The vice-president of the Dolci candy company has good reason to shift the company’s focus to producing additional lines of premium candy rather than continuing to sell its cheaper candies. He correctly notes that two major factors have contributed to the recent success of Dolci’s ‘premium’ lines. First, sales of Dolci’s premium candies have increased by over 3,000%, whereas sales of Dolci’s regular candy lines have been stagnant. This suggests that the higher prices do in fact command a premium in the market. Second, he notes that when the current boom ends, consumers will still want to buy ‘small luxuries,’ indicating that they will continue to buy luxury products even after the boom has subsided. The vice-president’s conclusion that consumers will continue to purchase luxury products even after the economy has tanked is flawed, however

The vice president fails to consider that Dolci’s customers will not be able to afford such luxuries as cars once the boom has ended. The recession of 2008 was devastating to many Americans, and unemployment remains high. Even with his 3,000% increase in sales, the vice-president has not come close to breaking even. Even if Dolci were to begin to make a profit, it would still take years for it to reach even breakeven with its current sales levels, and by then a recession could easily have crippled the company. Even if Dolci were to continue its sales growth, most likely the vice president and the board would decide to sell the company. By that time, the company would have lost its competitive edge and would be unable to sustain its success

The vice-president’s logic is based on the assumption that consumers will continue to buy luxury products even when the economy has tanked. However, this assumption is flawed. He states that consumers will still want to buy ‘small luxuries.’ However, he fails to take into account another fact that he mentions: that ‘consumers will not be able to buy major luxuries, such as cars.’ While he believes that the economic downturn will not prevent consumers from buying smaller luxuries, he should know that many consumers will cut their spending to the bare minimum, and luxuries such as Dolci’s will not be a priority. The recession of 2008 demonstrated that many Americans do not have the disposable income to purchase luxuries such as cars. Even if the recession were less severe, consumers would have to make sacrifices such as downsizing their homes, eliminating luxuries, and cutting back on eating out. Since Dolci’s products are a luxury, they will likely be among the first to be eliminated

Furthermore, the vice president’s assumption that consumers will continue to buy Dolci’s products even when the economy has tanked is flawed. When the economy has tanked, many people are forced to curtail spending. Since Dolci’s products are expensive, consumers who have a great deal of disposable income may no longer be able to afford them. While some consumers may purchase Dolci’s products out of a sense of brand loyalty, many will simply discontinue their purchases. The success of Dolci’s regular lines suggests that, when the economic situation has stabilized, the vice president will be forced to shift the company’s focus to producing cheaper candy lines. Given the high cost of the premium lines, the cheaper candy lines will likely remain profitable while the more expensive lines will still be a big loss for the company

The vice-president’s reasoning that consumers are only interested in ‘small luxuries’ is flawed. He assumes that consumers will consume smaller portions of more expensive products, but he fails to take into account that consumers may simply choose to purchase fewer of each product. As the economy has tanked, many companies have been forced to reduce the size of their product packaging. While this will save money in the short term, it may result in losses for many companies in the long run. If consumers can no longer afford to purchase one box of premium chocolates, they may decide to forego buying the chocolates altogether

Although the vice-president’s reasoning is based on sound principles, his conclusion is flawed. The recession of 2008 demonstrated that many consumers do not have much money to spare. Even if a recession were less severe, many consumers would be forced to cut back on spending. Dolci’s premium products are a luxury that consumers will likely eliminate from their shopping lists when the economy has stabilized.