Sales of telephones have increased dramatically over the last year. In

Question

Sales of telephones have increased dramatically over the last year. In order to take advantage of this increase, Mammoth Industries plans to expand production of its own model of telephone, while continuing its already very extensive advertising of this product.

Which of the following, if true, provides most support for the view that Mammoth Industries  cannot  increase its sales of telephones by adopting the plan outlined above?

(A) Although it sells all of the telephones that it produces, Mammoth Industries' share of all telephone sales has declined over the last year.

(B) Mammoth Industries' average inventory of telephones awaiting shipment to retailers has declined slightly over the last year.

(C) Advertising has made the brand name of Mammoth Industries' telephones widely known, but few consumers know that Mammoth Industries owns this brand.

(D) Mammoth Industries' telephone is one of three brands of telephone that have together accounted for the bulk of the last year's increase in sales.

(E) Despite a slight decline in the retail price, sales of Mammoth Industries' telephones have fallen in the last year.

Source  :  GMATPrep Default Exam Pack 
And  OG11 Q111

ayushkumar22941 · Answer

only e is the option which cast doubt on mammoth industry plan of increasing sales by advertising alone .

lakshya14 · Answer

We never talked about the "advertisement" in the correct answer?

svasan05 · Answer

Hi Lakshya

Let us analyze what the stimulus tells us about the advertising:

"...while  continuing  its already very extensive advertising of this product."

Therefore, the mention of advertising in the stimulus is merely to rule out an additional factor which may reverse the currently declining sales of Mammoth Industries' telephone. The company only plans to "continue" its extensive advertising, not increase it substantially. We also know that "...sales of Mammoth Industries' telephones have  fallen  in the last year" as mentioned in Option (E). This decline has to be considered in the context of the extensive advertising that is currently in place, which is expected to continue and not increase any further. Therefore, this tells us that there are other factors at play that have led to a fall in the sales of Mammoth Industries' telephone last year despite the "dramatic" increase in telephone sales overall over the same period.

Hence option (E) tells us that the strategy of expanding production will not help in increasing sales of Mammoth Industries' telephones.

Hope this helps.

koolk · Answer

egmat  , how do I do the pre-thinking for this question?

Pritishd · Answer

We need to show that the telephones manufactured by Mammoth are not that great and hence despite an increase in production or marketing expenditure, Mammoth might not see the desired growth in sales (sales in line with the trends observed in the market) (A) Although it sells all of the telephones that it produces, Mammoth Industries' share of all telephone sales has declined over the last year - Incorrect A decline in share does not indicate issues with Mammoth's telephones. May be it would start selling more units if it manufactured more units. (B) Mammoth Industries' average inventory of telephones awaiting shipment to retailers has declined slightly over the last year - Incorrect One reason for this could be that Mammoth has worked on its logistics processes and this might have improved the waiting times. In other words this does not tell us why the plan would not work (C) Advertising has made the brand name of Mammoth Industries' telephones widely known, but few consumers know that Mammoth Industries owns this brand - Incorrect This does not impact the sales. I am sure a lot of consumers might not know that Hardcastle owns McDonalds, but consumers still go around looking for McDonalds

(D) Mammoth Industries' telephone is one of three brands of telephone that have together accounted for the bulk of the last year's increase in sales - Incorrect This strengthens the argument by indicating that the increase in production combined with an continued expenditure in advertising may grow sales for Mammoth (E) Despite a slight decline in the retail price, sales of Mammoth Industries' telephones have fallen in the last year - Correct This indicates that even a drop in price could not sustain sales last year, indicating that the plan might not work as expected. Mammoth might have to first solve issues with product quality, customer support etc. Ans. E

CEdward · Answer

Tough one. Here's my reasoning.

Sales of telephones have increased dramatically over the last year. In order to take advantage of this increase, Mammoth Industries plans to expand production of its own model of telephone, while continuing its already very extensive advertising of this product.

Which of the following, if true, provides most support for the view that Mammoth Industries cannot increase its sales of telephones by adopting the plan outlined above?

(A) Although it sells all of the telephones that it produces, Mammoth Industries'  share of all telephone sales  has declined over the last year.

This is saying that the Mammoth Industries' sales as a proportion of ALL telephone sales (including those of other companies) has declined. We might think that this weakens but we should be careful not to get mixed up between percentages and absolute numbers. It's possible that MI increases their sales yet still have a smaller chunk of the pie.

A less subtle detail is the fact that their share of all sales HAS DECLINED present perfect tense. That's not necessarily an indication that it will continue to decline in the future.

(B) Mammoth Industries' average inventory of telephones awaiting shipment to retailers has declined slightly over the last year.

This could go both ways. Suppose their logistics improved and they are actually able to get more phones out of the warehouse. Great, that strengthens. On the other hand suppose the shipping time has gone down b/c they aren't getting enough orders. Weakens. So this choice is ambiguous.

(C) Advertising has made the brand name of Mammoth Industries' telephones widely known, but few consumers know that Mammoth Industries owns this brand.

Irrelevant.

(D) Mammoth Industries' telephone is one of three brands of telephone that have together accounted for the bulk of the last year's increase in sales.

