Summer is Coming! Join the Game of Timers Competition to Win Epic Prizes. Registration is Open. Game starts Mon July 1st.

 It is currently 18 Jul 2019, 01:59

### 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

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

# Companies are often torn between the benefits of focusing on one major

Author Message
TAGS:

### Hide Tags

SVP
Joined: 11 Mar 2008
Posts: 1607
Location: Southern California
Schools: Chicago (dinged), Tuck (November), Columbia (RD)
Companies are often torn between the benefits of focusing on one major  [#permalink]

### Show Tags

Updated on: 24 Sep 2018, 05:14
5
15
00:00

Difficulty:

45% (medium)

Question Stats:

65% (01:50) correct 35% (02:06) wrong based on 1719 sessions

### HideShow timer Statistics

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) 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

(B) an advertising agency loses one of its clients

(C) a holding company that owns a car rental agency and a national doughnut chain is now interested in purchasing a professional basketball team

(D) a construction company opts to use non-union labor to increase its profits

(E) a specialty sandwich store decides to open franchises throughout the country that will focus on using local ingredients

_________________
Check out the new Career Forum
http://gmatclub.com/forum/133

Originally posted by agold on 13 May 2008, 22:20.
Last edited by Bunuel on 24 Sep 2018, 05:14, edited 1 time in total.
Renamed the topic and edited the question.
Retired Moderator
Joined: 16 Jun 2012
Posts: 1003
Location: United States
Re: Companies are often torn between the benefits of focusing on one major  [#permalink]

### Show Tags

21 Jun 2013, 00:02
12
3
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.
_________________
Please +1 KUDO if my post helps. Thank you.

"Designing cars consumes you; it has a hold on your spirit which is incredibly powerful. It's not something you can do part time, you have do it with all your heart and soul or you're going to get it wrong."

Chris Bangle - Former BMW Chief of Design.
SVP
Joined: 11 Mar 2008
Posts: 1607
Location: Southern California
Schools: Chicago (dinged), Tuck (November), Columbia (RD)
Re: Companies are often torn between the benefits of focusing on one major  [#permalink]

### Show Tags

14 May 2008, 08:03
2
The OE is:

The tension indicated in the argument is that between the benefits of focusing on one primary product or service and the inherent risks of relying too heavily on an undiversified income stream. The correct answer choice must exemplify this tension.

(A) CORRECT. This example correctly identifies a company with a clear, narrow focus – a local messenger service - that enjoys a competitive advantage because of its reputation for speedy deliveries. At the same time, its undiversified income stream becomes problematic when a factor outside of its control – the relocation of local businesses out of state – forces it to lay off employees.

(B) This example does not specify any particular focus of the advertising agency nor does it demonstrate any major cash flow consequences due to the loss of the client.

(C) In contrast to the predicament described in the passage, this example describes a company that is interested in diversifying its holdings.

(D) The fact that the construction company is attempting to increase its profits does not illustrate the tension described in the passage.

(E) Though the specialty sandwich store that uses local ingredients might be called a very focused company, there is no evidence presented that this focus has had any adverse effect on cash flow.
_________________
Check out the new Career Forum
http://gmatclub.com/forum/133
##### General Discussion
Manager
Status: Final Lap
Joined: 25 Oct 2012
Posts: 230
Concentration: General Management, Entrepreneurship
GPA: 3.54
WE: Project Management (Retail Banking)
Re: Companies are often torn between the benefits of focusing on one major  [#permalink]

### Show Tags

26 Apr 2013, 17:46
3
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
_________________
KUDOS is the good manner to help the entire community.

Manager
Joined: 12 Dec 2012
Posts: 151
Location: Poland
Re: Companies are often torn between the benefits of focusing on one major  [#permalink]

### Show Tags

28 Apr 2013, 06:32
3
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.
_________________
If I answered your question with this post, use the motivating power of kudos!
Intern
Joined: 04 Apr 2015
Posts: 16
Concentration: Human Resources, Healthcare
GMAT Date: 08-06-2015
GPA: 3.83
WE: Editorial and Writing (Journalism and Publishing)
Re: Companies are often torn between the benefits of focusing on one major  [#permalink]

### Show Tags

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)
Intern
Joined: 09 Oct 2015
Posts: 39
Companies are often torn between the benefits of focusing on  [#permalink]

### Show Tags

25 Jul 2016, 06:57
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,
Intern
Joined: 09 Oct 2015
Posts: 39
Re: Companies are often torn between the benefits of focusing on one major  [#permalink]

### Show Tags

25 Jul 2016, 07:03
1
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,
Non-Human User
Joined: 01 Oct 2013
Posts: 4774
Re: Companies are often torn between the benefits of focusing on one major  [#permalink]

### Show Tags

24 Sep 2018, 05:19
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
_________________
Re: Companies are often torn between the benefits of focusing on one major   [#permalink] 24 Sep 2018, 05:19
Display posts from previous: Sort by