In corporate purchasing, competitive scrutiny is typically limited to

Question

In corporate purchasing, competitive scrutiny is typically limited to suppliers of items that are directly related to end products. With “indirect” purchases (such as computers, advertising, and legal services), which are not directly related to production, corporations often favor “supplier partnerships” (arrangements in which the purchaser forgoes the right to pursue alternative suppliers), which can inappropriately shelter suppliers from rigorous competitive scrutiny that might afford the purchaser economic leverage. There are two independent variables—availability of alternatives and ease of changing suppliers—that companies should use to evaluate the feasibility of subjecting suppliers of indirect purchases to competitive scrutiny. This can create four possible situations.

In Type 1 situations, there are many alternatives and change is relatively easy. Open pursuit of alternatives—by frequent competitive bidding, if possible—will likely yield the best results. In Type 2 situations, where there are many alternatives but change is difficult—as for providers of employee health-care benefits—it is important to continuously test the market and use the results to secure concessions from existing suppliers. Alternatives provide a credible threat to suppliers, even if the ability to switch is constrained. In Type 3 situations, there are few alternatives, but the ability to switch without difficulty creates a threat that companies can use to negotiate concessions from existing suppliers. In Type 4 situations, where there are few alternatives and change is difficult, partnerships may be unavoidable.   1 
 RC00394-03 
 1. Which of the following best describes the relation of the second paragraph to the first?

(A) The second paragraph offers proof of an assertion made in the first paragraph.
(B) The second paragraph provides an explanation for the occurrence of a situation described in the first paragraph.
(C) The second paragraph discusses the application of a strategy proposed in the first paragraph.
(D) The second paragraph examines the scope of a problem presented in the first paragraph.
(E) The second paragraph discusses the contradictions inherent in a relationship described in the first paragraph.

2 
 RC00394-02 
 2. Which of the following can be inferred about supplier partnerships, as they are described in the passage?

(A) They cannot be sustained unless the goods or services provided are available from a large number of suppliers.
(B) They can result in purchasers paying more for goods and services than they would in a competitive-bidding situation.
(C) They typically are instituted at the urging of the supplier rather than the purchaser.
(D) They are not feasible when the goods or services provided are directly related to the purchasers' end products.
(E) They are least appropriate when the purchasers' ability to change suppliers is limited.

3 
 RC00394-06 
 3. According to the passage, which of the following factors distinguishes an indirect purchase from other purchases?

(A) The ability of the purchasing company to subject potential suppliers of the purchased item to competitive scrutiny
(B) The number of suppliers of the purchased item available to the purchasing company
(C) The methods of negotiation that are available to the purchasing company
(D) The relationship of the purchased item to the purchasing company's end product
(E) The degree of importance of the purchased item in the purchasing company's business operation

4 
 RC00394-04 
 4. It can be inferred that the author of the passage would be most likely to make which of the following recommendations to a company purchasing health care benefits for its employees?

(A) Devise strategies for circumventing the obstacles to replacing the current provider of health care benefits.
(B) Obtain health care benefits from a provider that also provides other indirect products and services.
(C) Obtain bids from other providers of health care benefits in order to be in a position to negotiate a better deal with the current provider.
(D) Switch providers of health care benefits whenever a different provider offers a more competitive price.
(E) Acknowledge the difficulties involved in replacing the current provider of health care benefits and offer to form a partnership with the provider.

5 
 RC00394-05 
 5. Which of the following is one difference between Type 2 situations and Type 4 situations, as they are described in the passage?

(A) The number of alternative suppliers available to the purchaser
(B) The most effective approach for the purchaser to use in obtaining competitive bids from potential suppliers
(C) The degree of difficulty the purchaser encounters when changing suppliers
(D) The frequency with which each type of situation occurs in a typical business environment
(E) The likelihood that any given purchase will be an indirect purchase

EMPOWERgmatVerbal · Accepted Answer

Full EMPOWERgmat Analysis

In corporate purchasing, competitive scrutiny is typically limited to suppliers of items that are directly related to end products. With “indirect” purchases (such as computers, advertising, and legal services), which are not directly related to production, corporations often favor “supplier partnerships” (arrangements in which the purchaser forgoes the right to pursue alternative suppliers), which can inappropriately shelter suppliers from rigorous competitive scrutiny that might afford the purchaser economic leverage. There are two independent variables—availability of alternatives and ease of changing suppliers—that companies should use to evaluate the feasibility of subjecting suppliers of indirect purchases to competitive scrutiny. This can create four possible situations.

In Type 1 situations, there are many alternatives and change is relatively easy. Open pursuit of alternatives—by frequent competitive bidding, if possible—will likely yield the best results. In Type 2 situations, where there are many alternatives but change is difficult—as for providers of employee health-care benefits—it is important to continuously test the market and use the results to secure concessions from existing suppliers. Alternatives provide a credible threat to suppliers, even if the ability to switch is constrained. In Type 3 situations, there are few alternatives, but the ability to switch without difficulty creates a threat that companies can use to negotiate concessions from existing suppliers. In Type 4 situations, where there are few alternatives and change is difficult, partnerships may be unavoidable.

