The Kapoor Meatworks has a virtual monopoly on expensive, gourmet deli

Question

The Kapoor Meatworks has a virtual monopoly on expensive, gourmet delicacies. In order to expand their market, they intend to offer a budget line of less costly delicacies. Such a product is virtually unknown, and they realize that its success depends upon a heavy advertising campaign. They have decided to finance the advertising with the profits from their gourmet line.

Which of the following, assuming that each is a realistic possibility, would constitute the most serious obstacle to the Kapoor Meatworks' project?

A) The introduction of a budget line of delicacies completely undercuts the sales of the gourmet line.
B) At the start, the company spends more on advertising than it makes from sales of the budget line delicacies.
C) When the budget line delicacies grow in popularity, competitors enter the budget delicacies market and Kapoor does not have a monopoly in that market.
D) Many of the consumers who purchase the budget line are tempted to try the delicacies offered in the gourmet line.
E) Many of the stores that now carry Kapoor's gourmet line of delicacies are exclusive, and refuse to carry their budget line.

chetan2u · Answer

Profit from gourmet line for advertising for budget line ...
 All choices may be tempting but look for most serious obstacle for above

Choice A gives us a reason that the money may not be available for advertising, thereby effecting the project.

gmat1393 · Answer

Hi  chetan2u

Can you please point whats wrong with choice E.
I felt that it seriously weakens the Argument as Kapoor's are ready for heavy advertising but there's no point in spending that much money as many stores refuse to carry the new budget line of less costly delicacies.

Is it because of the keyword  Many .Meaning few stores may carry the new budget line.

chetan2u · Answer

Hi..

the main point of project is that the financing advertisement will be from profit of gourmet lines

the stores are not being questioned. if these stores refuse, other stores on rent/new may be picked up.

but point A puts a question mark on the profit itself, so a better choice

gmat1393 · Answer

Thank you @chetan2u.This makes sense.

jackspire · Answer

Hello  chetan2u ,

I went for C and my thought process was that when it loses the market for new budget line, there will be huge loss. There is no point in investing on advertising.

Where I went wrong?

Prateek176 · Answer

chetan2u  ,  nightblade354  ,  broall  , GMATNinjaTwo  ,  aragonn

Reason why I selected B: If influx of money via sales of gourmet delicacy is less than that spent on advertising, then the entire plan to finance the project can go haywire.

Reason why I rejected A: Ok, agreed, the introduction of a budget line of delicacies completely undercuts the sales of the gourmet line but we don't know whether the it undercuts sales to the point that financing the budget line becomes impossible.

I am still confused why the answer is A. Please help

goaltop30mba · Answer

Could someone help me to eliminate answer choice “c” ??

Posted from my mobile device

Turkish · Answer

would constitute the most serious obstacle to the Kapoor Meatworks' project

What is the project?

expand  their market by  advertising  with the profits from their gourmet line.

Now C says competitors will enter the market so no more monopoly for Kapoor's But Kapoors do have expensive, gourmet delicacies that makes them remain in status quo . It has no effect on the project.

But A says budget line of delicacies completely undercuts the sales of the gourmet line. It means no heavy advertising campaign. As the wont have the money to do so-- So, the project fails.

jorgetomas9 · Answer

SOmebody could tell me whta is wrong with letter D?
Thank you.

nightblade354 · Answer

I have not read the question, so I cannot issue a statement directly about it. That said, it is a Kaplan question, and Kaplan question can be wildly unrealistic and unrepresentative of an actual GMAT question. There can sometimes be multiple answers and there can sometimes be no answers.

Edit: I read it and it seems like a fine question.

jorgetomas9 , (D) is wrong because it says "many". Many is the same as some, and some can mean any amount between 1 and the full amount. Therefore, this cannot be our answer

aditliverpoolfc , (C) is wrong because it is out of scope. Who cares if they do not have a monopoly? If they are profitable and have 50 competitors, who cares?

jorgetomas9 · Answer

I understand now that Many could mean some that can be mean as one or teo. thank you.

swim2109 · Answer

I got a bit confused between A & E. Took me well over 2:00 minutes.

Here's how I decided to go with A.

The project is to expand their market. So if the new line undercuts the gourmet line, would it be expanding the market in real terms?

As far as E is concerned, if the current retailers dont carry the new line, the company can use other budget retailers to sell their new line. Not as strong a weakener as the first one.

Hope it helps

PSKhore · Answer

The most serious obstacle to the Kapoor Meatworks' project is  A) The introduction of a budget line of delicacies completely undercuts the sales of the gourmet line.
  
This outcome presents the most serious problem because it directly threatens the company's primary business and its ability to finance the new venture. The company is relying on profits from the gourmet line to fund the advertising for the budget line. If the new, cheaper product cannibalizes the sales of the more profitable gourmet line, the company loses both its main source of income and its funding for the expansion project. This could lead to a net loss and the failure of the entire plan.

Analysis of Other Options:
  
 B) At the start, the company spends more on advertising than it makes from sales of the budget line delicacies.  
This is a normal, expected part of launching a new product. Initial losses are common, as the goal is to build market share for future profitability. This isn't a serious obstacle but a typical part of the business plan.

C) When the budget line delicacies grow in popularity, competitors enter the budget delicacies market and Kapoor does not have a monopoly in that market.  
This is also a typical, expected market outcome. As a new market becomes successful, competition is inevitable. While it might reduce potential profits, it doesn't prevent the project from succeeding or pose the same existential threat as option A.

D) Many of the consumers who purchase the budget line are tempted to try the delicacies offered in the gourmet line.  
This is actually a positive outcome. It suggests that the budget line is successfully acting as a gateway to the more profitable gourmet line, which is an ideal scenario for the company.
 
E) Many of the stores that now carry Kapoor's gourmet line of delicacies are exclusive, and refuse to carry their budget line.  
While an inconvenience, this is not the most serious obstacle. It means Kapoor Meat works will need to find new distribution channels for their budget line, but it doesn't directly undermine their existing business or their ability to fund the project.

Source: Google Gemini

The Kapoor Meatworks has a virtual monopoly on expensive, gourmet deli

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The Kapoor Meatworks has a virtual monopoly on expensive, gourmet deli

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