Question

Memmie: The greater the population near a restaurant, the more potential customers it has and the greater chance its popularity will spread through word-of-mouth. O’Sullivans Restaurant just opened in the very densely populated town of Redville, so its chances for success are great. Sam: But the more people living in an area, the more restaurants there are in that area, so the more competition each one faces. There are twelve other restaurants serving the people of Redville.
Memmie and Sam seem to disagree about whether:

A. O’Sullivans will fail in its first few months.B. O’Sullivans will serve a different kind of food than the other restaurants in Redville.C. the high population of Redville ensures that O’Sullivan’s has a great chance for success.D. word-of-mouth about a restaurant can spread in a densely populated town like Redville.

Answer 1

Answer:

C. The high population of Redville ensures that O'Sullivan's has a grant chance for success.

Explanation:

From the case given, we have some assertions:

1. Memmie states that the greater the population near a restaurant, the higher the number of customers and the greater chance its popularity will spread through words of mouth.

2. Sam state that the more people in an area, the more restaurants there'll be in that area, and so the more competition each one faces.

From the foregoing, we can establish that both Memmie and Sam agree that general increase in the number of people in a product environment is likely to improve the product's popularity and its eventual success.

However, there's a clear departure from the above assumption owing by the observation raised by Sam. While nothing the importance of population, Sam pointed out that this might not be a huge determining force in that:

1. The more people in an area - population, the more the number of restaurants willing to take advantage of this, and thus the more the competition. As at now, there are 12 of such restaurants in Redville.

2. Point number one above will bring about a stiff competition which may put strain on the positives a big population could bring.

Evidently, while giving a blanket ticket of success to a restaurant, Memmie fails to critically evaluate the business environment and the competitive nature of the industry as a basis for determining the offers success. This is unlike Sam, as Sam has brought into fore other critical issues that need to be carefully looked at to conclude a firm can be successful.

Answer 2

Answer:

the correct option is C) the high population of Redville ensures that O’Sullivan’s has a great chance for success.

Explanation:

Selling in a densely populated and highly copeteive area suggets the folowing

• higher market share which usually means greater sales, lesser effort to sell more and a strong barrier to entry for other competitors. A higher market share also means that if the market expands, the leader gains more than the others.
• Strategic location which drives sales due to proximity and ease of access.

Therefore O’Sullivan’s has a great chance for success and can use pricing to create competitive advantage.