Passage Analysis  
This passage gets pretty technical right from the first impression. The sentence “In corporate purchasing, competitive scrutiny is typically limited to suppliers of items that are directly related to end products” we’re left wondering what the heck it’s talking about. If you felt that way, do not take it personally---the first sentence is vague without more context---it’s not you.

BUT, sharp test-takers know to hold fast and move on without surrendering any confidence. GMAT passages always end up providing the context we need, and here, it happens in the next sentence: “With “indirect” purchases (such as computers, advertising, and legal services), which are not directly related to production”. For example, the computers an accounting firm uses. Or the advertising services purchased by a car manufacturer, or the legal services contracted out by a software company. In these cases it’s harder for a company to gain competitive scrutiny, to make sure the suppliers are being fair and honest. So now we’re given the context we need. So now, we can also make sense of the first sentence then:

“In corporate purchasing, competitive scrutiny is typically limited to suppliers of items that are directly related to end products”. 
In this case, we’re referring to suppliers that factor directly in to the end result: a car company’s contract with a seat manufacturer, for example. In these cases, it’s easier for a company to gain competitive scrutiny.

OK, so we took a few seconds to make sure we understood what was going on. But can we afford to take that time? Yes. If we didn’t understand what was going on, imagine the time we’d be wasting on the rest of the passage, and the questions. With the understanding we now have, we’re also in position to score points confidently, and efficiently.

So now, let’s continue to summarize the first paragraph. For indirect purchases, companies often sign supplier partnerships that can cost them leverage and scrutiny. 
The structure of the last sentence in paragraph 1 is choppy and awkward to follow (it’s a passively constructed nightmare that would never survive in GMAT Sentence Correction), but that aside, it’s saying that companies should consider two variables to evaluate the opportunity of subjecting suppliers to more scrutiny. 1) Availability of alternatives, and 2) The ease of changing suppliers.

The second describes, and makes the case for 4 different situations/types.

Type 1: Lots of alternatives and change is easy. 
Type 2: Lots of alternatives but change is difficult. 
Type 3: Few alternatives but change is easy. 
Type 4: Few alternatives and change is difficult.

Ladder 
1 =/+ Direct vs indirect; For more scrutiny, consider #, and ease
2 =/+ 4 Types of situations

The four types can fit into a four quadrant matic:

Many Alts: Few Alts:
Change Easy: 1 (best) 3
Change Not Easy: 2 4 (worst)

Recommendations:
1: Frequent competitive bidding
2: Continuously test the market/Get concessions
3: Creates threat to suppliers companies can use to negotiate concessions
4: Little can be done; partnerships unavoidable

Questions below are presented in the order found in the GMAT Official Guide:

OG 2019 Q438 
Q 1 of 5  
Which of the following can be inferred about supplier partnerships, as they are described in the passage?

A. They cannot be sustained unless the goods or services provided are available from a large number of suppliers.
B. They can result in purchasers paying more for goods and services than they would in a competitive-bidding situation.
C. They typically are instituted at the urging of the supplier rather than the purchaser.
D. They are not feasible when the goods or services provided are directly related to the purchasers' end products.
E. They are least appropriate when the purchasers' ability to change suppliers is limited.

Analysis: 
 Inference Question
This question asks for something that can be inferred to be true from the passage regarding supplier partnerships.  That means that one and only one option can be absolutely concluded based on what's in the passage.

A. The author never states that many suppliers are needed for a partnership to be sustained. The issue isn’t whether the partnership is sustainable, but rather if purchasers have leverage to try to get the best prices/concessions.
 
 B. This is the correct choice. The author specifically states that the supplier partnerships can reduce a business’s “economic leverage” because the business can’t pursue alternative suppliers.

C. The author never states that anybody is urging for supplier partnerships, whether the urging comes from the supplier of the purchaser. All we are told is that corporations often favor these relationships.

D. The passage never rules out that for direct purchases strategic partnerships aren’t feasible, but rather they just tend not to be common. Though supplier partnerships typically affect relationships with those whose supplies are indirectly related to the end product, this does not mean that supplier partnerships can’t also apply to purchases that do directly relate to the end products.

E. In Type 4 situations, the ability to change is limited, but a partner relationship may be “unavoidable.”  
 Official Answer :
 B

OG 2019 Q439
Q 2 of 5  
Which of the following best describes the relation of the second paragraph to the first?

