Hi there,
I'm very sorry but Clara and Udayan's answers are wrong. The answer is A and D. (Though Answer B for Q1 is indeed tempting)
Let's talk through this....
------------------------------------------------------
The key here is to identify what matters. What clues are you getting in the text? I.e. what moves the needle? I see two clear phrases:
1) The current value proposition is not driving profitable economics (loss of profitability)
2) Customer behaviour is highly skewed towards infrequent one-off purchases
3) High Inventory days and non-moving stock leading to sub-optimal throughput.
----------------------------------------------------------
QUESTION 1
(ANSWER) A. Current value proposition and value proposition of competitors, global players etc.
- Value proposition! This is the answer...the text explicitly told us the current value proposition is a big issue. We need to first decide if the big-picture i.e. the highest-level decision makes sense, before we dive into any specifics.
B. Contracts for purchase of various SKUs (stock keeping units)
- Irrelevant...nothing like this is mentioned. It is tempting to pick this one as we know we have a problem with stock. However, the problem is regarding throughput not contracts.
C. Employee wages to be benchmarked against competitors
- Irrelevant...nothing like this is mentioned
D. Store locations to assess spread and focus
- Irrelevant...nothing like this is mentioned
---------------------------------------------------------------
QUESTION 2
Which of the following is NOT a priority for the client? Choose One
A. Improving customer loyalty
- Of course it is! Customers aren't coming back..that's a problem...loyalty means they come back...i.e. repeat purchases...i.e. this is a focus
B. Increasing frequency to reduce inventory days
- We have high inventory days. This is a problem for profitability. So, reducing them is good
C. Improving profitability and margins
- Of course! We said we have a profitability issue
(ANSWER) D. Identifying profitable stores and closing down others
- Store-specific profitability isn't mentioned anywhere. We can't make this assumption!