younger generation will stop giving birth. If that happens the population will start decreasing and this problem will be greater than the benefit of the older adults being more in number than the younger age groups.
The third assumption is that if indeed the cited 40-year trend continues in the future and we see a significant increase in the older adults, that those adults will follow the same consumer behaviour as the previous generation. There is no proof but also no record to justify why the future generations will continue to consume coffee or cola. It might as well be the case that the people of the future will stop altogether this drinking behaviour. Furthermore, a new unfounded today drink, may appear that will dominate the market and decrease the consumption of coffee and cola.
In conclusion, this argument unfairly assumes that the the firm should transfer its invesments from coffee to cola. In order to strengthen this argument, the consultant must justify better why the 40-year age related consumption trend will continue in the future, why the population for older adults will indeed increase and finally do extensive research on the forecasted consumption behaviour of coffee an cola for the older adults in the future.
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