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.