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Companies are often torn between the benefits of focusing on

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Companies are often torn between the benefits of focusing on [#permalink] New post 26 Apr 2013, 16:06
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Companies are often torn between the benefits of focusing on one major product or service and the drawbacks of
relying too heavily on one primary source of income. While narrow focus can provide a company with an advantage
over competitors that offer a wider range of products or services, an undiversified income stream can leave a
company susceptible to major fluctuations in cash flow.
We can see this tension realized when, for example,________________.

Which of the following best completes the passage below?

• a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after
a rise in local taxes encourages many local businesses to move out of state
• an advertising agency loses one of its clients
• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a
professional basketball team
• a construction company opts to use non-union labor to increase its profits
• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients
[Reveal] Spoiler: OA

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Re: Companies are often torn between the benefits of focusing on [#permalink] New post 26 Apr 2013, 16:46
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carcass wrote:
Companies are often torn between the benefits of focusing on one major product or service and the drawbacks of
relying too heavily on one primary source of income. While narrow focus can provide a company with an advantage
over competitors that offer a wider range of products or services, an undiversified income stream can leave a
company susceptible to major fluctuations in cash flow.
We can see this tension realized when, for example,________________.

Which of the following best completes the passage below?

• a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after
a rise in local taxes encourages many local businesses to move out of state
• an advertising agency loses one of its clients
• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a
professional basketball team
• a construction company opts to use non-union labor to increase its profits
• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients



A it is

Benefits of A : one speciality service: speedy deliveries ( one major service)
drawbacks of A: A rise in local taxes encourages many local businesses to move out of state ---> Income Down ---> Company is forced to lay off ppl
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Re: Companies are often torn between the benefits of focusing on [#permalink] New post 26 Apr 2013, 17:15
carcass wrote:
Companies are often torn between the benefits of focusing on one major product or service and the drawbacks of
relying too heavily on one primary source of income. While narrow focus can provide a company with an advantage
over competitors that offer a wider range of products or services, an undiversified income stream can leave a
company susceptible to major fluctuations in cash flow.
We can see this tension realized when, for example,________________.

Which of the following best completes the passage below?

• a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after
a rise in local taxes encourages many local businesses to move out of state
• an advertising agency loses one of its clients
• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a
professional basketball team
• a construction company opts to use non-union labor to increase its profits
• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients



I would go with E.

Came down to A and E.

Our main aim is to find a choice which indicates that an organization gets its income mainly from a single source.
E maintains that it focuses on getting its local ingredient from local bodies.. If this is affected then the business is also affected.

Meanwhile A doesn't give us a sure short indication that it focuses on local income. it just mentions that local taxes affected its business...
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Re: Companies are often torn between the benefits of focusing on [#permalink] New post 28 Apr 2013, 05:32
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carcass wrote:
Companies are often torn between the benefits of focusing on one major product or service and the drawbacks of relying too heavily on one primary source of income. While narrow focus can provide a company with an advantage over competitors that offer a wider range of products or services, an undiversified income stream can leave a
company susceptible to major fluctuations in cash flow.
We can see this tension realized when, for example,________________.

Which of the following best completes the passage below?


The situation: Specialization can put a company at advantage, but also at disadvantage. Disadvantage: one source of income makes the company susceptible to changes on the market.

A:
Quote:
• a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local businesses to move out of state


The messanger must lay off considerable part of workforce because he has lost clients due to a third factor. He cannot cushion the negative effect of the change on the market due to some reason: he is susceptible to the change, because he has no other major source of income: he is specialized in some field. Thus, he suffers the drawback of being specialized.

B:
Quote:
• an advertising agency loses one of its clients


The reason and consequence of the loss are relevant, not the loss itself: too little information to conclude whether the agency is susceptible or not.

C:
Quote:
• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team


The reason for such intention could be current risky susceptibility to changes on the market, but also will to increase profit and many more. There exist many alternative explanations for C.

D:
Quote:
• a construction company opts to use non-union labor to increase its profits


Leave alone the significance to the problem, one would have to look for any relationship first.

E:
Quote:
• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients


Incorrect like C, because there exist multiple reasons other than susceptibility to the market change for such behaviour, and incorrect like D, because it is unrelated to the changes on the market in question.
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Re: Companies are often torn between the benefits of focusing on [#permalink] New post 28 Apr 2013, 13:54
carcass wrote:
Companies are often torn between the benefits of focusing on one major product or service and the drawbacks of
relying too heavily on one primary source of income. While narrow focus can provide a company with an advantage
over competitors that offer a wider range of products or services, an undiversified income stream can leave a
company susceptible to major fluctuations in cash flow.
We can see this tension realized when, for example,________________.

Which of the following best completes the passage below?

• a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after
a rise in local taxes encourages many local businesses to move out of state
• an advertising agency loses one of its clients
• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a
professional basketball team
• a construction company opts to use non-union labor to increase its profits
• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients



CARCASS,

Its a bouncer to me..please do explain this.

although i chose C. :cry:

THANKS

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Re: Companies are often torn between the benefits of focusing on [#permalink] New post 28 Apr 2013, 15:47
• a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local
businesses to move out of state
This option correctly nails the argument. A local service focused on local businesses would definitely experience fluctuations in cash flow as compared to a giant like say Fedex or DHL.

