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.
To support the claim that it is more profitable for the company to specialize in selling only domestic cheeses, the memo cites the Cheeses of the World survey in which 67% of respondents said that they prefer domestic cheeses. While certainly impressive, this statistic paints only a partial picture of the situation. The survey was open toCheeses of the World subscribers, who can presumably be assumed to be cheese lovers. A more pertinent question would be how many of these respondents are from grocery stores, and what percentage of the overall population in the United States is a grocery store customer. If the survey were limited to the grocery store population, the survey results would be skewed heavily in favor of domestic cheeses, because grocery stores tend to stock only domestic cheeses. In that case, the recommendation to ‘concentrate primarily on domestic cheeses’ would not be consistent with the preferences of the general population, which favors foreign cheeses. If the survey was not limited to grocery store customers, the results would be skewed further in favor of domestic cheese, because grocery stores are more likely to stock foreign cheeses.
The memo also states that the company can reduce its expenses by limiting its inventory, but this assumes that the company does not face any capacity constraints. If the chain is running out of shelf space, it may not be possible to reduce the inventory further, or it may adversely affect the customer experience. If the chain is running out of shelf space, it will need to add more to its existing locations. However, if the chain is already operating at maximum capacity, it will need to expand to new locations or discontinue some of its cheese offerings. To the extent that the company is already selling its cheese at a profit, it may decide that it is better to expand than to limit its cheese offerings. The memo does not address these factors.
The memo concludes that ‘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.’ The memo fails to consider the impact of this decision on the employees who may be affected by the decision. The company has a tradition of offering a wide variety of cheeses to its customers. If the chain were to emphasize domestic cheeses, it could alienate a significant number of its customers. Furthermore, 67% of respondents in the survey favored domestic cheese, which suggests that the company could alienate a significant number of its employees as well. If the company were to cut back on the inventory of foreign cheeses, it would need to hire fewer employees, but it would not need to hire any employees for jobs related to domestic cheese. If the chain were to cut back on the inventory of domestic cheese, it would need to hire more employees, and some employees would be out of a job.
If the chain were to cut back on the inventory of foreign cheeses, it would need to hire more employees, and some employees would be out of a job. If the chain were to cut back on the inventory of domestic cheese, it would need to hire more employees, and some employees would be out of a job. The memo does not address this issue.
The memo is vague in describing the process by which the decision was made to limit cheese offerings. A more direct statement such as ‘After careful consideration, the company decided to discontinue offering its imported cheeses, and to specialize in selling only domestic cheeses’ would help clarify the decision. The memo also fails to address the issue of whether or not the company’s employees would be affected by the decision. The memo’s one-sided treatment of the concerns of the employees would fuel the employees’ opposition to the decision, undermining the company’s credibility.
The memo contains several references to surveys of Cheeses of the World subscribers and to Cheeses of the World magazine. However, the memo fails to provide any information about who conducted these surveys, how the results were compiled, what sampling methods were used, or what the margin of error for the results might be. This information would provide a more accurate picture of the survey’s reliability.
The memo’s recommendation that the company limit its cheeses would have a negative effect on the company’s profits. If the chain limits the inventory of foreign cheeses, it will lose customers who like foreign cheeses. If the chain limits the inventory of domestic cheeses, it will lose some customers who prefer domestic cheese. The memo is vague about whether the chain has been losing money on foreign cheeses, which could support the company’s position that it is better to sell only domestic cheeses. Even if the company is losing money on foreign cheeses, it could make back some of the money it loses by limiting its foreign cheese offering. The memo does not mention how the company would decide what cheeses to discontinue. If the chain limits its cheeses to only those cheeses that have a high profit margin, it may lose customers who prefer lower-priced cheeses. If the chain limits its cheeses to only those cheeses that have a high profit margin, it may lose customers who prefer lower-priced cheeses. The memo does not address the issue of how the company would decide which cheeses are more profitable.
The memo recommends several actions that would have a negative impact on the company, but it fails to address these questions. If the chain does decide to limit its cheeses, the company will lose customers and employees. However, the memo does not provide any evidence that the proliferation of domestic cheeses is the reason for the company’s financial problems.
The memo describes a situation in which the company would benefit from asking more questions.