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The First Banking Group s decision to invest in an

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The First Banking Group s decision to invest in an [#permalink] New post 03 Sep 2012, 09:43
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The First Banking Group’s decision to invest in an electronic network for transferring funds was based on a cost advantage over a nonelectronic system of about ten dollars per transaction in using an electronic system. Executives reasoned further that the system would give them an advantage over competitors.
Which of the following, if it is a realistic possibility, most seriously weakens the executives’ projection of an advantage over competitors?
(A) The cost advantage of using the electronic system will not increase sufficiently to match the pace of inflation.
(B) Competitors will for the same reasons install electronic systems, and the resulting overcapacity will lead to mutually damaging price wars.
(C) The electronic system will provide a means for faster transfer of funds, if the First Banking Group wishes to provide faster transfer to its customers.
(D) Large banks from outside the area served by the First Banking Group have recently established branches in that area as competitors to the First Banking Group.
(E) Equipment used in the electronic network for transferring funds will be compatible with equipment used in other such networks.
[Reveal] Spoiler: OA

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Re: The first Banking Group’s decision to invest [#permalink] New post 03 Sep 2012, 10:07
I will go with B. If competitors follow suit,then First bank will not enjoy the envisaged advantages. That must weaken the reasoning that the electronic system will give First Banking Group an advantage.
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Re: The first Banking Group’s decision to invest [#permalink] New post 04 Sep 2012, 04:44
PUNEETSCHDV wrote:
The First Banking Group’s decision to invest in an electronic network for transferring funds was based on a cost advantage over a nonelectronic system of about ten dollars per transaction in using an electronic system. Executives reasoned further that the system would give them an advantage over competitors.
Which of the following, if it is a realistic possibility, most seriously weakens the executives’ projection of an advantage over competitors?
(A) The cost advantage of using the electronic system will not increase sufficiently to match the pace of inflation.
(B) Competitors will for the same reasons install electronic systems, and the resulting overcapacity will lead to mutually damaging price wars.
(C) The electronic system will provide a means for faster transfer of funds, if the First Banking Group wishes to provide faster transfer to its customers.
(D) Large banks from outside the area served by the First Banking Group have recently established branches in that area as competitors to the First Banking Group.
(E) Equipment used in the electronic network for transferring funds will be compatible with equipment used in other such networks.



I would like to explain the answer. Please correct me if my reasoning goes wrong.
I got the answer right.

The strategy I followed in answering the question is.

1. Find the premise
2. Find the conclusion
3. Assumption made by the executives.

Premise: invest in an electronic network for transferring funds over nonelectronic system because of cost advantage the bank will get for a transaction i.e. 10$.
Conclusion: This system would give them an advantage over competitors

Assumption Made: No other competitor will use the same technology.

Simple POE can be used now.
A: Out of Scope
B: Price wars between competitors will not give them cost advantage weakens the conclusion. Hence the Answer
C: Does not say how it is advantageous.
D: Out of Scope
E: Out of Scope


Hope you understood it.

Cheers,
Ankit
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Re: The first Banking Group’s decision to invest [#permalink] New post 06 Sep 2012, 21:02
+1 B

The author assumes that the competitors won't use electronic systems too.
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Re: The first Banking Group’s decision to invest [#permalink] New post 06 Sep 2012, 23:51
The author assumes that the banking group will have cost advantage as well as advantage over competitors.

B weakens because as per B competitors will install the same technology and then the price wars (means all will begin to charge less) and hence the cost advantage will also disappear.
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Re: The first Banking Group’s decision to invest [#permalink] New post 10 Sep 2012, 11:36
ranjeet75 wrote:
The author assumes that the banking group will have cost advantage as well as advantage over competitors.

B weakens because as per B competitors will install the same technology and then the price wars (means all will begin to charge less) and hence the cost advantage will also disappear.



My vote for B too.

Only B clearly indicates that the bank cannot have an advantage over other banks
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Re: The first Banking Group’s decision to invest   [#permalink] 10 Sep 2012, 11:36
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