• an advertising agency loses one of its clients
It seem the advertising agency has multiple clients and is sufficiently diversified.

• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team
This is an example of a diversified company intending to diversify more. Cash Flow fluctuations might be lesser in this case as compared to a local service.

• a construction company opts to use non-union labor to increase its profits
Non-union labor is a resource, not a service or a product. Out of scope.

• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients
Opening franchises throughout the country is diversifying the regional presence in a way. Even if it is not diversifying its products, there is no clue as to its cash flow would be affected. "Local ingredients" seems to be useless information to confuse the test-taker
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Re: Companies are often torn between the benefits of focusing on [#permalink] New post 20 Jun 2013, 23:02
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The question asks us to find an example that is similar to the situation in the stimulus.

ANALYZE THE STIMULUS:

A company focuses on ONE MAJOR PRODUCT ==> relies too heavily on ONE PRIMARY SOURCE OF INCOME ==> an undiversified income stream leave a company susceptible to major FLUCTUATION IN CASH FLOW

Basically, we need to follow a pattern: one product ==> one source of income ==> fluctuation in cash flow.

ANALYZE EACH ANSWER:

• a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local businesses to move out of state
Correct. This company focuses on its major product. Its cash flow would be affected if some unfavorable factors happened.

• an advertising agency loses one of its clients
Wrong. The loss of one client does not affect too much to the company's cash flow.

• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team
Wrong. This company actually diversifies its business.

• a construction company opts to use non-union labor to increase its profits
Wrong. Nothing about one product & one source of income.

• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients[/quote]
Wrong. SHELL GAME. you may pick E because of a word "a specialty" and you assume the company has ONLY ONE product. But actually, this company diversifies its business because it focus on using local ingredients. If one store has problem with its local ingredient, it does not affect other stores in different areas.

Hope it helps.
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Re: Companies are often torn between the benefits of focusing on [#permalink] New post 21 Jun 2013, 22:45
pqhai wrote:
The question asks us to find an example that is similar to the situation in the stimulus.

ANALYZE THE STIMULUS:

A company focuses on ONE MAJOR PRODUCT ==> relies too heavily on ONE PRIMARY SOURCE OF INCOME ==> an undiversified income stream leave a company susceptible to major FLUCTUATION IN CASH FLOW

Basically, we need to follow a pattern: one product ==> one source of income ==> fluctuation in cash flow.

ANALYZE EACH ANSWER:

• a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local businesses to move out of state
Correct. This company focuses on its major product. Its cash flow would be affected if some unfavorable factors happened.

• an advertising agency loses one of its clients
Wrong. The loss of one client does not affect too much to the company's cash flow.

• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team
Wrong. This company actually diversifies its business.

• a construction company opts to use non-union labor to increase its profits
Wrong. Nothing about one product & one source of income.

• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients

Wrong. SHELL GAME. you may pick E because of a word "a specialty" and you assume the company has ONLY ONE product. But actually, this company diversifies its business because it focus on using local ingredients. If one store has problem with its local ingredient, it does not affect other stores in different areas.

Hope it helps.[/quote]

Hi,
Could you please explain whats a shell game ?
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Re: Companies are often torn between the benefits of focusing on [#permalink] New post 21 Jun 2013, 23:31
cumulonimbus wrote:
pqhai wrote:
The question asks us to find an example that is similar to the situation in the stimulus.

ANALYZE THE STIMULUS:

A company focuses on ONE MAJOR PRODUCT ==> relies too heavily on ONE PRIMARY SOURCE OF INCOME ==> an undiversified income stream leave a company susceptible to major FLUCTUATION IN CASH FLOW

Basically, we need to follow a pattern: one product ==> one source of income ==> fluctuation in cash flow.

ANALYZE EACH ANSWER:

• a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local businesses to move out of state
Correct. This company focuses on its major product. Its cash flow would be affected if some unfavorable factors happened.

• an advertising agency loses one of its clients
Wrong. The loss of one client does not affect too much to the company's cash flow.

• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team
Wrong. This company actually diversifies its business.

• a construction company opts to use non-union labor to increase its profits
Wrong. Nothing about one product & one source of income.

• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients

Wrong. SHELL GAME. you may pick E because of a word "a specialty" and you assume the company has ONLY ONE product. But actually, this company diversifies its business because it focus on using local ingredients. If one store has problem with its local ingredient, it does not affect other stores in different areas.

Hope it helps.


Hi,
Could you please explain whats a shell game ?[/quote]

Hi cumulonimbus. I'm glad to help.

The shell game in this question are (I say "are" because there are two shell games in E)

The reasoning of the stimulus is: one product ==> one source of income ==> fluctuation in cash flow.


Shell game #1: if you read E too quickly, you may think A SPECIALTY sandwich store provides only one product.
==> It's like the pattern of the stimulus, so E should be the answer. But E is wrong.

