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The following is part of a business plan created by the management of the
Megamart grocery store.
ďOur total sales have increased this year by 20 percent since we added a pharmacy
section to our grocery store. Clearly, the customerís main concern is the
convenience afforded by one-stop shopping. The surest way to increase our profits
over the next couple of years, therefore, is to add a clothing department along with
an automotive supplies and repair shop. We should also plan to continue adding
new departments and services, such as a restaurant and a garden shop, in
subsequent years. Being the only store in the area that offers such a range of
services will give us a competitive advantage over other local stores.Ē
Discuss how well reasoned... etc.
The management of the Megamart grocery store concludes that adding new departments and services is the surest way to increase
profits over the next couple of years. They are led to this conclusion because of a 20 percent increase in total sates, realized after the
addition of a pharmacy section to the grocery store. On the basis of this experience, they concluded that the convenience of one-stop
shopping was the main concern of their customers. The managementís argument is faulty in several respects.
In the first place, the management assumes that the increase in total sales was due to the addition of the pharmacy section. However,
the only evidence offered to support this conclusion is the fact that the addition of the pharmacy preceded the increase in sales. But
the mere fact that the pharmacy section was added before the increase occurred is insufficient grounds to conclude that it was
responsible for the increase. Many other factors could bring about this same result. Lacking a detailed analysis of the source of the
sales increase, it would be sheer folly to attribute the increase to the addition of the pharmacy section.
In the second place, even if it were the case that the increase in total sales was due to the addition of the pharmacy section, this fact
alone is insufficient to support the claim that adding additional departments will increase sales even further. It is quite possible that the
addition of the pharmacy section increased sales simply because there was no other pharmacy in the vicinity. The additional proposed
departments and services, on the other hand, might be well represented in the area and their addition might have no impact whatsoever
on the profits of the store. In other words, there may be relevant differences between the pharmacy section and the additional
proposed sections that preclude them from having a similar effect on the sales of the store.
In conclusion, the managementís argument is not well-reasoned. To strengthen the conclusion, the management must provide additional
evidence linking the addition of the pharmacy section to the increase in total sales. It must also show that there are no exceptional
reasons for the sales increase due to the pharmacy section that would not apply to the other proposed additions.