Find all School-related info fast with the new School-Specific MBA Forum

It is currently 01 Aug 2014, 07:55

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

Since the late 1970’s, in the face of a severe loss of marke

  Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:
Director
Director
User avatar
Joined: 25 Oct 2006
Posts: 652
Followers: 7

Kudos [?]: 182 [0], given: 6

GMAT Tests User
Since the late 1970’s, in the face of a severe loss of marke [#permalink] New post 13 May 2009, 23:51
This passage is discussed in detail at the the below mentioned link
since-the-late-1970-s-in-the-face-of-a-severe-loss-of-134669.html


Since the late 1970’s, in the face of a severe loss of market share in dozens of industries, manufacturers in the United States have been trying to improve productivity—and therefore enhance their international competitiveness—through cost-cutting programs. (Cost-cutting here is defined as raising labor output while holding the amount of labor constant.) However, from 1978 through 1982, productivity—the value of goods manufactured divided by the amount of labor input—did not improve; and while the results were better in the business upturn of the three years following, they ran 25 percent lower than productivity improvements during earlier, post-1945 upturns. At the same time, it became clear that the harder manufactures worked to implement cost-cutting, the more they lost their competitive edge.
With this paradox in mind, I recently visited 25 companies; it became clear to me that the cost-cutting approach to increasing productivity is fundamentally flawed. Manufacturing regularly observes a “40, 40, 20” rule. Roughly 40 percent of any manufacturing-based competitive advantage derives from long-term changes in manufacturing structure (decisions about the number, size, location, and capacity of facilities) and in approaches to materials. Another 40 percent comes from major changes in equipment and process technology. The final 20 percent rests on implementing conventional cost-cutting. This rule does not imply that cost-cutting should not be tried. The well-known tools of this approach—including simplifying jobs and retraining employees to work smarter, not harder—do produce results. But the tools quickly reach the limits of what they can contribute.
Another problem is that the cost-cutting approach hinders innovation and discourages creative people. As Abernathy’s study of automobile manufacturers has shown, an industry can easily become prisoner of its own investments in cost-cutting techniques, reducing its ability to develop new products. And managers under pressure to maximize cost-cutting will resist innovation because they know that more fundamental changes in processes or systems will wreak havoc with the results on which they are measured. Production managers have always seen their job as one of minimizing costs and maximizing output. This dimension of performance has until recently sufficed as a basis of evaluation, but it has created a penny-pinching, mechanistic culture in most factories that has kept away creative managers.
Every company I know that has freed itself from the paradox has done so, in part, by developing and implementing a manufacturing strategy. Such a strategy focuses on the manufacturing structure and on equipment and process technology. In one company a manufacturing strategy that allowed different areas of the factory to specialize in different markets replaced the conventional cost-cutting approach; within three years the company regained its competitive advantage. Together with such strategies, successful companies are also encouraging managers to focus on a wider set of objectives besides cutting costs. There is hope for manufacturing, but it clearly rests on a different way of managing.

The author refers to Abernathy’s study (line 36) most probably in order to
(A) qualify an observation about one rule governing manufacturing
(B) address possible objections to a recommendation about improving manufacturing competitiveness
(C) support an earlier assertion about one method of increasing productivity
(D) suggest the centrality in the United States economy of a particular manufacturing industry
(E) given an example of research that has questioned the wisdom of revising a manufacturing strategy

Edit: Highlighted text
_________________

If You're Not Living On The Edge, You're Taking Up Too Much Space


Last edited by priyankur_saha@ml.com on 14 May 2009, 09:32, edited 1 time in total.
Kaplan Promo CodeKnewton GMAT Discount CodesManhattan GMAT Discount Codes
SVP
SVP
avatar
Joined: 17 Jun 2008
Posts: 1580
Followers: 12

Kudos [?]: 176 [0], given: 0

GMAT Tests User
Re: RC: Cost-cutting [#permalink] New post 14 May 2009, 00:40
I will go with A.
Manager
Manager
avatar
Joined: 15 May 2009
Posts: 172
Followers: 4

