The following appeared in a memo from the owner of a chain of cheese stores located throughout the United States.
"For many years all the stores in our chain have stocked a wide variety of both domestic and imported cheeses. Last year, however, all of the five best-selling cheeses at our newest store were domestic cheddar cheeses from Wisconsin. Furthermore, a recent survey by Cheeses of the World magazine indicates an increasing preference for domestic cheeses among its subscribers. Since our company can reduce expenses by limiting inventory, the best way to improve profits in all of our stores is to discontinue stocking many of our varieties of imported cheese and concentrate primarily on domestic cheeses."
Write a response in which you discuss what questions would need to be answered in order to decide whether the recommendation is likely to have the predicted result. Be sure to explain how the answers to these questions would help to evaluate the recommendation.
In this memo, the author believes that the discontinuation of a variety of imported cheeses and a shift of concentration towards domestic cheeses is the best way to reduce company expenses and improve profits. While there is a survey quoted to support the author’s claim, through careful examination and analyzation of the text with consideration to said claims, we are able to find that some of the statements made leave room for doubt and some of the author’s assumptions are, at worst, shaky conjecture and, at best, wishful thinking. When we consider the references mentioned by the author from a vantage point different than his/her own, we are able to compare and contrast the pros and cons of his/her statements in an unbiased manner.
To begin with, in the first sentence of the text, the author mentions that their company is a chain, which, undoubtedly, means that there are many different store locations throughout the country operated under the company’s umbrella. That being said, when the author references a recent survey to provide his claims with numerical foundation and statistical evidence, the only results provided in the text for support are those from the company’s newest store location. While the results do play in favor of the authors claim—domestic cheeses are selling better than imported ones—the narrowness in scope of the survey must be taken into account, as the results from a single store can hardly be representative of those from all store locations. If the best-selling cheeses at the other store locations are imported cheeses rather than domestic cheeses, then the decision to discontinue a wide variety of imported cheeses in all store locations would prove to be rash; a large portion of the chain’s demographic would be neglected, which would eventually lead to a decline in sales and profit, contrary to what the author is anticipating.
Furthermore, the author also references a survey conducted by Cheeses of the World magazine, which indicates an increasing preference for domestic cheeses among its subscribers. This, too, positively supports the author’s claim that there is extensive demand for domestic cheeses. However, we cannot be certain that the subscribers of the magazine are customers of the chain store. If a great number of subscribers are customers, then the author’s claim would be, to some extent, accurate ;however, if only a small portion of subscribers are customers, then the results of said survey would not be a great predictor of future cheese sales. Therefore, without precise knowledge about the composition of the survey group, these survey results cannot be considered substantial evidence that there is also an increasing preference for domestic cheeses among the chain store’s customers.
Even if the people who participated in the survey are all customers of the store, it doesn’t necessarily mean that the trend manifested in the data will persist in the future. Even if demand for domestic cheeses is on the rise, as indicated by the survey, the results of said survey only show sales from the previous year. As many of us are aware, sales trends have a tendency to fluctuate unpredictably: sales of certain products might increase at a sharp interval one year, peak out, and then gradually begin to decline in following years. Without conducting a wider analysis of sales over a longer period of time, there is no guarantee that sales will continuously increase. If demand for imported cheeses were to boom in the following years, the chain store would not be able to take advantage of this trend with only a limited supply of imported cheeses. Therefore, making hasty decisions to discontinue certain products without taking a wider range of sales and potential trend changes into consideration would not be beneficial to the company.
Even if the new store can successfully represent the sales of other store locations, and the preferences of magazine subscribers could accurately portray those of store customers, there still remains the assumption that consumers have no need for imported cheese, therefore imported cheese should be cleaned out from the stock. The author’s ultimate aim in this proposal is to increase profit in the chain stores, so we need to understand the profit margins of the top five domestic cheeses. If the profit margins are minuscule, it would be unwise to make a change in the stock. For example, if the price of domestic cheese is inexpensive, but the cost is very high, that would, in turn, lead to high sales but meager profit. Although imported cheeses have lower sales, they possess higher profit margins and constitute an overwhelming proportion of overall profit.
Even though domestic cheeses hold an absolute weight in the profit aspect, according to the suggestions regarding profit increase, the author also assumes that discontinuation of certain products is the best way to increase profits and that there is no other feasible way to increase profits. However, in this assumption, the author neglects other ways that could greatly increase profits, such as reducing other costs or increasing sales of existing cheeses through some cost-controlled marketing methods. Perhaps it would not incur more profit byincreasing sales or reducing other costs compare with discontinuing imported products. (Perhaps increasing sales or reducing other costs would not incur more profit than the discontinuation of imported products.)*But by incorporating a variety of different tactics, it is likely that profits will increase more than they would if the store were to simply heed to the discontinuation method proposed by the author. If this were to happen, the author's assumption would be invalidated.
To conclude, in lieu of a discontinuation, the company might benefit more from an adjustment in inventory, which is to say that they could adjust the amount of imported and exported products at individual locations, taking into consideration the demographics and customer demands at each location, and proceed to carry out measures accordingly. The company should also take the profit margin of each product into account; it would be beneficial for the company to holistically analyze the amount of profit brought in by each individual cheese, and how the sales of each product affects the overall profit of the store. If the company chooses to discontinue sales of a certain product based solely on circumstantial evidence, similar to that provided in the text, there is no guarantee that they will be able to increase profits in the future.