A major tea producer in the country wants more restaurant chains to serve its tea leaves. The manufacturer is planning to offer its tea to large chains at a significantly lower price, at least for a certain period. This decrease in price initially will reduce the manufacturer’s profits, but they hope to get into enough country restaurant chains that their volume increases significantly. Once they have a much higher volume, even a small increase in their price would have an enormous effect on their profits.
In evaluating the plan’s chances of success, it would be most helpful to know which of the following?
- Whether their discounted price is lower than the prices of the tea manufacturers who currently provide tea to these nationwide restaurant chains.
- Whether the manufacturer will use the same shipping system as it has been using to ship tea to restaurants across the country.
- Whether the prices of some mixes of tea will be discounted more than the prices of others.
- Whether the tea manufacturer will be able to cut costs associated with advertising to maintain a strong profit margin even with the lower prices.
- Whether an alternate plan would allow the tea manufacturer to take greater profits from the restaurant chains to which it currently provides tea.
Summary of the argument: According to the tea manufacturer, lowering his tea price will result in more sales of his tea brand. In order to prove the validity of the manufacturer statement, we have to prove that his plan will have the desired result.
- If the other manufacturers are selling tea at the same price this tea manufacturer is intending to, then the manufacturer won’t have a result. we do need to know the price level the manufacturer can lower its tea price. Hence, this is the right answer.
- The argument is related to the sales and prices, information about the mode of shipment is irrelevant for the argument. Hence eliminated.
- The type of tea mixtures are not discussed, the manufacturer is intended to lessen the price so that the sales will increase overall. Hence eliminated.
- Profit is not really a concern, nor the determining factor to decide manufacturer intended sales. Hence eliminated.
- The argument does not discuss the alternate plan. Hence eliminated.