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Since the late 1970's, in the face of a severe loss of [#permalink] New post 27 Jun 2008, 10:40
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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 wreakhavoc 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.



1. The author of the passage is primarily concerned with
(A) summarizing a thesis
(B) recommending a different approach
(C) comparing points of view
(D) making a series of predictions
(E) describing a number of paradoxes


2. It can be inferred from the passage that the manufacturers mentioned in line 2 expected that the measures they implemented would
(A) encourage innovation
(B) keep labor output constant
(C) increase their competitive advantage
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives


3. The primary function of the first paragraph of the passage is to
(A) outline in brief the author’s argument
(B) anticipate challenges to the prescriptions that follow
(C) clarify some disputed definitions of economic terms
(D) summarize a number of long-accepted explanations
(E) present a historical context for the author’s observations


4. The author refers to Abernathy’s study 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


5. The author’s attitude toward the culture in most factories is best described as
(A) cautious
(B) critical
(C) disinterested
(D) respectful
(E) adulatory


6. In the passage, the author includes all of the following EXCEPT
(A) personal observation
(B) a business principle
(C) a definition of productivity
(D) an example of a successful company
(E) an illustration of a process technology


7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is
(A) flawed and ruinous
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate
(E) misunderstood but promising
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Re: RC: Business Passage [#permalink] New post 27 Jun 2008, 16:29
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Notes:
Para 1: Historical context. Cost cutting.
Para 2: Paradox of historical cost cutting.
Para 3: Specific example. Abernayth’s study. Tie innovation to cost cutting.
Para 4: Author’s point. Manufacturing strategy.

1. The author of the passage is primarily concerned with
(A) summarizing a thesis
(B) recommending a different approach
Correct. Passage says in para 4 “There is hope for manufacturing, but it clearly rests on a different way of managing”
(C) comparing points of view
(D) making a series of predictions
(E) describing a number of paradoxes


2. It can be inferred from the passage that the manufacturers mentioned in line 2 expected that the measures they implemented would
(A) encourage innovation
(B) keep labor output constant
(C) increase their competitive advantage
Correct. Passage says “been trying to improve productivity—and therefore enhance their international competitiveness—through cost-cutting programs”
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives


3. The primary function of the first paragraph of the passage is to
(A) outline in brief the author’s argument
(B) anticipate challenges to the prescriptions that follow
(C) clarify some disputed definitions of economic terms
(D) summarize a number of long-accepted explanations
(E) present a historical context for the author’s observations
Correct. Author is emphasing “cost cutting” in 1970s.


4. The author refers to Abernathy’s study 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
Correct. Study questions “cost cutting”.

5. The author’s attitude toward the culture in most factories is best described as
(A) cautious
(B) critical
Correct. Author says we need alternative approach.
(C) disinterested
(D) respectful
(E) adulatory


6. In the passage, the author includes all of the following EXCEPT
(A) personal observation
(B) a business principle
(C) a definition of productivity
Correct. Rest all are discussed in different paragraphs.
(D) an example of a successful company
(E) an illustration of a process technology


7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is
(A) flawed and ruinous
Correct. Para 2 says “cost-cutting approach to increasing productivity is fundamentally flawed”
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate
(E) misunderstood but promising

Please post the OAs.
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Re: RC: Business Passage [#permalink] New post 27 Jun 2008, 16:37
gmatcrook 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 wreakhavoc 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.



1. The author of the passage is primarily concerned with
(A) summarizing a thesis
(B) recommending a different approach
(C) comparing points of view
(D) making a series of predictions
(E) describing a number of paradoxes

B--

2. It can be inferred from the passage that the manufacturers mentioned in line 2 expected that the measures they implemented would
(A) encourage innovation
(B) keep labor output constant
(C) increase their competitive advantage
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives

C

3. The primary function of the first paragraph of the passage is to
(A) outline in brief the author’s argument
(B) anticipate challenges to the prescriptions that follow
(C) clarify some disputed definitions of economic terms
(D) summarize a number of long-accepted explanations
(E) present a historical context for the author’s observations

tough one btw A and E..will pick E

4. The author refers to Abernathy’s study 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

C...

5. The author’s attitude toward the culture in most factories is best described as
(A) cautious
(B) critical
(C) disinterested
(D) respectful
(E) adulatory

B is best

6. In the passage, the author includes all of the following EXCEPT
(A) personal observation
(B) a business principle
(C) a definition of productivity
(D) an example of a successful company
(E) an illustration of a process technology

Simple one E..

