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# V10-30

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Founder
Joined: 04 Dec 2002
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Founder
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Math Expert
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WE:General Management (Manufacturing)
bb
Official Solution:

Company Executive: Ten years ago, we held about 80% market share in Japan in terms of revenue, even though we are a U.S.-based company. At that time, Japanese consumers overwhelmingly preferred our product to those locally produced in Japan. Over the past ten years, our market share in Japan has decreased to about 40%. However, our revenue from the Japanese market has actually increased.

Which of the following best helps to explain the above discrepancy?

A. The size of the Japanese market for the company’s product has significantly grown over the past ten years.
B. The population of Japan has remained the same over the past ten years.
C. The company has increased its selling price for the product over the past ten years in line with the average price increase for the product in the Japanese market.
D. Over the past ten years, local Japanese manufacturers have introduced a number of low-cost products that compete with the company’s product line.
E. Consumer sentiment in Japan has shifted away from imported goods and towards domestically produced goods.

(A) CORRECT. If the size of the market increased significantly then even after losing market share in terms of % revenue, the company could still increase its absolute revenue. For example, suppose the market grew from 100M JP¥ to 300M JP¥. 80% of 100M € is lower than 40% of 300M €.

(B) This does not explain why revenue increased while market share was lost.

(C) Increasing price in line with the market would not help in increasing the absolute revenue when the market share is halved - a much higher price increase compared to the average is required in order to reach the result mentioned in passage.

(D) This option suggests a reason for the drop in market share, but not for the increase in revenue.

(E) This option simply restates the fact that the U.S. company has lost market share.

Well I am having a hard time here to agree to above explanation, as we know, market share getting halved doesn't mean the revenue is getting halved. There might be a significant growth in the overall market as option A rightly depicts. However if there is significant growth in the market, it doesn't always mean the revenue for the company might have jumped. OR as option C says company's no of sales might be constant ( the same reason the product share has declined, as total market has grown ) but the price of the product might have increased. So IMO, option C is always possible candidate here to explain why the revenue from Japanese market has increased.
Founder
Joined: 04 Dec 2002
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Sathvik02
Well I am having a hard time here to agree to above explanation, as we know, market share getting halved doesn't mean the revenue is getting halved. There might be a significant growth in the overall market as option A rightly depicts. However if there is significant growth in the market, it doesn't always mean the revenue for the company might have jumped. OR as option C says company's no of sales might be constant ( the same reason the product share has declined, as total market has grown ) but the price of the product might have increased. So IMO, option C is always possible candidate here to explain why the revenue from Japanese market has increased.

Good question. Let's use numbers for an example.

Let's say the company market share was \$80million and the total market was \$100 million in Japan.
If the market grows significantly - that means it may double or triple or even grow 10-fold. However, do not know besides that it has grown significantly. But let's assume it has tripped. In that case, even though the market share is half of what it used to be, the revenue is greater because the market is \$300M and the revenue is \$120M. This is a likely candidate for the answer.
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Here, option (a) says: size of the Japanese market for the 'company's product'. I believe, here the company means that particular company for which the executive is speaking. If the option would have said "the size of the Japanese market for the product", in that case it would have been true.

Please provide a clear explanation for this.
Founder
Joined: 04 Dec 2002
Posts: 38613
Own Kudos [?]: 75327 [0]
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GMAT 1: 750 Q49 V42
GPA: 3