Quote:
The following appeared in a memorandum from the owner of Movies Galore, a chain of video rental stores.
“In order to reverse the recent decline in our profits, we must reduce operating expenses at Movies Galore’s ten video rental stores. Since we are famous for our special bargains, raising our rental prices is not a viable way to improve profits. Last month our store in downtown Marston significantly decreased its operating expenses by closing at 6:00 P.M. rather than 9:00 P.M. and by reducing its stock by eliminating all movies released more than five years ago. Therefore, in order to increase profits without jeopardizing our reputation for offering great movies at low prices, we recommend implementing similar changes in our other nine Movies Galore stores.”
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.
The owner of the Movies Galore concluded that to increase the profits, the operating expenses and the stocks of old movies have to be reduced. This has been based on the assumptions that customers are not ready to pay more than the present prices, that the service and quality of the products have not reduced and that the store at Marston has not done anything extra apart from reducing the timings and eliminating the old stocks like better advertisement and out reach exercise for the customers. Therefore, this memorandum is marred with basic assumptions full of flaws and deep irrationality.
First of all, to assume that the Galore is famous for only its special bargains is deeply flawed. It fails to answer the question that whether the present customer base is ready to pay more or not and whether such discounted price is at par with the current market prices for the service of Galore’s. A well surveyed data about the opinion of the customers might have revealed the actual cause of its publicity and an incisive analysis of market rates of similar products and services might have revealed the extent to which the present discount on the movies may be altered.
Secondly, the arugument of the owner failed to answer the question that whether the decline in profits can only be reversed through reducing operating costs and not by improving quality of services and products. For example, a quality check on the CD-ROMs, through which the movies are given to customers, might have helped to answer this question. Also, the delivery time, the store environment and the behviour of the store executives should have been examined before rejecting them as a cause fo reducing profits.
Finally, a pertinent question that whether the reduced timing and elimination of the stocks of old movies have resulted in the increased profit at Marston store or better advertisement and out reach efforts of store executives also played a vital role in reversing the declining trend of the profits. The stroe executive might hav advertised door to door about their improved services and offers which might have allured the customers.
In a nutshell the arugument presented in memorandum doesn’t answer many pertinent questions and is based on incomplete data and assumptions which are hollow irrartional. The argument can be made concrete with addition surveys and facts.
21 Jul 2021, 03:57 
