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The following appeared in a memorandum written by the vice president of Nature's Way, a chain of stores selling health food and other health-related products. "revious experience has shown that our stores are most profitable in areas where residents are highly concerned with leading healthy lives. We should therefore build our next new store in Plainsville, which has many such residents. Plainsville merchants report that sales of running shoes and exercise clothing are at all-time highs. The local health club, which nearly closed five years ago due to lack of business, has more members than ever, and the weight training and aerobics classes are always full. We can even anticipate a new generation of customers: Plainsville's schoolchildren are required to participate in a 'fitness for life' program, which emphasizes the benefits of regular exercise at an early age."
The decision to invest in Plainsville is not quite appropriate. In this argument, the vice president supported his decision by proving the residents in Plainsville are highly concerned with leading healthy lives which corresponds to previous experience. However, the vice president generalize the notion of healthy lives and failed to elaborate how the business benefits from the healthy life styles people choose.
The notion of healthy life consists of many aspects, including diet, exercise, and many others. The first thing that needs to be figured out is which specific aspect can benefit the business. Obviously, the diet plays a very important role since Nature's way is a chain of stores selling health food and other health related products. When making decisions of the cite for a new store, how the residents choose food should be a vital consideration. Unfortunately, in the argument of Plainsville, there is no evidence that the residents there would choose health food.
Secondly, the reasons listed in the argument are not adequate enough to demonstrate Plainsville is a good investing destination. All time high sales in running shoes and exercise clothing is a good signal for sports (especially running related) business. There is no evidence that Nature's way, a health food and health related business, can benefit from it. The boom of local club results from many reasons. The residents go to gyms may contribute to their high concerns of healthy lives. There is also possibility that the residence are fund of unhealthy food that they have to go to weight training and aerobics classes in order to keep fit. In that case, it is hard for a store selling health food to be popular. The "fitness for life" program highlights the importance of exercise in early age but not healthy diet. There is no deduction that those who exercise regularly would eat healthily.
A investment decision should be made with more specific analysis and investigation. The Nature's way stores are more likely to be profitable in areas where the residents are highly concerned with healthy diet.
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