This potentially strengthens...MI has a good chunk of the market share.

(E) Despite a slight decline in the retail price, sales of Mammoth Industries' telephones have fallen in the last year.

Correct. So despite extensive amounts of advertising...their sales are still dropping. Expanding their production might totally be all for nothing.

Please give me a kudos if you like my reasoning.

MBAB123 · Answer

koolk , it might be difficult to pre-think an exact response, but you can pre-think the idea that would give you the right answer. My thought was that I need something that would probably differentiate Mammoth from other industries or would differentiate the last year from the future years or something that would directly tell me a fault in production. Hope this helps!

lakshya14 · Answer

I agree that only (E) is the correct answer, but (E) has a flaw in it. The argument asks whether the "plan" of marketing will be successful, but in (E) decline in sales despite the decrease in prices could be result of poor marketing, and we would want to market more this time around to not to let the opportunity pass by?
 AndrewN

AndrewN · Answer

Hello,  lakshya14 . You have to be careful not to read an argument, conclusion, or plan too narrowly and see only what you want to see. The plan in the last line of the passage is two-pronged:

1)  to expand production of its own model of telephone

2)    its already very extensive advertising of this product  (i.e. its own model of telephone)

It is this more comprehensive plan that we need to analyze. Will Mammoth Industries be able to capitalize on market trends by expanding production of its own telephones and promoting them?

We cannot say, as you suggested, that the decline in  sales of Mammoth Industries' telephones  from the past year is due to "poor marketing," since GMAC™ has that base covered, describing the marketing/advertising strategy of the company as  already very extensive . Choice (E) works because,  in spite of  these promotional efforts, Mammoth Industries is still having trouble selling its phones, bucking the market trend. Why would we have reason to believe that continuing in the same vein but expanding production would necessarily lead to better results (sales) for Mammoth? Choice (E) is a compelling answer in light of the above considerations.

I hope that helps dispel—or at least diminish—your concerns. Thank you for thinking to ask.

- Andrew

sbhutta · Answer

still confused between option d and e

rashwiniyer · Answer

I found this question very strange. Options talk about the past to prove that Mammoth Industries CANNOT increase its sales of telephones by adopting the plan outlined.
How can we assume this? Even if something has not done well last year, can it not do great the next year or future?

It is an OG question, so certainly my understanding is wrong. 
I am struggling with such questions. Can anyone please suggest?

NCC · Answer

Solution: E

Plan: +Production and + Advertising of product P
Goal: inc sales
Logic: if the market is doing well, then assuming that demand > supply, people will buy more

We looking for an issue with company - Weaken Plan

A - 30% to 10% = can be either because of a problem in the company or because denominator inc significantly - HOLD
B,C - Irrelevant
D - Strengthens
E - definite issue with company/product so plan will fail - ANSWER

GMATNinja · Answer

Remember that we're just trying to find the answer choice that "provides   most  support  for the view that Mammoth Industries cannot increase its sales of telephones by adopting the plan." So, we don't need to PROVE that the plan is doomed to failure -- we just need to support the view that the plan isn't going to work.

Let's say that my friend predicts that she'll run an upcoming 10 kilometer race in under 50 minutes. I could (rudely) suggest that this future plan isn't going to work because of some past evidence. For example, I could say "Well, you're using the same training plan as last year, and it took you over an hour to run that race."

Does this evidence  prove  that my friend (or frenemy...) isn't going to achieve her goal? Nope, she could still do it! But the evidence does provide support for the view that she's not going to finish in under 50 minutes.

Similarly, Mammoth Industries plans to use the same advertising campaign and expand production of its phone. Its goal is to increase sales of the phone.

You could say, "Well, phone sales are  already  declining, so if you just make more of them then you're not going to increase sales."

That's essentially what (E) says:
 
From this, we know that sales are declining even though the retail price went down. If Mammoth doesn't change its advertising plan and just makes more phones, then it doesn't seem likely that they'll see the sales increases that they want.

(E) is the correct answer.

I hope that helps!

rickyric395 · Answer

KarishmaB ,  GMATNinja  ,  AjiteshArun , in support of B, if inventory has  decreased slightly  in light that sales of telephones is on the rise. Doesn't it mean that it may be possible that MI's phone sale is not good and increase in production won't do any good? I mean since phone sales is on rise and consequently inventory should have decreased rapidly, then increase in production would have made sense. But it not this case as stated in B

AjiteshArun · Answer

Hi rickyric395,

Inventory management is very complex, so what you are saying is  possible . However, we must not look at option B in isolation.

B.  A decline in inventory levels could be due to many reasons, but in the absence of any other information, we should generally assume that  a drop in inventory levels is a good thing  (it indicates  greater-than-expected demand ). Conversely, if inventory piles up, that's generally a bad sign (it indicates  lower-than-expected demand ).

(Think about all the newspaper stories that discuss iPhone inventory levels. When inventory levels fall, Apple is usually struggling to meet increased demand.)

We can thus say that option B (very slightly) strengthens the view that Mammoth Industries  can  increase its sales of telephones by adopting the plan.