7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is
(A) flawed and ruinous
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate
(E) misunderstood but promising

B is what i would have said about this topic :)
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Re: RC: Business Passage [#permalink] New post 27 Jun 2008, 16:46
abhijit_sen wrote:


4. The author refers to Abernathy’s study 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
Correct. Study questions “cost cutting”.

how do you distinguish btw C and E??? isnt he really using this example to support his assertion tht cost cutting doesnt work?


6. In the passage, the author includes all of the following EXCEPT
(A) personal observation
(B) a business principle
(C) a definition of productivity
Correct. Rest all are discussed in different paragraphs.
(D) an example of a successful company
(E) an illustration of a process technology

I dont see an example of Process technology..i see he talk about a manufacturing technology but not process technology..maybe i am missing something..

7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is
(A) flawed and ruinous
Correct. Para 2 says “cost-cutting approach to increasing productivity is fundamentally flawed”
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate
(E) misunderstood but promising

I was stuck btw A and B..picked B..cause thats how i felt :)
Please post the OAs.
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Re: RC: Business Passage [#permalink] New post 27 Jun 2008, 17:16
fresinha12 wrote:
abhijit_sen wrote:


4. The author refers to Abernathy’s study most probably in order to
I hard part in E is "revising a manufacturing strategy" which I assume is "cost cutting", then it makes sense.
how do you distinguish btw C and E??? isnt he really using this example to support his assertion tht cost cutting doesnt work?


6. In the passage, the author includes all of the following EXCEPT

I dont see an example of Process technology..i see he talk about a manufacturing technology but not process technology..maybe i am missing something.
You may be quiet right about this. I was not able to find C or E. I went for C.

7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is

I was stuck btw A and B..picked B..cause thats how i felt :)
Even I think A is too extreme. But somehow I went with A because of wording in passage. But In actual GMAT I won't choose that extreme words.
Please post the OAs.
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Re: RC: Business Passage [#permalink] New post 27 Jun 2008, 17:19
1.B
2. C
3. E
4. A
5. A
6. E
7. B
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Re: RC: Business Passage [#permalink] New post 27 Jun 2008, 18:08
gmatcrook 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 wreakhavoc 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.



1. The author of the passage is primarily concerned with
(A) summarizing a thesis
(B) recommending a different approach
(C) comparing points of view
(D) making a series of predictions
(E) describing a number of paradoxes


2. It can be inferred from the passage that the manufacturers mentioned in line 2 expected that the measures they implemented would
(A) encourage innovation
(B) keep labor output constant
(C) increase their competitive advantage
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives


3. The primary function of the first paragraph of the passage is to
(A) outline in brief the author’s argument
(B) anticipate challenges to the prescriptions that follow
(C) clarify some disputed definitions of economic terms
(D) summarize a number of long-accepted explanations
(E) present a historical context for the author’s observations


4. The author refers to Abernathy’s study 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


5. The author’s attitude toward the culture in most factories is best described as
(A) cautious
(B) critical
(C) disinterested
(D) respectful
(E) adulatory


6. In the passage, the author includes all of the following EXCEPT
(A) personal observation
(B) a business principle
(C) a definition of productivity
(D) an example of a successful company
(E) an illustration of a process technology


7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is
(A) flawed and ruinous
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate
(E) misunderstood but promising


1.B
2.C
3A.
4 C
5 a or b
6E
7B
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Re: RC: Business Passage [#permalink] New post 27 Jun 2008, 22:23
This time we got quite a few responses.
Thanks guys! Below are the OAs:

1.B
2.C
3.E
4.C
5.B
6.E
7.D


The 4th one was a pretty difficult one to find out.
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Re: RC: Business Passage [#permalink] New post 28 Jun 2008, 06:49
Shit got number 7 wrong..any OE???



gmatcrook wrote:
This time we got quite a few responses.
Thanks guys! Below are the OAs:

1.B
2.C
3.E
4.C
5.B
6.E
7.D


The 4th one was a pretty difficult one to find out.
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Re: RC: Business Passage [#permalink] New post 28 Jun 2008, 07:33
gmatcrook wrote:
This time we got quite a few responses.
Thanks guys! Below are the OAs:

1.B
2.C
3.E
4.C
5.B
6.E
7.D


The 4th one was a pretty difficult one to find out.


what was your reasoning behind 4?
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Re: RC: Business Passage [#permalink] New post 28 Jun 2008, 09:57
I got this one wrong.

