For decades after World War II, American businesses produced goods of

For decades after World War II, American businesses produced goods of such high quality and low cost that many foreign corporations could not effectively compete. But in the mid-1960s American corporations began losing their advantage and by the 1980s they lagged behind their competitors in many industries. Some analysts argue that stringent U.S. governmental regulations, combined with the support given to foreign firms by their governments, have created an environment in which American products cannot compete. Other analysts blame corporate raiders who buy companies primarily in order to sell off lucrative divisions for huge profits. Others blame American workers, citing excessive labor demands and poor productivity. Even American consumers are censured for favoring foreign goods. While there is some truth to each charge, the fundamental problem involves corporate management, which has made serious errors about what is required for marketplace success. Three misconceptions involving labor costs, production choices, and growth strategies have been especially damaging.

Although labor costs typically account for less than 15% of a product's cost, management has blamed workers' wages for driving up prices and making products uncompetitive. Because of their attempts to minimize wage costs, American corporations have had trouble recruiting and retaining skilled workers.

The emphasis on cost minimization has led to another blunder: an overconcentration on high-technology products. Many foreign firms began by specializing in low-technology products, gaining manufacturing experience and earning huge profits. These corporations later broke into high-technology markets by applying their experience and resources to the production of higher quality goods. American business has consistently ignored this sensible approach. Because of its distaste for low-technology industry, business has gradually lost much of its financial and technological advantage.

The recent rash of corporate mergers has worsened the situation. While U.S. firms have neglected long-range planning, preferring instead to reap fast profits through mergers and acquisitions, foreign firms have moved to dominate future markets by investing in the modernization of their facilities. Today's executives lack the vision which once propelled U.S. business to a position of unrivaled dominance. Without a basic change in philosophy, the outlook for American business is bleak.

1. The central thesis of the passage is that:

A. cost minimization is a key strategy for gaining a competitive advantage in business
B. questionable management is largely to blame for the weakened position of American business
C. American corporations have lost their traditional dominance of both domestic and foreign markets
D. American companies must invest in modernization of their facilities in order to become competitive
E. earlier explanations of the decline of American business are invalid


2. The author's attitude toward American corporate management can best be characterized as:

A. arrogant
B. cautious
C. disdainful
D. ambivalent
E. paternalistic


3. Based on the passage, it is reasonable to conclude that U.S. corporate managers believe that:

A. corporate raiders have undermined the competitiveness of American business
B. manufacturing low technology goods is a useful way to acquire production experience
C. American industry will soon regain dominance of the world economy
D. the U.S. government should subsidize failing American businesses
E. it is necessary to hold down labor costs in order to offer competitively priced products


4. The passage supports which of the following statements about American corporations?

I. American corporations have difficulty finding ways to attract and retain highly skilled labor.
II. In the aftermath of World War II, American corporations made huge profits by producing cheap, low-quality products.
III. American corporations often favor growth through merger and acquisition rather than through internal development.

A. I only
B. II only
C. III only
D. I and II only
E. I and III only