A. The second paragraph offers proof of an assertion made in the first paragraph.
B. The second paragraph provides an explanation for the occurrence of a situation described in the first paragraph.
C. The second paragraph discusses the application of a strategy proposed in the first paragraph.
D. The second paragraph examines the scope of a problem presented in the first paragraph.
E. The second paragraph discusses the contradictions inherent in a relationship described in the first paragraph.

Analysis: 
  Item Purpose 
This question simply asks how the second paragraph follows from the first. Our analysis above should help.
 A. The second paragraph advises on the situation in more detail. That’s totally different from providing more evidence/proof.

B. This option is the same as option A reworded. Providing an explanation of what happened in the first paragraph is another way of saying that paragraph two is providing proof, when it actually takes what was in paragraph one, and offers advice on what should be done depending on which of the 4 types an indirect purchaser finds themselves in.

C. This is the correct choice. Paragraph 2 takes what was in paragraph one, and offers advice on what should be done depending on which of the 4 types an indirect purchaser finds themselves in so that they can gain more leverage for better scrutiny and to gain possible supplier concessions.

D. The only problem mentioned in the first paragraph is the lack of competitive scrutiny. The second paragraph actually discusses possible methods to gain greater leverage against suppliers. In other words it offers possible solutions. It certainly doesn’t serve to merely further describe the problem itself.

E. There is no discussion of contradictions in the second paragraph. Yes, there’s a challenge, but that doesn’t mean there’s a contradiction, AND, as we’ve discussed, paragraph 2 serves as a set of strategic advice to overcome the challenge inherent in supplier partnerships.  
 Official Answer: 
 C

OG 2019 Q440
Q 3 of 5  
It can be inferred that the author of the passage would be most likely to make which of the following recommendations to a company purchasing health care benefits for its employees?

A. Devise strategies for circumventing the obstacles to replacing the current provider of health care benefits.
B. Obtain health care benefits from a provider that also provides other indirect products and services.
C. Obtain bids from other providers of health care benefits in order to be in a position to negotiate a better deal with the current provider.
D. Switch providers of health care benefits whenever a different provider offers a more competitive price.
E. Acknowledge the difficulties involved in replacing the current provider of health care benefits and offer to form a partnership with the provider.

Analysis: 
 Many Alts Few Alts
Change Easy 1 (best) 3
Change Not Easy 2 4 (worst)
2: Continuously test the market/Get concessions

Inference Question 
This question asks what you believe the author would recommend to a company making a health care benefit purchase. That example was mentioned in discussion of the Type 2 situation (many alternatives, but change isn’t easy).

The author specifically recommends that business making these purchases should continuously test the market to gain concessions from suppliers.

So then, which of these options can we then infer the author of the passage would agree with?

A. There is no mention or implication of getting around obstacles to replace providers. Chuck it.

B. This option is designed to punish test-takers who never invested in gaining the understanding on the difference between direct and indirect supplier situations in the first couple of sentences in the passage. You can change what Type you’re in. This option magically suggests a supplier can be both direct and indirect.

C. This is the correct choice and follows the analysis of the question above. The author advises looking continuously test the market with the mission of gaining concessions (negotiating) for a better deal.

D. Type 2 situations are defined as being not easy to change, so frequently switching providers whenever a better price comes along directly flies against the description of a Type 2 situation, thus making D a 180.

E. This option miserably misunderstands a Type 2 situation and thereby doesn’t present anything the author would remotely agree with. The author does say that change is difficult in Type 2 situations, but there is no mention of therefore offering to form a partnership with a provider. The focus is on negotiating for a better deal.  
 Official Answer :
 C

OG 2019 Q441 
Q 4 of 5  
Which of the following is one difference between Type 2 situations and Type 4 situations, as they are described in the passage?

A. The number of alternative suppliers available to the purchaser
B. The most effective approach for the purchaser to use in obtaining competitive bids from potential suppliers
C. The degree of difficulty the purchaser encounters when changing suppliers
D. The frequency with which each type of situation occurs in a typical business environment
E. The likelihood that any given purchase will be an indirect purchase

Analysis: 
 Many Alts Few Alts
Change Easy 1 (best) 3
Change Not Easy 2 4 (worst)
2: Continuously test the market/Get concessions
4: Little can be done; partnerships unavoidable
Detail Question
This question asks for a difference between Type 2 and Type 4 situations. Our diagram helps out here immensely. As we can see in our table, a supplier change isn’t easy for both Type 2 and Type 4 situations, but the big difference is that in Type 2 there are many alternative suppliers, and in Type 4 there are not.

A. Bam, that’s it. This is the correct choice. Type 2 situations involve “lots of alternative suppliers,” while Type 4 involves “few alternatives.”

B. According to the passage, in Type 4 situations competitive bids are not even possible, but this option incorrectly suggests that the difference is a matter of which approach is best. Gone.

C. Nope, both Type 2 and Type 4 face difficulty changing suppliers.

D. We’re given absolutely nothing as to how frequent any of the 4 Types of situations are, let alone the relative occurrence of Type 2 vs. Type 4.

