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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]

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26 Apr 2013, 17:06
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61% (02:31) correct 39% (01:40) wrong based on 1279 sessions

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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
• 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]

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26 Apr 2013, 17:46
3
KUDOS
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
• 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]

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26 Apr 2013, 18:15
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
• 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]

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28 Apr 2013, 06:32
3
KUDOS
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]

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28 Apr 2013, 14:54
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
• 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.

THANKS

SKM
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Re: Companies are often torn between the benefits of focusing on [#permalink]

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28 Apr 2013, 16:47
• 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]

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21 Jun 2013, 00:02
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This post was
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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.

• 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]

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21 Jun 2013, 23:45
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.

• 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]

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22 Jun 2013, 00:31
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.

• 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]

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22 Jun 2013, 16:44
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.

• 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
• 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]

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19 Aug 2013, 04:12
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.

• 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
• 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.

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]

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14 Nov 2014, 11:06
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Re: Companies are often torn between the benefits of focusing on [#permalink]

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06 Mar 2015, 03:28
Rock750 wrote:
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
• 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

But it is said in the answer A that all the business not just the local messenger service is affected. So, if you diversify your income, still you are hit by the imposition of tax by the government. I can't get why A is the answer
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Re: Companies are often torn between the benefits of focusing on [#permalink]

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24 Mar 2015, 10:18
I don't understand the logic of Answer A...
• 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

Where does it say that there are going to be any fluctuations of the cash flow?? The fact that the company laid off 20% of workers does not necessarily mean that income will go down (it may even go up due to cost efficiency), so the cash flow might not be affected. Likewise, this sentence does not say that this local messenger HAS MOVED or WILL MOVE out of state... Answer B works better from cashflow standpoint.. Not a good question from my point of view.
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Re: Companies are often torn between the benefits of focusing on [#permalink]

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06 Aug 2015, 00:42
Corporate are torn between
A) benefits of focussing on one product b) drawbacks on relying on one primary source of income

---> means they are torn between whether to rely on one product
or on relying only on one source of income by focussing on that product alone and not on other services (maybe?)

While
A) narrow focus can help the company in shelling out a perfect and innovative (maybe?) product in comparison to other rivals
there is also a factor
B) depending on one source of income doesn't allow diversified cash flow (causing the company maybe trouble in future?)

inference (positive? possible?) = don't focus on only one?; have diversified view?;

inference (to drive home the point to NOT focus?) = example of companies who suffered because of this??

Ask yourself which is being asked? positive inference (of changes a company can make to deal with this?) or a negative inference (where companies are shown to suffer because of being torn between...?)

HOW CAN WE SEE THE TENSION REALIZED? MEANING ---> example of where a company suffers because of this? Author might have used an example to justify his

A) is the only one that gives a straightforward example of negative inference. ( = tension REALIZED)
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Re: Companies are often torn between the benefits of focusing on [#permalink]

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06 Aug 2015, 19:51
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
• 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

We can see this tension realized when, for example,________________
what is meaning of this line? I am just trying to understand question stem itself.
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Re: Companies are often torn between the benefits of focusing on [#permalink]

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07 Aug 2015, 02:21
The essence of tailgating, mad praise, do not explain.
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Re: Companies are often torn between the benefits of focusing on [#permalink]

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25 Jul 2016, 07:03
1
KUDOS
Hi All,

The MOST important factor in the question ( as per my understanding) is that we need to complete the sentence which begins with " we can see this TENSION is realised when " --> What we are expected to do is give an example of a situation where a company has some concerns because of its style of operating ( Niche)

Now lets look at the answer choices :

(A) 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 --> Now this is a "Local" service known for " speedy deliveries. Without going too much into detail, we need to notice that certainly there was a TENSION

(B) an advertising agency loses one of its clients --> All you business minded people will now argue losing a client is a tense situation as well. Sure it is but do we have any information about the advertising agency or the client ? Let me give you more examples:

1. A big advertising agency , a very small revenue customer --> Is the agency niche in its operations ? They may be into all sorts of advertisements print, radio, mobile. Losing one of the lets say 10k + customers, and that too a very small customer. Do you think it fits into the analogy required for the argument.

2. If the sentence read --> An advertising agency lost one of its biggest clients. This client contributed to 70 % of the agencies' revenue. Then this could have been a very strong contender

(C) a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team ---> Will this lead to any sorts of tension ?

(D) a construction company opts to use non-union labor to increase its profits --> plans to increase profits surely do not qualify as concerning issues

(E) a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients --> Same as C. No apparent tension.

This questions becomes extremely simple if we catch of hold of that very important word. you do not even need to get into the exercise of classifying the industry as a niche one or not. That almost becomes irrelevant.

I hope you find this approach useful.

Regards,
Re: Companies are often torn between the benefits of focusing on   [#permalink] 25 Jul 2016, 07:03
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