Kudos [?]: 16 [0], given: 3

Re: RC: Cost-cutting [#permalink] New post 17 May 2009, 15:56
priyankur_saha@ml.com wrote:
Since the late 1970’s, in the face of a severe loss of market share in dozens of industries, manufacturers in the United States have been trying to improve productivity—and therefore enhance their international competitiveness—through cost-cutting programs. (Cost-cutting here is defined as raising labor output while holding the amount of labor constant.) However, from 1978 through 1982, productivity—the value of goods manufactured divided by the amount of labor input—did not improve; and while the results were better in the business upturn of the three years following, they ran 25 percent lower than productivity improvements during earlier, post-1945 upturns. At the same time, it became clear that the harder manufactures worked to implement cost-cutting, the more they lost their competitive edge.
With this paradox in mind, I recently visited 25 companies; it became clear to me that the cost-cutting approach to increasing productivity is fundamentally flawed. Manufacturing regularly observes a “40, 40, 20” rule. Roughly 40 percent of any manufacturing-based competitive advantage derives from long-term changes in manufacturing structure (decisions about the number, size, location, and capacity of facilities) and in approaches to materials. Another 40 percent comes from major changes in equipment and process technology. The final 20 percent rests on implementing conventional cost-cutting. This rule does not imply that cost-cutting should not be tried. The well-known tools of this approach—including simplifying jobs and retraining employees to work smarter, not harder—do produce results. But the tools quickly reach the limits of what they can contribute.
Another problem is that the cost-cutting approach hinders innovation and discourages creative people. As Abernathy’s study of automobile manufacturers has shown, an industry can easily become prisoner of its own investments in cost-cutting techniques, reducing its ability to develop new products. And managers under pressure to maximize cost-cutting will resist innovation because they know that more fundamental changes in processes or systems will wreak havoc with the results on which they are measured. Production managers have always seen their job as one of minimizing costs and maximizing output. This dimension of performance has until recently sufficed as a basis of evaluation, but it has created a penny-pinching, mechanistic culture in most factories that has kept away creative managers.
Every company I know that has freed itself from the paradox has done so, in part, by developing and implementing a manufacturing strategy. Such a strategy focuses on the manufacturing structure and on equipment and process technology. In one company a manufacturing strategy that allowed different areas of the factory to specialize in different markets replaced the conventional cost-cutting approach; within three years the company regained its competitive advantage. Together with such strategies, successful companies are also encouraging managers to focus on a wider set of objectives besides cutting costs. There is hope for manufacturing, but it clearly rests on a different way of managing.

The author refers to Abernathy’s study (line 36) most probably in order to
(A) qualify an observation about one rule governing manufacturing
(B) address possible objections to a recommendation about improving manufacturing competitiveness
(C) support an earlier assertion about one method of increasing productivity
(D) suggest the centrality in the United States economy of a particular manufacturing industry
(E) given an example of research that has questioned the wisdom of revising a manufacturing strategy

Edit: Highlighted text


I think I would go with (C) as the best description of the reference to the study. It is the main supporting evidence for the assertion (in the previous sentence) that "cost cutting hinders innovation".

The 40/40/20 rule was mentioned in previous sections w/ other evidence, so A isn't the best answer; B is feasible, since that is the overall gist of the passage, but it seems to be too broad of a descriptor for this one single sentence; D is the least plausible of all the answers, manufacturing's importance was mentioned in another area; E is also plausible, but I chose (C) over E for the same reason as B - it is too broad to describe the function of this sentence.
Intern
Intern
avatar
Joined: 14 Apr 2009
Posts: 17
Followers: 0

Kudos [?]: 1 [0], given: 1

Re: RC: Cost-cutting [#permalink] New post 19 Jul 2009, 00:48
OA???
Director
Director
avatar
Joined: 05 Jun 2009
Posts: 852
WE 1: 7years (Financial Services - Consultant, BA)
Followers: 8

Kudos [?]: 176 [0], given: 106

GMAT Tests User
Re: RC: Cost-cutting [#permalink] New post 19 Jul 2009, 01:08
I will go for A

----
(4:30)
_________________

Consider kudos for the good post ... :beer
My debrief : journey-670-to-720-q50-v36-long-85083.html

Senior Manager
Senior Manager
User avatar
Joined: 04 Sep 2008
Posts: 262
Location: Kolkata
Schools: La Martiniere for Boys
Followers: 1

Kudos [?]: 19 [0], given: 9

GMAT Tests User
Re: RC: Cost-cutting [#permalink] New post 19 Jul 2009, 03:48
Clearly A

By citing the example the author is qualifying the observation that he made i.e. loss of creativity
_________________

Thanks
rampuria

Re: RC: Cost-cutting   [#permalink] 19 Jul 2009, 03:48
    Similar topics Author Replies Last post
Similar
Topics:
Since the late 1970 s, in the face of a severe loss of riteshv 4 19 Jun 2012, 02:12
Since the late 1970 s, in the face of a severe loss of eybrj2 1 20 Mar 2012, 21:01
1 Since the late 1970's, in the face of a severe loss of anilnandyala 12 29 Nov 2010, 18:54
Passage 27 (27/63) ======== Since the late 1970's, in the nitya34 8 09 Apr 2009, 11:39
1 Since the late 1970's, in the face of a severe loss of gmatcrook 14 27 Jun 2008, 10:40
Display posts from previous: Sort by

Since the late 1970’s, in the face of a severe loss of marke

  Question banks Downloads My Bookmarks Reviews Important topics  


GMAT Club MBA Forum Home| About| Privacy Policy| Terms and Conditions| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group and phpBB SEO

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.