E. All of the 4 Types, including Type 2 and Type 4 situations ALL are discussed in regard to indirect purchases. Since both Type 2 and Type 4 both deal with indirect purchases, E is gone.  
 Official Answer: 
 A

OG 2019 Q442 
Q 5 of 5  
According to the passage, which of the following factors distinguishes an indirect purchase from other purchases?

A. The ability of the purchasing company to subject potential suppliers of the purchased item to competitive scrutiny
B. The number of suppliers of the purchased item available to the purchasing company
C. The methods of negotiation that are available to the purchasing company
D. The relationship of the purchased item to the purchasing company's end product
E. The degree of importance of the purchased item in the purchasing company's business operations

Analysis: 
  Detail Question 
Our investment in understanding the intricate first two sentences of the passage enable us to swiftly make the distinction between a direct and indirect purchase situation. An indirect purchase is not directly related to a company’s end product. For example, purchasing computers by a company that doesn’t make computers so those computers would be indirectly related to the company’s end product.

A. Scrutiny of suppliers is not the distinguishing factor between direct and indirect purchasers. While the suppliers of directly related purchases are typically scrutinized, this is also possible for indirect purchases, as recommended in the second paragraph. So on top of the fact that scrutiny isn’t described as the distinguishing factor, both direct and indirect supplier relationships can be scrutinized.

B. Depending on the Type, the number of suppliers can vary wildly, so there’s no way that the number of suppliers could be used as the distinguishing factor between direct and indirect suppliers.

C. Similar to B, depending on the Type, the method of negotiation used with suppliers can vary wildly by type, so there’s no way that the style of negotiation could be used as the distinguishing factor between direct and indirect suppliers. Not only that, this option technically says that there are different methods of negotiation. That mischaracterizes what varies in paragraph 2. It’s not that there are different methods of negotiation, but rather different circumstances of when the negotiations would take place, depending on Type.

D. Bingo. This is the correct choice. An indirect purchase merely means that it is not directly related to a company’s end product.

E. The degree of importance of the purchased item is not mentioned at all and certainly the degree of importance can’t necessarily be evaluated between direct and indirect purchasers. Just because a purchase is indirect, doesn’t necessarily make it any less important. A total misfire.  
 Official Answer: 
 D

methevoid · Answer

Also did the same mistake as yours @ankit.

I guess its all about the wording between the two options, now after re-reading it I can see the incorrect option has a wording of "Examining the Scope" v/s in correct option "Application of strategy".

My 2 cents now lie on this wording -  This can create four possible situations. 
This line suggests "Application" is better than "Examination"

Otherwise these are very close choices, If I would have got this RC in thick of time,my first gut would be {D} and I would move on not realizing I did a mistake. Ticking on {C} here would be the Differentiator in getting V40 and V37 !!!

Can RC gurus throw some Big Light for seekers like us!!!

ankit0411 · Answer

I understand the difference, there is a very subtle shift of meaning between the two choices.

Even if we stick close to the scope of passage, it's really hard to differentiate.

anyone any thoughts on this ?

rajgurinder · Answer

Outline of Passage
p1
There are two types of purchases - direct and indirect.
In direct - already competitive scrutiny exists.
In indirect - it doesn't
Author says thats in appropriate . If there is competitive scrutiny , it might save some money to purchasers
Now he says which factors should be used while evaluating whether to apply the competitive scrutiny:- availability of alternatives and ease of
changing suppliers

P2
He discuss 4 situations that arise on application of these 2 factors.

q1 - Which of the following best describes the relation of
the second paragraph to the first?
Answer C - The second paragraph discusses the
application of a strategy proposed in the first
paragraph.

reason - see outline of passage above
also the line - There are two independent variables—availability of alternatives and ease of changing suppliers—t hat companies should use to
evaluate the feasibility  of subjecting suppliers of indirect purchases to competitive scrutiny.

q2 - Which of the following can be inferred about supplier
partnerships, as they are described in the passage?
answer B - They can result in purchasers paying more for goods and services than they would in a competitive-bidding situation.
Check line -  inappropriately shelter suppliers  from rigorous competitive scrutiny that might afford the purchaser economic leverage

q3 - According to the passage, which of the following factors distinguishes an indirect purchase from other purchases?
answer D - The relationship of the purchased item to the purchasing company’s end product
check line - First 2 lines of para 1..

Sujeet07 · Answer

In corporate purchasing, competitive scrutiny is typically limited to suppliers of items that are directly related to end products.   With “indirect” purchases (such as computers, advertising, and legal services),  which are not directly related to production , corporations often favor “supplier partnerships” (arrangements in which the purchaser forgoes the right to pursue alternative suppliers), which can inappropriately shelter suppliers from rigorous competitive scrutiny that might afford the purchaser economic leverage .  There are two independent variables—availability of alternatives and ease of changing suppliers—that companies should use to evaluate the feasibility of subjecting suppliers of indirect purchases to competitive scrutiny .  This can create four possible situations.

