XAT 2020 — Decision Making Question 5
Read the following paragraph carefully and answer the question that follows:
Two industrial towns, Jayanagar and Ramnagar, about 15 kms. apart, are similar in land area, population, ethnic diversity and per capita incomes.
Jagdeep Singh owns a bakery named Le Baguette in Jayanagar. He specializes in croissants, masala bread and whole wheat bread; eggless cakes are also a favorite.
Among the four bakeries in Jayanagar, Jagdeep’s bakery with a market share of 30% is second only to the oldest Le Croissant bakery whose market share is 40%. Le Croissant commands a loyal customer base and does not offer eggless varieties.
Jagdeep has decided to open a branch in Ramnagar. Which of the following facts about Ramnagar will BEST support his decision?
Answer & solution
- A
Ramnagar is served by 4 bakeries, with the two largest bakeries having market shares of 55% and 25% respectively.
3% of Le Baguette’s current revenue comes from Ramnagar.
- C
Le Croissant’s Ramnagar branch struggles with a market share of 10%.
- D
Jagdeep has managed to acquire a big space in Ramnagar at a nominal rent.
- E
Before starting his own bakery, Jagdeep was supplying bread to most bakeries in Ramnagar.
Only knowing the market shares of the two largest bakeries in Ramnagar will not help Jagdeep in deciding to open a branch in Ramnagar. Eliminate option 1. Le Croissant’s market share has no relevance to Jagdeep’s bakery. Thus option 3 can also be eliminated. Only having a big place at a nominal rent does not imply that the business will do well in Ramnagar. Eliminate option 4. between options 2 and 5, the former is a better choice since 3% of Le Baguette’s current revenue comes from Ramnagar. It then makes more sense in opening a new branch of Le Baguette in Ramnagar. Only supplying bread to many bakeries in Ramnagar need not necessitate opening a new branch in Ramnagar.
Hence, option (b).