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Decision Making: Le Baguette Bakery Expansion

XAT 2020 · Decision Making · Medium · Decision Making

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Passage / data set

Read the situation below and answer the 3 associated questions:

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.

Question 1 of 3

Jagdeep has decided to open a branch in Ramnagar. Which of the following facts about Ramnagar will BEST support his decision?

  1. A.

    3% of Le Baguette's current revenue comes from Ramnagar.

  2. B.

    Jagdeep has managed to acquire a big space in Ramnagar at a nominal rent.

  3. C.

    Before starting his own bakery, Jagdeep was supplying bread to most bakeries in Ramnagar.

  4. D.

    Ramnagar is served by 4 bakeries, with the two largest bakeries having market shares of 55% and 25% respectively.

  5. E.

    Le Croissant's Ramnagar branch struggles with a market share of 10%.

Answer

A

Explanation

Option A shows existing organic customer demand from Ramnagar, directly proving customer interest and market potential.

Question 2 of 3

Jagdeep wishes to open a 100% eggless branch in Ramnagar. To explore feasibility, he collected the following facts:

  1. Eggless products account for 30% of Le Baguette's sales.
  2. At least 20% of all bakery sales in Ramnagar is from eggless products.
  3. The eggless varieties of Le Baguette contain minute traces of egg.
  4. Le Baguette currently makes 3% of its revenue from Ramnagar customers and all of it comes from eggless products.
  5. Le Croissant's Ramnagar branch struggles with a market share of 10%. From the combinations below, in the DESCENDING order of effectiveness, choose the one that BEST supports Jagdeep's decision.
  1. A.

    5, 2, 1

  2. B.

    2, 1, 3

  3. C.

    2, 4, 1

  4. D.

    4, 3, 2

  5. E.

    5, 4, 1

Answer

C

Explanation

Statement 2 proves market demand in Ramnagar. Statement 4 shows proven existing sales from Ramnagar. Statement 1 shows product viability in his original store. Order: 2, 4, 1.

Question 3 of 3

From a newspaper, Jagdeep has learnt that Americans use their own ovens to bake ready-to-bake products, sold by some bakeries. This idea is apparently catching up in Indian metros as well. Jagdeep wants to try this out in his bakery. He has gathered the following facts:

  1. US bakeries that also sell ready-to-bake products earned higher revenues compared to those that do not.
  2. Around 7% of Jagdeep's regular customers own baking ovens in their homes.
  3. The sale of baking ovens in India is forecast to increase by 12% every year, for the next three years.
  4. 50% of Jagdeep's regular customers are fulltime working couples.
  5. In Indian metros, ready-to-bake products give higher profit margins compared to finished products. Select the BEST of the following sequences of the above facts, in DESCENDING order of effectiveness, to support Jagdeep.
  1. A.

    2, 5, 1, 3, 4

  2. B.

    3, 4, 5, 1, 2

  3. C.

    1, 5, 3, 2, 4

  4. D.

    2, 3, 5, 1, 4

  5. E.

    3, 2, 1, 4, 5

Answer

D

Explanation

Statement 2 gives immediate feasibility among current customers. Statement 3 gives future growth trends. Statement 5 gives higher profit margins. Statement 1 shows US precedent. Statement 4 indicates lifestyle need. Descending sequence: 2, 3, 5, 1, 4.

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