In Type 1   situations, there are many alternatives and change is relatively easy. Open pursuit of alternatives—by frequent competitive bidding, if possible—will likely yield the best results . In Type 2 situations,  where there are many alternatives but change is difficult—as for providers of employee health-care benefits—it is important to continuously test the market and use the results to secure concessions from existing suppliers. Alternatives provide a credible threat to suppliers, even if the ability to switch is constrained . In  Type 3  situations,  there are few alternatives, but the ability to switch without difficulty creates a threat that companies can use to negotiate concessions from existing suppliers . In  Type 4  situations,  where there are few alternatives and change is difficult, partnerships may be unavoidable .

P1 :- About Direct purchase. About indirect Purchase with strategy. 
P2 :- Possible situations and its description.

In paragraph 1 : Two variables - X & Y (Suppose) - use to evaluate the feasibility of subjecting suppliers.
In paragraph 2 : Four situation - how can these X & Y variable can be used to evaluate.
 Type X Y
 1 Many Easy
 2 Many Difficult
 3 Few Not Difficult
 4 Few Difficult
Above table is just summary of p2

Q35:Which of the following best describes the relation of the second paragraph to the first?
A. The second paragraph offers  proof of an assertion  made in the first paragraph.
B. The second paragraph provides an explanation for the occurrence of  a situation  described in the first paragraph.
C.  The second paragraph discusses the application of a strategy proposed in the first paragraph. 
D. The second paragraph examines  the scope of a problem  presented in the first paragraph.
E. The second paragraph discusses  the contradictions  inherent in a relationship described in the first paragraph.

"indirect purchase" mentioned in 1st para so need to read details about it.
IP - which are not directly related to production. and also for direct purchase it mentioned relationship between suppliers ans end products.

Q37:According to the passage, which of the following factors distinguishes an indirect purchase from other purchases?
* The ability of the purchasing company to subject potential suppliers of the purchased item to competitive scrutiny
* The number of suppliers of the purchased item available to the purchasing company
* The methods of negotiation that are available to the purchasing company
*  The relationship of the purchased item to the purchasing company's end product  (the only options match)
* The degree of importance of the purchased item in the purchasing company's business operations

Thanks,
Sujeet

Skywalker18 · Answer

Took 7 mins 20 seconds , including almost 3 mins to read . All correct

1. Which of the following best describes the relation of the second paragraph to the first?
"this can create 4 situations" is, in the transcription at hand, at the beginning of the second paragraph. it's not in the first paragraph.

the first paragraph consists of a bunch of background, about a certain business strategy. the second paragraph goes into the possible consequences of employing that strategy, but certainly does not "prove" anything stated in the first paragraph.

A. The second paragraph offers proof of an assertion made in the first paragraph. -- It does not prove anything stated in first paragraph
B. The second paragraph provides an explanation for the occurrence of a situation described in the first paragraph. -- Incorrect -- it does not provide any such explanation
C. The second paragraph discusses the application of a strategy proposed in the first paragraph. -- Correct
D. The second paragraph examines the scope of a problem presented in the first paragraph. -- Incorrect - Paragraph 1 does a fine job of defining the scope of the issue. Paragraph 2 compartmentalizes what has already been defined into specific strategies and when to apply them.
E. The second paragraph discusses the contradictions inherent in a relationship described in the first paragraph. -- Incorrect -- no contradictions are discussed

2. Which of the following can be inferred about supplier partnerships, as they are described in the passage?
 With “indirect” purchases (such as computers, advertising, and legal services), which are not directly related to production, corporations often favor “supplier partnerships” (arrangements in which the purchaser forgoes the right to pursue alternative suppliers),  which can inappropriately shelter suppliers from rigorous competitive scrutiny that might afford the purchaser economic leverage.

(A) They cannot be sustained unless the goods or services provided are available from a large number of suppliers. --Incorrect 
(B) They can result in purchasers paying more for goods and services than they would in a competitive-bidding situation. --Correct
(C) They typically are instituted at the urging of the supplier rather than the purchaser. -- Incorrect -- nowhere mentioned in passage
(D) They are not feasible when the goods or services provided are directly related to the purchasers' end products.-- Not necessarily -- it depends on the scenario
(E) They are least appropriate when the purchasers' ability to change suppliers is limited. -- Opposite -- they are most appropriate ..

