AA-125. The following appeared as part of the business plan of the Capital Idea investment firm.
“Across town in the Park Hill district, the Thespian Theater, Pizzazz Pizza, and the Niblick Golf Club have all had business increases within the past two years. Capital Idea should therefore invest in the Roxy Playhouse, the Slice-o’-Pizza, and the Divot Golf Club, three new businesses in the Irongate district. As a condition, we should require them to participate in a special program: Any customer who patronizes two of the businesses will receive a substantial discount at the third. By motivating customers to patronize all three, we will thus contribute to the profitability of each and maximize our return.”
In this argument, the author assert that Capital Idea should invest in the Roxy playhouse, the slice-o-pizza and the divot golf club in the Irongate district. In order to support the assertation, it cited that in park hill district, the thepian theater , the pizzazz pizza and the niblick colf club Pizzazz Pizza, and the Niblick Golf Club have all had business increases within the past two years. In addition, the author think the promotion program offered substantial discount to consumers will lead to increase in profitabilty of each and maximize their return. This argument commits several critical fallacies.
In the first place, this argument commits a fallacy of incorrect analogy. Lacking the information of Irongate district and the Park Hill district, we can’t conclude that the two different districts bear on the similarity to establish the businesses, such as pizza, theater and gulf club, and even foresee the commercial success in such businesses. For example, the demograhpic charateristics will determine the sccuess opportunities to some businesses. If many young people live in park hill district, they prefer to spend money in pizza, theater and gulf club. However, in case many retiree live in Irongate district, the old people have different life style and cosuming characteristics, and thus the old people can’t account for the potential consumers of the aboved proposed businesses. Moreover, the local competition status is a very vital factor to determine the success of the proposed businesses. As proposed business confronted severe competition status in Irongate district, Capital Idea will need increase investment and promotion fees in order to fight for market share in limited market.
In the second place, the author fails to provide any evidence to the special promotion program. The line of reasoning is that consumers will spend much more money in three all shops for the substantial discount and the increased sales will lead to improved profitablitiy and maximization of return. Lacking of the necessary information of costs, increased revenue from the potential consumers, we can not safely conclude capital idea will
improve profitablity and maximization of return. For instance, the consumers only purchase the big discounted products or serivices, and thereby the company will benefit from the increased sales from low-profitable consumers. Even if the consumers buy some products profitable to company, the comsumers size is not bigh enough to sustain the business. In order to reach the valid conclusion, the author have to provide more information to support his evaluation.
In conclusion, the author have a harsh conclusion about the success of the new investment and suggest the special promotion program. To streghten the argument, the author would have to provide evidence about the two different districts. To better evaluate the special promotion program, the author should submit more information about the local potential consumers.
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