SHELL GAME: It may be true that the sandwich store provides only one product - specialty sandwich. But how a store diversifies its business. It uses a business model - franchises throughout the country. There is a very rare situation all franchised stores have cash flow problem. This case differs from the case in A in which a messenger service company focus on serving local area.


Shell game #2: When you see the second part "focus on using local ingredient",
==> you may think a sandwich store relies on A MAJOR ingredient. What if there's a problem with the local ingredient such as vender fails to supply. ==> That will affect the sandwich store's sales ==> affects its income ==> It's like the pattern of the stimulus, so E should be the answer. One more time, E is wrong.

SHELL GAME: Because a sandwich store focus on using local ingredient. If one store in one area has problem with its local ingredient, it does not affect other stores in other areas.

Hope it helps.
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Re: Companies are often torn between the benefits of focusing on [#permalink] New post 22 Jun 2013, 15:44
cumulonimbus wrote:
pqhai wrote:
The question asks us to find an example that is similar to the situation in the stimulus.

ANALYZE THE STIMULUS:

A company focuses on ONE MAJOR PRODUCT ==> relies too heavily on ONE PRIMARY SOURCE OF INCOME ==> an undiversified income stream leave a company susceptible to major FLUCTUATION IN CASH FLOW

Basically, we need to follow a pattern: one product ==> one source of income ==> fluctuation in cash flow.

ANALYZE EACH ANSWER:

• a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local businesses to move out of state
Correct. This company focuses on its major product. Its cash flow would be affected if some unfavorable factors happened.

• an advertising agency loses one of its clients
Wrong. The loss of one client does not affect too much to the company's cash flow.

• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team
Wrong. This company actually diversifies its business.

• a construction company opts to use non-union labor to increase its profits
Wrong. Nothing about one product & one source of income.

• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients

Wrong. SHELL GAME. you may pick E because of a word "a specialty" and you assume the company has ONLY ONE product. But actually, this company diversifies its business because it focus on using local ingredients. If one store has problem with its local ingredient, it does not affect other stores in different areas.

Hope it helps.


Hi,
Could you please explain whats a shell game ?[/quote]

Don't get hung up on the names. The main point is :
One product -> fluctuations in profit.
The main difference between A and E is that E is a may be true option. Consumers may or may not like local ingredients. Ex: Florida is famous for oranges so if the company tries to use local oranges in AZ versus florida oranges it may or may not fly.

Where as in A the relation is very evident.
Company A is known for speedy delievery. But if the local business are shut their profit margins are affected. you see the direct relation ship here ?

That's why A wins.
a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after
a rise in local taxes encourages many local businesses to move out of state
• an advertising agency loses one of its clients
• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a
professional basketball team
• a construction company opts to use non-union labor to increase its profits
• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients
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Re: Companies are often torn between the benefits of focusing on [#permalink] New post 19 Aug 2013, 03:12
Bluelagoon wrote:
cumulonimbus wrote:
pqhai wrote:
The question asks us to find an example that is similar to the situation in the stimulus.

ANALYZE THE STIMULUS:

A company focuses on ONE MAJOR PRODUCT ==> relies too heavily on ONE PRIMARY SOURCE OF INCOME ==> an undiversified income stream leave a company susceptible to major FLUCTUATION IN CASH FLOW

Basically, we need to follow a pattern: one product ==> one source of income ==> fluctuation in cash flow.

ANALYZE EACH ANSWER:

• a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after a rise in local taxes encourages many local businesses to move out of state
Correct. This company focuses on its major product. Its cash flow would be affected if some unfavorable factors happened.

• an advertising agency loses one of its clients
Wrong. The loss of one client does not affect too much to the company's cash flow.

• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team
Wrong. This company actually diversifies its business.

• a construction company opts to use non-union labor to increase its profits
Wrong. Nothing about one product & one source of income.

• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients

Wrong. SHELL GAME. you may pick E because of a word "a specialty" and you assume the company has ONLY ONE product. But actually, this company diversifies its business because it focus on using local ingredients. If one store has problem with its local ingredient, it does not affect other stores in different areas.

Hope it helps.


Hi,
Could you please explain whats a shell game ?


Don't get hung up on the names. The main point is :
One product -> fluctuations in profit.
The main difference between A and E is that E is a may be true option. Consumers may or may not like local ingredients. Ex: Florida is famous for oranges so if the company tries to use local oranges in AZ versus florida oranges it may or may not fly.

Where as in A the relation is very evident.
Company A is known for speedy delievery. But if the local business are shut their profit margins are affected. you see the direct relation ship here ?

That's why A wins.
a local messenger service known for its speedy deliveries is forced to lay off twenty percent of its work force after
a rise in local taxes encourages many local businesses to move out of state
• an advertising agency loses one of its clients
• a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a
professional basketball team
• a construction company opts to use non-union labor to increase its profits
• a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients[/quote]

A it is.

To your question

shell game is one of the choices that may contain the same words as mentioned in the argument, is easier to understand, but the choice would have few words which will lead it to imply a different meaning than the intended one.
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Re: Companies are often torn between the benefits of focusing on   [#permalink] 19 Aug 2013, 03:12
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