My reasoning behind 4 would be the immediate earlier statement made by the author:
(I know! I myself was thinking later on - How did I miss this one?)

"the cost-cutting approach hinders innovation and discourages creative people" - Assertion made by the author.

This cost-cutting approach is the method adopted to improve productivity.

Option C states this clearly.

Am I right fresinha12.
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Re: RC: Business Passage [#permalink] New post 28 Jun 2008, 10:07
The 7th one.

B states that the cost-cutting as a strategy is short-sighted and difficult to sustain.

Is it Short-sighted? Yes
Is it difficult to sustain? No.

The author states at the end of the 2nd paragraph -"...The final 20 percent
rests on implementing conventional cost-cutting. This rule does not imply that cost-cutting should not be tried.
"
Also at the end of the last paragraph the author states, "Together with such strategies, successful
companies are also encouraging managers to focus on a wider set of objectives besides cutting costs.
"

Thus, D sums it up correctly. Cost-cutting as a strategy that is useful and inadequate which means that in addition to cost-cutting we would require something else as well.
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Re: RC: Business Passage [#permalink] New post 28 Jun 2008, 10:11
Once again, Thanks abhijitsen, for taking the pains to type in the notes and explain the answers.
It sure helps us.

+1 kudos to you.
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Re: RC: Business Passage [#permalink] New post 28 Jun 2008, 11:39
you got it..
i re-read 7..and i can agree with D..but also at the sametime i feel B is also correct..isnt the whole point of bringing up the detroit example..they are focused on cost cutting and now cannot sustain that since it has become a vicious circle..



gmatcrook wrote:
I got this one wrong.

My reasoning behind 4 would be the immediate earlier statement made by the author:
(I know! I myself was thinking later on - How did I miss this one?)

"the cost-cutting approach hinders innovation and discourages creative people" - Assertion made by the author.

This cost-cutting approach is the method adopted to improve productivity.

Option C states this clearly.

Am I right fresinha12.
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Re: RC: Business Passage [#permalink] New post 29 Jun 2008, 08:16
abhijit_sen wrote:
Notes:
Para 1: Historical context. Cost cutting.
Para 2: Paradox of historical cost cutting.
Para 3: Specific example. Abernayth’s study. Tie innovation to cost cutting.
Para 4: Author’s point. Manufacturing strategy.

1. The author of the passage is primarily concerned with
(A) summarizing a thesis
(B) recommending a different approach
Correct. Passage says in para 4 “There is hope for manufacturing, but it clearly rests on a different way of managing”
(C) comparing points of view
(D) making a series of predictions
(E) describing a number of paradoxes


2. It can be inferred from the passage that the manufacturers mentioned in line 2 expected that the measures they implemented would
(A) encourage innovation
(B) keep labor output constant
(C) increase their competitive advantage
Correct. Passage says “been trying to improve productivity—and therefore enhance their international competitiveness—through cost-cutting programs”
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives


3. The primary function of the first paragraph of the passage is to
(A) outline in brief the author’s argument
(B) anticipate challenges to the prescriptions that follow
(C) clarify some disputed definitions of economic terms
(D) summarize a number of long-accepted explanations
(E) present a historical context for the author’s observations
Correct. Author is emphasing “cost cutting” in 1970s.


4. The author refers to Abernathy’s study 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
Correct. Study questions “cost cutting”.

5. The author’s attitude toward the culture in most factories is best described as
(A) cautious
(B) critical
Correct. Author says we need alternative approach.
(C) disinterested
(D) respectful
(E) adulatory


6. In the passage, the author includes all of the following EXCEPT
(A) personal observation
(B) a business principle
(C) a definition of productivity
Correct. Rest all are discussed in different paragraphs.
(D) an example of a successful company
(E) an illustration of a process technology


7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is
(A) flawed and ruinous
Correct. Para 2 says “cost-cutting approach to increasing productivity is fundamentally flawed”
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate
(E) misunderstood but promising

Please post the OAs.



Abhijit, One question. WHat is your approach to solve RCs?Do you read the passage thoroughly or ready only the first para/first lines of subsequent paras+skim+jot key words?

Thanks.
Re: RC: Business Passage   [#permalink] 29 Jun 2008, 08:16
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Since the late 1970’s, in the face of a severe loss of marke priyankur_saha@ml.com 5 13 May 2009, 23:51
Passage 27 (27/63) ======== Since the late 1970's, in the nitya34 8 09 Apr 2009, 11:39
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Since the late 1970's, in the face of a severe loss of

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