3. According to the passage, which of the following factors distinguishes an indirect purchase from other purchases?
In corporate purchasing, competitive scrutiny is typically limited to suppliers of items that are directly related to end products. With “indirect” purchases (such as computers, advertising, and legal services), which are not directly related to production, corporations often favor “supplier partnerships”

(A) The ability of the purchasing company to subject potential suppliers of the purchased item to competitive scrutiny -- Incorrect -- companies favor supplier partnerships in case of indirect , but can still do if they want depending the cases
(B) The number of suppliers of the purchased item available to the purchasing company -- Incorrect
(C) The methods of negotiation that are available to the purchasing company -- Irrelevant
(D) The relationship of the purchased item to the purchasing company's end product -- Correct
(E) The degree of importance of the purchased item in the purchasing company's business operation -- Incorrect

Harsh2111s · Answer

Q2 E
Q4 E.

Whats wrong with these options ?

GMATNinja · Answer

Question 2 
Question 2 asks, "Which of the following can be inferred about supplier partnerships, as they are described in the passage?"

According to the passage, supplier partnerships are "arrangements in which the purchaser forgoes the right to pursue alternative suppliers."

So if firm A enters into supplier partnership with firm B, then firm A commits to purchasing agreed-upon supplies from firm B — and firm A cannot pursue those same supplies from any other firm.

After defining this term, the author spends all of paragraph 2 describing four situations and explaining how firms should think about supplier partnerships within each situation:

1. Many alternatives and change is relatively easy -> Open pursuit of alternatives will likely yield the best results.
2. Many alternatives but change is difficult -> Continuously test the market and use the results to secure concessions from existing suppliers.
3. Few alternatives but change is easy -> Negotiate concessions from existing suppliers.
4. Few alternatives and change is difficult -> Partnerships may be unavoidable.

Now, here's what Choice (E) says about supplier partnerships:

This does NOT match how the author breaks down purchasers' options in paragraph 2.

The breakdown of situations suggests that supplier partnerships are least appropriate in situation 1, where firm A has the most flexibility to dictate the terms of supply (e.g. through frequent competitive bidding).

Change is also easy in situation 3. But does this means that supplier partnerships are just as inappropriate here as they are in situation 1?

Nothing in the passage implies that. In situation 1, firm A has  practically no reason  to enter into a supplier partnership. But in situation 3, firm A has few choices for suppliers. Even if the author's advice for situation 3 is to negotiate concessions from those suppliers,  firm A has much less leverage in this situation . Consequently, it is logically more appropriate for firm A to consider a supplier partnership in situation 1 than in situation 3.

That's why we can eliminate choice (E).

Question 4 
This one asks, "It can be inferred that the author of the passage would be most likely to make which of the following recommendations to a company purchasing health care benefits for its employees?"

According to the passage, providers of employee health-care benefits fall into  situation 2 .

So let's revisit the author's own words for that situation. Here's the breakdown of situations and advice again, from paragraph 2:

1. Many alternatives and change is relatively easy -> Open pursuit of alternatives will likely yield the best results.
 2. Many alternatives but change is difficult ->  Continuously test the market and use the results to secure concessions from existing suppliers.  
3. Few alternatives but change is easy -> Negotiate concessions from existing suppliers.
4. Few alternatives and change is difficult -> Partnerships may be unavoidable.

Now, choice (E) says that the author would likely recommend the following:

This absolutely does NOT line up with the passage. In situation 2, the author does NOT recommend forming a partnership. That action would contradict the author's recommendation to "continuously test the market and use the results to secure concession," and that's why we eliminate (E).

This error is especially clear when comparing (E) to choice (C), which is a spot-on match for how the author uses health-care benefit providers to illustrate situation 2:

I hope this helps!

noellee · Answer

hi experts~
there is a sentence in this passage:"With “indirect” purchases (such as computers, advertising, and legal services), which are not directly related to production, corporations often favor “supplier partnerships” (arrangements in which the purchaser forgoes the right to pursue alternative suppliers), which can inappropriately shelter suppliers from rigorous competitive scrutiny that might afford the purchaser economic leverage. " i can understand its meaning except for this word"afford"…i am not a native speaker, so anyone can help me about this ? i just can understand that "I could never afford to buy a new house."

GMATNinja · Answer

That sentence is a doozy!

Another definition of "afford" is "to supply or provide." For example, you could say that "the sinking of the Titanic  afforded  Rose the opportunity to fake her own death and assume an alternate identity."

Here, "supplier partnerships"  afford  (or provide) economic leverage to suppliers. This is because these partnerships are somewhat hidden from view, and so suppliers don't have to face competitive scrutiny that would come with a different type of agreement.

I hope that helps!

zoezhuyan · Answer

dear  AndrewN ,and other experts: DavidTutorexamPAL 
 GMATNinja ,  GMATNinjaTwo ,  VeritasKarishma ,  AnthonyRitz ,  CJAnish ,  MartyTargetTestPrep , 
 VeritasPrepBrian , fiftyoneverbal 
 GMATRockstar 
 HowdyPartner

1. Which of the following best describes the relation of the second paragraph to the first?

(A) The second paragraph offers proof of an assertion made in the first paragraph. 
(B) The second paragraph provides an explanation for the occurrence of a situation described in the first paragraph. 
(C) The second paragraph discusses the application of a strategy proposed in the first paragraph. 
(D) The second paragraph examines the scope of a problem presented in the first paragraph. 
(E) The second paragraph discusses the contradictions inherent in a relationship described in the first paragraph.

