RC: Competitive Scrutiny

[RohitM269]

In corporate purchasing, competitive scrutiny is typically limited to suppliers of items that are directly related to end products. With “indirect” purchases(such as computers, advertising, and legal services), which are not directly related to production, corporations often favor “supplier partnerships”(arrangements in which the purchaser forgoes the right to pursue alternative suppliers), which can inappropriately shelter suppliers from rigorous competitive scrutiny that might afford the purchaser economic leverage. There are two independent variables-availability of alternatives and ease ofchanging suppliers-that companies should use to evaluate the feasibility of subjecting suppliers of indirect purchases to competitive scrutiny.



This can create four possible situations. In Type 1 situations, there are many alternatives and change is relatively easy. Open pursuit of alternatives-by frequent competitive bidding, if possible-will likely yield the best results. In Type 2 situations, where there are many alternatives but change is difficult-as for providers of employee health-care benefits-it is important to continuously test the market and use the results to secure concessions from existing suppliers. Alternatives
provide a credible threat to suppliers, even if the ability to switch is constrained. In Type 3 situations, there are few alternatives, but the ability to switch without difficulty creates a threat that companies can use to negotiate concessions from existing suppliers. In Type 4 situations, where there are few alternatives and change is difficult, partnerships may be unavoidable.


Which of the following best describes the relation of the second paragraph to the first?

A. The second paragraph offers proof of an assertion made in the first paragraph.
B. The second paragraph provides an explanation for the occurrence of a situation described in the first paragraph.
C. The second paragraph discusses the application of a strategy proposed in the first paragraph.
D. The second paragraph examines the scope of a problem presented in the first paragraph.
E. The second paragraph discusses the contradictions inherent in a relationship described in the first paragraph.



IMO:B and OA:C

IMO: I thought First paragraph is discussing about situation rather than strategy. Where am I going wrong?

[RonPurewal]

the problem isn't the word "situation". what about the rest of the words?

[RonPurewal]

B. The second paragraph provides an explanation for the occurrence of a situation described in the first paragraph.

paragraph #2 most certainly does not explain why anything in paragraph #1 happens.

C. The second paragraph discusses the application of a strategy proposed in the first paragraph.

this choice is accurate; paragraph #2 describes when it would be appropriate or inappropriate to apply a certain strategy that's laid out in paragraph #1.

[gmatkiller_24]

the problem isn't the word "situation". what about the rest of the words?

Hi, Ron

this problem I vote for choice A.
because the second paragraph talked about the four different situation in the preceding paragraph.
in reference to the last sentence in the final paragraph. "This can create four possible situations."

Can you brief a little bit why choice A is incorrect?

Thank you~

[tim]

A is incorrect because the second paragraph doesn't *prove* anything from the first paragraph. Can you explain what you think answer choice A proves?

[RonPurewal]

this problem I vote for choice A.
because the second paragraph talked about the four different situation in the preceding paragraph.
in reference to the last sentence in the final paragraph. "This can create four possible situations."

"this can create 4 situations" is, in the transcription at hand, at the beginning of the second paragraph. it's not in the first paragraph.

the first paragraph consists of a bunch of background, about a certain business strategy. the second paragraph goes into the possible consequences of employing that strategy, but certainly does not "prove" anything stated in the first paragraph.

[harika.apu]

this problem I vote for choice A.
because the second paragraph talked about the four different situation in the preceding paragraph.
in reference to the last sentence in the final paragraph. "This can create four possible situations."

"this can create 4 situations" is, in the transcription at hand, at the beginning of the second paragraph. it's not in the first paragraph.

the first paragraph consists of a bunch of background, about a certain business strategy. the second paragraph goes into the possible consequences of employing that strategy, but certainly does not "prove" anything stated in the first paragraph.

Hi Ron ,
i have another question from same passage
According to the passage, which of the following factors distinguishes an indirect purchase from other purchases?
A. The ability of the purchasing company to subject potential suppliers of the purchased item to competitive scrutiny
B. The number of suppliers of the purchased item available to the purchasing company
C. The methods of negotiation that are available to the purchasing company
D. The relationship of the purchased item to the purchasing company’s end product
E. The degree of importance of the purchased item in the purchasing company’s business operations

OA is D
as for option A ,because competitive scrutiny is limited to purchases directly related to end products
does "limited" not indicate that purchasers of indirect purchases are not able to subject their suppliers to competitive scrutiny

[750plus]

this problem I vote for choice A.
because the second paragraph talked about the four different situation in the preceding paragraph.
in reference to the last sentence in the final paragraph. "This can create four possible situations."

"this can create 4 situations" is, in the transcription at hand, at the beginning of the second paragraph. it's not in the first paragraph.

the first paragraph consists of a bunch of background, about a certain business strategy. the second paragraph goes into the possible consequences of employing that strategy, but certainly does not "prove" anything stated in the first paragraph.