E.  Option E tells us that although sales of telephones  have increased dramatically  over the last year, sales of Mammoth Industries' telephones, even with extensive advertising and a small price cut, have fallen in the last year.

Given that  Mammoth's plan is only to increase production  ("extensive advertising" won't change), option E is better than the other options.

rickyric395 · Answer

Thanks  AjiteshArun  for the explanation, I put up too much emphasis on 'slightly decreased' phrase and thought that since sales overall are increasing and even after extensive ads decrease in inventory is slight. Hence increased production won't solve the issue as issue may be something else such as old design, less features etc. But I agree that E is much more strong weakener overall.

KarishmaB · Answer

Though Ajitesh has already answered the question in his usual brilliant manner, there is one thing I would like to point out -

Option (B) says "average inventory awaiting shipment to retailers" has declined slightly.
Looking at that, we can say nothing about the change in sales of the company. It depends on a 100 factors such as when the production process completed, when the company raised the invoice, when was that cleared, when did the retailer request for the shipment, what is the schedule of the courier running the shipment etc. Something as simple as the courier running one extra pickup per day could decrease the "average inventory awaiting shipment to retailers" while the sales may have stayed the same.

Raman109 · Answer

Understanding the argument - The argument assumes that as the industry sales grow, Mammoth Industries sales will also grow. It's a big assumption. What if Mammoth Industries' product is not aligned with the features contributing to increased sales? Option E touches on this assumption and is thus a correct option here.

Option Elimination -

(A) Although it sells all of the telephones that it produces, Mammoth Industries' share of all telephone sales has declined over the last year. - It's a strengthener.

(B) Mammoth Industries' average inventory of telephones awaiting shipment to retailers has declined slightly over the last year. - At best, it can be a strengthener. Lower inventory is good. It means there is a pull in the market for your product. Conversely, higher inventory is terrible in a situation like this.

(C) Advertising has made the brand name of Mammoth Industries' telephones widely known, but few consumers know that Mammoth Industries owns this brand. - It's a self-contradictory. First, it says the brand name is widely known, and then it says few consumers know that Mammoth Industries owns this brand. It must be "a model" of a product described in the argument, not the "brand." We casually use a brand or a model as the same. But it isn't apparent here. Moreover, even if I know the brand owns the model, my reason for not buying it last time stays the same as the argument says they plan to expand the production of its model. Expanding production means if you were producing 100 units earlier, we now expand the production to 200. Expanding production doesn't mean introducing a new, improved model. So if the consumer didn't buy the product last time because of superior features or other reasons for other products, that reason remains valid.

(D) Mammoth Industries' telephone is one of three brands of telephone that have together accounted for the bulk of the last year's increase in sales. - strengthener.

(E) Despite a slight decline in the retail price, sales of Mammoth Industries' telephones have fallen in the last year. - ok. Attacks the assumption.

RutujaDeshmukh19 · Answer

Let us break down the argument and understand it in a better way:

Sales of telephones have increased dramatically over the last year.
 
 Telephone sales have increased a lot over the last year for Mammoth Industries.  
In order to take advantage of this increase, Mammoth Industries plans to expand production of its own model of telephone, while continuing its already very extensive advertising of this product.
 
 In order to take advantage of the increase in sales of telephone, Mammoth Industries is planning to increase the production of its own model of telephone. 
 It is also continuing the extensive advertising of this product.

Possible Weakener: 
Any option which shows that there is a possibility that sales of telephone would remain same or decline but not increase is the correct answer choice.

(A) Although it sells all of the telephones that it produces, Mammoth Industries' share of all telephone sales has declined over the last year. - Incorrect  
 
 Decrease in share of telephone sales does not imply that the newly produced telephone stock would not be sold.  
 This would surely show a decline in profits, but it won't affect the telephone sales.

(B) Mammoth Industries' average inventory of telephones awaiting shipment to retailers has declined slightly over the last year. - Incorrect  
 
 This option performs a function opposite to what is required. It is a strengthener.  
 If inventory of awaiting shipment has declined, this shows a positive point. 
 This means that more telephones are sold and the newly produced telephones will also get sold.

(C) Advertising has made the brand name of Mammoth Industries' telephones widely known, but few consumers know that Mammoth Industries owns this brand. - Incorrect  
 
 It is mentioned in the argument above that Mammoth Industries has been into extensive advertisement. 
 Hence the possibility that people will be unaware of the brand is low. 
 Thus, it does not affect the sales.

(D) Mammoth Industries' telephone is one of three brands of telephone that have together accounted for the bulk of the last year's increase in sales. - Incorrect  
 
 There is a possibility that the other 2 brands also increase the production and market competition can result in decrease in sales or same amount of sales for Mammoth Industries. 
 Hence, this is not a correct answer choice.

(E) Despite a slight decline in the retail price, sales of Mammoth Industries' telephones have fallen in the last year. - Correct  
 
 A slight decline in retail prices of telephones has caused a decrease in sales of telephones.  
 There seems a possibility that even after increase in production the sales would not increase to the required level. 
 Hence, this is the correct answer choice.

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