I am struggling with B and C of this question : I picked up B because I thought P2 is the more details of the 4 types mentioned in P1, so I thought this is explanation of 4 types in P1. also, I cannot understand the application in C, for me , application is something that tells you how to use the 4 types in different circumstances.

I recognized i frequently missed this kind of questions. I must have some reasoning bug or I haven't master the skills of this kind questions, would you please point out the test points behind this kind questions?

thanks in advance

GMATNinja · Answer

There are a couple different things that are important to remember with this question. The first is the particulars of the question. In this instance, the question is asking for the relation of the two  paragraphs . This means we have to identify the purpose of each  paragraph . And the next thing to remember is that we have to be diligent in our process of elimination. We need to find reasons to eliminate answers and not talk ourselves into answers.

With that in mind, let’s take a look at (B):

The problem is that the first paragraph does not describe a situation. It describes a corporate purchasing strategy, namely competitive scrutiny with “indirect” purchases. Moreover, the second paragraph doesn’t explain an occurrence. It talks about how competitive scrutiny can/cannot be applied in four different situations. For those reasons, we can eliminate (B).

And here’s (C):

As we identified above, the strategy discussed in the first paragraph is competitive scrutiny with “indirect” purchases. The second paragraph then describes how the competitive scrutiny can/cannot be applied in four different situations. This is exactly what is detailed in (C). “To apply” means to put into practice. And the second paragraph discusses how competitive scrutiny with “indirect” purchases can be put into practice. So, (C) is the best answer choice.

One other note on these questions: as we did above, it can be helpful to break down each part of an answer choice. For example, with (B), what exactly is the explanation in the second paragraph? Or with (C), what is the strategy proposed in the first paragraph? Being precise with the answer choices can make it much easier to eliminate incorrect options.

I hope that helps!

shivangiindore · Answer

3) According to the passage, which of the following factors distinguishes an indirect purchase from other purchases?

(A) The ability of the purchasing company to subject potential suppliers of the purchased item to competitive scrutiny
(B) The number of suppliers of the purchased item available to the purchasing company
(C) The methods of negotiation that are available to the purchasing company
(D) The relationship of the purchased item to the purchasing company's end product
(E) The degree of importance of the purchased item in the purchasing company's business operation
In this ques, why is option A wrong? CAn someone please clarify

GMATNinja · Answer

Question 3

The author discusses direct and indirect purchases at the beginning of the first paragraph:

"In corporate purchasing, competitive scrutiny is typically limited to suppliers of items that are  directly  related to end products. With  “indirect”  purchases , which are not directly related to production, corporations often favor “supplier partnerships”   , which can inappropriately shelter suppliers from rigorous competitive scrutiny that might afford the purchaser economic leverage. "

Here, the author points out a couple of differences between direct and indirect purchases:

1) Direct purchases are directly related to end products, while indirect purchases are not
2) Direct purchases are  "typically"  subjected to competitive scrutiny, while indirect purchases are  "often"  not subjected to this scrutiny.

After giving these contrasts, the author discusses whether it would be feasible to subject suppliers to competitive scrutiny. In some situations it is more feasible than in other situations.

Does (A) express a factor that differentiates indirect purchases from direct ones?
 
The key word here is "ability." We learned in the first sentence of the passage that indirect purchases are "often" not subjected to competitive scrutiny, but does that mean that companies are  unable  to subject them to this scrutiny. In fact, the rest of the passage goes on to outline some cases in which it IS feasible to subject indirect prices to competitive scrutiny.

Clearly, companies DO have an ability to subject some indirect purchases to indirect scrutiny. And we know that they ALREADY do this for direct purchases. So, this factor does NOT differentiate direct purchases from indirect purchases.

(A) is out for question 3.

Compare that with (D):
 
Yup, this is the first contrast between direct and indirect products mentioned by the author.

(D) is the correct answer to question 3.

I hope that helps!

woohoo921 · Answer

For question 510 (which of the following can be inferred about supplier partnerships, as they are described in the passage?), where in the text is choice A disproved? Is it disproved by Type 1 situations in that they can be sustained when there are many alternatives and change??is easy?

For question 511 (which of the following best describes the relation of the second paragraph to the first), the Official Guide says that Choice E is incorrect, as "the second paragraph does not focus exclusively on situations that involve a supplier partnership." From my understanding, the second paragraph??DOES exclusively focus on exploring supplier partnerships. Any clarifying insights would be greatly appreciated.??