I picked choice D here.

Isn't Paragraph 2 examining the scope, as to where the strategy will apply. Para 2 mentions 4 situations and I think it is clearly defining the scope of the strategy outlined in Para 1

Please help

[tim]

According to the passage, which of the following factors distinguishes an indirect purchase from other purchases?
A. The ability of the purchasing company to subject potential suppliers of the purchased item to competitive scrutiny
B. The number of suppliers of the purchased item available to the purchasing company
C. The methods of negotiation that are available to the purchasing company
D. The relationship of the purchased item to the purchasing company’s end product
E. The degree of importance of the purchased item in the purchasing company’s business operations

OA is D
as for option A ,because competitive scrutiny is limited to purchases directly related to end products
does "limited" not indicate that purchasers of indirect purchases are not able to subject their suppliers to competitive scrutiny

First, the fact that you quote the word "limited" rather than the phrase "typically limited" strongly suggests that you aren't paying attention to the important qualifying words. There is a HUGE difference between "limited" and "typically limited".

Second, it's not that purchasers are "not able" to engage in competitive scrutiny, but rather that they often choose not to. Paragraph 2 outlines the reasons why, and situations where, they may choose not to.

Finally, answer choice A reverses cause and effect. It's not that the inability to engage in competitive scrutiny causes the items to be indirect purchases. It's the fact that purchases are indirect that often results in the purchaser declining to engage in competitive scrutiny.

[tim]

I picked choice D here.

Isn't Paragraph 2 examining the scope, as to where the strategy will apply. Para 2 mentions 4 situations and I think it is clearly defining the scope of the strategy outlined in Para 1

Please help

Not at all. Paragraph 1 does a fine job of defining the scope of the issue. Paragraph 2 compartmentalizes what has already been defined into specific strategies and when to apply them.

[thuyn933]

Dear Ron,
Can you help me explain this question:

Which of the following can be inferred about supplier partnerships, as they are described in the passage?

(A) They cannot be sustained unless the goods or services provided are available from a large number of suppliers.
(B) They can result in purchasers paying more for goods and services than they would in a competitive-bidding situation.
(C) They typically are instituted at the urging of the supplier rather than the purchaser.
(D) They are not feasible when the goods or services provided are directly related to the purchasers' end products.
(E) They are least appropriate when the purchasers' ability to change suppliers is limited.

I prefer E

[TiffanyB]

Hello thuyn933,

Inference problems require you to use information from the passage and then make a deduction based on that information. However, we need to be cautious not to infer beyond the information that is presented in the passage!

The best way to answer this question is to first understand the structure of the passage. Paragraph one introduces background and a couple of variables to evaluate supplier partnerships, while paragraph 2 elaborates on 4 types of situations that arise based on changes in those variables.

Next, we ideally should seek to define the term supplier partnerships, which is used in the question.

Based on paragraph 1 of the passage, supplier partnerships are "arrangements in which the purchaser forgoes the right to pursue alternative suppliers."

Glancing at the answer choices, it seems that we have some statements describing and/or evaluating the potential application of supplier partnerships - when they "cannot be sustained," versus what "they can result in" or when they "typically are instituted."

To be fully prepared to choose an answer, I'd glance again at paragraph 2 and understand when these partnerships are recommended. Only in Type 4 situations (few alternatives + change is difficult) are we told that supplier partnerships may be unavoidable.

Now let's take a look at the answer choices and eliminate.

Which of the following can be inferred about supplier partnerships, as they are described in the passage?

(A) They cannot be sustained unless the goods or services provided are available from a large number of suppliers. - INCORRECT. Supplier partnerships are MORE likely when there are few alternatives.
(B) They can result in purchasers paying more for goods and services than they would in a competitive-bidding situation. - MAYBE. If suppliers have more power/control it is possible that purchasers pay more.
(C) They typically are instituted at the urging of the supplier rather than the purchaser. - INCORRECT. We don't have enough information to deduce this.
(D) They are not feasible when the goods or services provided are directly related to the purchasers' end products. - INCORRECT. The passage states that competitive scrutiny is sometimes limited to purchasing items that are directly related to end products, but it doesn't say that supplier partnerships are not feasible in those cases.
(E) They are least appropriate when the purchasers' ability to change suppliers is limited. - INCORRECT. They are sometimes unavoidable when there are few alternatives and change is difficult.

When eliminating answer choices, label potential answers as Maybe and clearly wrong answer choices as Incorrect.

In this case, I have only one "Maybe" and 4 "Incorrect," so B is the answer that I would select. If I had more than one "Maybe," I would compare and choose the best possible answer.


Tiffany Berkebile
Manhattan Prep GMAT Instructor