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Ever since the new Marketing Head joined Crackwell

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Ever since the new Marketing Head joined Crackwell [#permalink] New post 25 Oct 2012, 20:34
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Question Stats:

62% (02:11) correct 38% (01:11) wrong based on 114 sessions
Ever since the new Marketing Head joined Crackwell Corporation, its profits have increased steadily. In fact, over the past three years that the Marketing Head has been with Crackwell, the company’s profits have grown by almost 35% every year, a figure that used to hover around the 10% mark earlier. Pleased by this fact, the Board of Crackwell Corporation has decided to reward the Marketing Head with stock options in the company.

Which of the following, if true, casts the most serious doubts on the decision taken by the Board of Crackwell Corporation

(A) The Marketing Head is disliked by his team members because of his habit of criticising them in public
(B) Over the past three years, the profits of Crackwell’s closest competitor have grown by 42% every year
(C) The CFO of Crackwell Corporation has taken several cost cutting measures over the last three years, including retrenchment of unproductive employees and renegotiation of prices with vendors.
(D) A strategy consulting firm, known to have turned around several poorly performing companies, has been recently hired by Crackwell Corporation
(E) Several new marketing campaigns, which gave a lot of international exposure to the company’s products, have been successfully conducted by Crackwell Corporation over the past three years
[Reveal] Spoiler: OA

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Re: Ever since the new Marketing Head joined Crackwell Corp [#permalink] New post 25 Oct 2012, 22:03
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rajathpanta wrote:
Ever since the new Marketing Head joined Crackwell Corporation, its profits have increased steadily. In fact, over the past three years that the Marketing Head has been with Crackwell, the company’s profits have grown by almost 35% every year, a figure that used to hover around the 10% mark earlier. Pleased by this fact, the Board of Crackwell Corporation has decided to reward the Marketing Head with stock options in the company.

Which of the following, if true, casts the most serious doubts on the decision taken by the Board of Crackwell Corporation

(A) The Marketing Head is disliked by his team members because of his habit of criticising them in public
(B) Over the past three years, the profits of Crackwell’s closest competitor have grown by 42% every year
(C) The CFO of Crackwell Corporation has taken several cost cutting measures over the last three years, including retrenchment of unproductive employees and renegotiation of prices with vendors.
(D) A strategy consulting firm, known to have turned around several poorly performing companies, has been recently hired by Crackwell Corporation
(E) Several new marketing campaigns, which gave a lot of international exposure to the company’s products, have been successfully conducted by Crackwell Corporation over the past three years


Argument tells us that profits have increased since the new marketing head has joined. So the company board has decided to reward him.

Question: We need to cast doubt on the decision of the board i.e. we need to give a reason why the head should not be rewarded.

(A) The Marketing Head is disliked by his team members because of his habit of criticising them in public
This is no reason to not reward him. If this is producing results and profits are increasing, so be it.

(B) Over the past three years, the profits of Crackwell’s closest competitor have grown by 42% every year
It doesn't matter what the profits of other people are. It is possible that the competitor had 42% or higher profits in the prior yrs too. This info does not tell us anything about the state of the economy. Had there been info that the economy has been doing particularly well for the last 3 yrs (and not before that), we could have debated that the increase in profit could be due to the improved economic conditions and not the head's efforts. All we know is that Cromwell's profit has been growing by 35% instead of 10%.

(C) The CFO of Crackwell Corporation has taken several cost cutting measures over the last three years, including retrenchment of unproductive employees and renegotiation of prices with vendors.

Profits increase when you either increase revenue or decrease costs or both. This tells us that the increase in profits could be because the CFO is cutting costs. The marketing head is supposed to push the top line i.e. increase the revenue by marketing the product better. This does make us doubt whether the increase in profit is because of the marketing head's efforts or because of the cost cutting done by CFO. So it does make us doubt the board's decision. Answer.

(D) A strategy consulting firm, known to have turned around several poorly performing companies, has been recently hired by Crackwell Corporation

Two things here - the firm has been recently hired so it can't be responsible for Crackwell's 3 yr performance. Also, we don't know whether the firm actually did any good for Crackwell. Just because it turned around other companies, it doesn't mean it was effective in this case too.

(E) Several new marketing campaigns, which gave a lot of international exposure to the company’s products, have been successfully conducted by Crackwell Corporation over the past three years

Possibly, marketing head led these campaigns and hence, did a commendable job. There is no reason to not reward him.

Answer (C)
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Re: Ever since the new Marketing Head joined Crackwell [#permalink] New post 17 Mar 2014, 12:28
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

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Re: Ever since the new Marketing Head joined Crackwell   [#permalink] 17 Mar 2014, 12:28
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