For question 513 (which of the following is one difference between Type 2 situations and Type 4 situations, as they are described in the passage?) What does the author mean by Choice B? Is this choice saying they differ in seeing which way is most effective to go about getting competitive bids?

Many thanks

GMATNinja · Answer

Question 2 
 
Question 2 asks what we can infer about supplier partnerships.

Here's (A):
 
Do supplier partnerships REQUIRE a large number of suppliers, as indicated by (A)?

Nope. In fact, supplier partnerships are LESS likely to survive with more suppliers. After all, if there are a whole bunch of choices, why would companies limit themselves by partnering with just one supplier? They shouldn't, as explained in the Type 1 scenario.

Question 1 
 
The explanations on the OG books are not written by the same people who write the questions -- so you can take them with a grain of salt.

(E) is out for question 1 because the second paragraph doesn't point out any contradictions. It just explores four different situations that can help companies decide how to subject suppliers to competition.

Question 5 
 
Question 5 asks us about the difference between Type 2 and Type 4 situations. Here's (B):
 
For (B) to be correct, the passage would have to tell us how the purchaser gets competitive bids in Type 2 situations AND in Type 4 situations. In addition, these approaches to getting competitive bids would have to be different.

The passage DOES tell us how purchasers can get competitive offers in Type 2 situations -- they should "continuously test the market and use the results to secure concessions from existing suppliers." However, the passage never tells us how purchasers can get competitive offers in Type 4 situations. Instead, the author kind of gives up on the idea of competition, saying only that "partnerships may be unavoidable."

Because the author doesn't provide an approach to get competitive bids in Type 4 situations, we can eliminate (B).

I hope that helps!

Tanchat · Answer

Dear experts,

Could you pls elaborate the correct choice in Q1 and Q4?
I can eliminate the wrong choices but I don't actually understand the correct choices.

Q1
1. Which of the following best describes the relation of the second paragraph to the first?

(C) The second paragraph discusses the application of a strategy proposed in the first paragraph.

What are the application and the strategy here?

Q4
4. It can be inferred that the author of the passage would be most likely to make which of the following recommendations to a company purchasing health care benefits for its employees?

(C) Obtain bids from other providers of health care benefits in order to be in a position to negotiate a better deal with the current provider.

<Actually, I am not sure (A) and (C)> but I choose (C) because if I were the manager or person-in-charge, I would do (C)... I does make much sense.. but I have found no where in the passage. How can we infer (C)?

RonTargetTestPrep · Answer

The strategy in the first paragraph is 
 “supplier partnerships” (arrangements in which the purchaser forgoes the right to pursue alternative suppliers)

In other words, the  strategy  is for buyers (companies buying wholesale) to form  exclusive partnerships with  suppliers. The comment in parentheses notes something that's true for all exclusive partnerships: They ELIMINATE  potential competition between/among suppliers for the buyer's business .

Next sentence:
 There are two independent variables—availability of alternatives and ease of changing suppliers—that companies should use to evaluate the feasibility of  subjecting suppliers  of indirect purchases  to competitive scrutiny .

This pink thing is the same as the pink thing above. It's the OPPOSITE of " the strategy ".

Let's color-code the second paragraph in the same two ways (for " the strategy " and  its opposite ):

In Type 1 situations, there are many alternatives and change is relatively easy.  Open pursuit of alternatives—by frequent competitive bidding, if possible —will likely yield the best results. In Type 2 situations, where there are many alternatives but change is difficult—as for providers of employee health-care benefits—it is important to continuously  test the market  and  use the results to secure concessions   ]   from existing suppliers. Alternatives provide a credible threat to suppliers, even if the ability to switch is constrained. In Type 3 situations, there are few alternatives, but  the ability to switch without difficulty  creates  a threat that companies can use to negotiate concessions  from existing suppliers. In Type 4 situations, where there are few alternatives and change is difficult,  partnerships may be unavoidable

So the whole second paragraph is "The strategy makes sense HERE but its opposite makes sense THERE"—in other words, specific applications of the strategy and its opposite.

RonTargetTestPrep · Answer

It's clear which part of the text is relevant here, because the entire green search term is reproduced almost verbatim:
 In Type 2 situations —as for  providers of employee health-care benefits —it is important to    continuously test the market and use the results to secure concessions from existing suppliers   .

So, we want whichever answer choice says basically    this   .

Obtain bids from other providers of health care benefits  = "test the market"
 in order to be in a position to negotiate a better deal with the current provider  = "use the results to secure concessions from existing suppliers"

This is definitely the choice we want.

What did you like about choice A? Not only does choice A fail to match the block of text that's plainly the relevant part here (above), but, in fact, I don't see any text matching choice A anywhere.

In corporate purchasing, competitive scrutiny is typically limited to

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GMAT Reading Comprehension (RC) Questions

In corporate purchasing, competitive scrutiny is typically limited to

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