argument15 [0710G 戴三个表冲刺小组] 第17次作业

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TOPIC: ARGUMENT15 - The following appeared in a newsletter offering advice to investors.

"Over 80 percent of the respondents to a recent survey indicated a desire to reduce their intake of foods containing fats and cholesterol, and today low-fat products abound in many food stores. Since many of the food products currently marketed by Old Dairy Industries are high in fat and cholesterol, the company's sales are likely to diminish greatly and their profits will no doubt decrease. We therefore advise Old Dairy stockholders to sell their shares and other investors not to purchase stock in this company."

WORDS: 406   TIME: 00:45:00          DATE: 2007-8-12 0:53:45

In the newsletter the author recommends to sell their share for Old Dairy stockholders and not to purchase stock in this company for other investors, which based on the prediction that the company's sales will decline dramaticly and the profits will decrease accordingly. And the author, to substanciate his prediction, cite a recent survey which implicated a desire to reduce intake of foods containning fats and cholesterol. The argument is problematic in serveral aspects, thus render the remendation unconvincing as it stands.

To begin with, the author provide absolutely no acurate number of the repondents of the survey. The lesser the respondents, the less reliable the survey resut.  It is highly possible just a small number of people involved in the survey, thus not representitive to all the consumers, which render the result that, people don't prefer foods with fats and choleterol, less reliable.

In addition, even assume the survey truely reflect the disire of consumers to reduce intake of foods wiht high fat and cholesterol, Old Dariy's sales are not surely diminish sharply as the author predicted. First, it is entirely possible the food of Old Dariy may remain to be competative because of their relative low price which can be attractive for some consumers. Second, if there are other features of the company's food, such as tast, delicate package, thoughtful service and so forth, which have earn good reputation for the company will great contribute to a good selling as before.  Third, the author provide no evidence that Old Dariy only produce food with high fat and cholesterol, it is highly likely that the selling will not be greatly affected if the company also produce other food which are meet the disire of consumers.

Finally, even assume the company's sales will diminish greatly. However, a shrink of market does not equal to great decrease of profits. If the cost of food also greatly reduced, it is possible the profits of company will not be influenced by the reduction of sales, and even perhaps there will be an increase in profits. And It may be less reasonable to advise the stockholders to sell their shares and other investors not to purchase the stock even the company suffer from a great profits loss, since the stock are related to much factors other than company's profits, such as the whole economy trend, the government policy.

In sum, to convince me that it is a wise choice to sell their share for the shareholders of company, the author need to provide evidence that the survey truely reflects the trend that consumers are less interested in food with high fat and cholesterol. And the author also need to present clear evidence that the trend will lead to the profit loss of the company. To better assess the recommendation, I need the author to proof that it is profit loss that cause the devaluation of share of stockholders.