I'm going to quote Ben Ku from up above:
"We can restate the Engineer's decision this way - "If we look for new sources of raw material, then we can increase our profit margin." Although by using new technology, the cost may decrease and profit margins may increase, it does not strengthen or weaken the Engineer's decision to LOOK FOR NEW SOURCES."

_________________
Jamie Nelson
ManhattanGMAT Instructor

I came across this question in an mgmat cat .
I have read staceys explanation and have found that option can be assessed in 2 ways
1) We see A as providing an alternate conclusion for the decrease in profits .
From this line of reasoning , the answer choice seems to be a valid weakener
2) The second line of reasoning is that we consider the answer choice keeping the conclusion in perspective .
The conclusion states that the head of eng. will be able to increase the profit by looking for an alternate source of the raw material .
what in the option A suggests that the head of engineer will not be able to increase profits by looking for a cheaper source of raw material .
I agree that the profits may diminish in the due course of time because of the pricing wars. But at least for a short period of time , the strategy of looking for a cheaper source will increase the profit margin for a short while.

looking for another source is only a valid strategy if the raw material can be gotten more cheaply from a different source. while the argument implies that this may be the case - it sets up an assumption that it could the earthquake at the current source that is squeezing profit margins - A pretty much overpowers this assumption with a completely different and more compelling reason why the profit margins could have been so low. and if that is the case, finding a different source for the raw material won't necessarily help. notice that there is NO mention of the possibility that the material can be found more cheaply elsewhere..

i notice your explanation specifically ignores long-term gain in order to focus on a short term profit. try that suggestion in the real world after you've graduated from business school and let us know how that works out for you.. :)

_________________
Tim Sanders
Manhattan GMAT Instructor

I think (A) is incorrect. In the GMAT world, we can not tie an argument about "revenue" to a conclusion about "profit margin". We do not know anything about the cost of manufacturing. There is no way to justify (A) without making "external" assumption about the cost.

Sorry, I'm not sure what you mean about the cost of manufacturing. Answer choice A doesn't even address that. Also, please know that the GMAT *does* like to address revenue and profitability. They use the formula profit=revenue - cost on a few problems. I don't think that's very relevant to this problem, so this is just a side note.

I have posted the question and answer choice A here to help us refresh our memory:

"Two years ago, the cost of the raw material used in a particular product doubled after an earthquake disrupted production in the region where the material is mined. Since that time, the company that makes the product has seen its profit margins decline steadily. Aiming to improve profit margins, the company's head of engineering has decided that he must find a new source for the raw material.

Which of the following, if true, would cast the most doubt on the validity of the head of engineering's decision?

A) New competitors have entered the market every six months for the past two years, resulting in price wars that have progressively driven down revenues across the market."

So let's review:
Conclusion: the company must find a new source for the raw material
WHY?
Premise: A raw material is used to make a company's product. The raw material's price has doubled since an earthquake disrupted the supply. Since then, the company's profit margins have decreased.

So the executive is assuming that the increased cost of the raw material is what is causing the profit margins to be decreased. If that can be fixed the profit margins will be fine.

We want to weaken this idea. One way to do that is to show that there is another cause for the lower profit margins that has nothing to do with the price of the raw material.

Now, check out A. A gives another possible cause for the situation at hand--increased competition. If increased competition is the reason for the lower profit margins, getting the raw material cheaper isn't really going to help me.

Please let us know if we can elaborate further.

_________________
Jamie Nelson
ManhattanGMAT Instructor