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In corporate purchasing, competitive scrutiny is typically limited to

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In corporate purchasing, competitive scrutiny is typically limited to  [#permalink]

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GMAT® Official Guide 2019

Practice Question
Question No.:
Online test bank question number : RC00394-02 ~ RC00394-06

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.


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.



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.



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



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.



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


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Originally posted by ankit0411 on 30 Sep 2012, 01:19.
Last edited by hazelnut on 27 Jun 2018, 17:35, edited 3 times in total.
Edited the question. Added Q4 & Q5.
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Re: In corporate purchasing, competitive scrutiny is typically limited to  [#permalink]

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GMAT® Official Guide 2019

Practice Question
Question No.:
Online test bank question number : RC00394-02 ~ RC00394-06

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:




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:



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:




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:


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:

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Re: In corporate purchasing, competitive scrutiny is typically limited to  [#permalink]

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New post 30 Sep 2012, 07:22
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!!!
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Re: In corporate purchasing, competitive scrutiny is typically limited to  [#permalink]

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New post 30 Sep 2012, 07:25
2
methevoid wrote:
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!!!


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 ?
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Re: In corporate purchasing, competitive scrutiny is typically limited to  [#permalink]

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New post 31 May 2015, 09:18
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—that 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..
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Re: In corporate purchasing, competitive scrutiny is typically limited to  [#permalink]

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New post 26 Apr 2017, 02:26
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. InType 2situations, 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
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Re: In corporate purchasing, competitive scrutiny is typically limited to  [#permalink]

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New post 21 Oct 2017, 10:15
Sujeet07 wrote:
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. InType 2situations, 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



In Q-37, Why is "C" wrong?
The methods of negotiation that are available to the purchasing company:- indirect purchase-partnerships may be unavoidable & other purchases(means direct purchase)-frequent competitive bidding... Doesn't "c" fit here? Can somebody explain...
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Re: In corporate purchasing, competitive scrutiny is typically limited to  [#permalink]

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New post 24 Oct 2017, 07:30
1
maddy1234567890123 wrote:

In Q-37, Why is "C" wrong?
The methods of negotiation that are available to the purchasing company:- indirect purchase-partnerships may be unavoidable & other purchases(means direct purchase)-frequent competitive bidding... Doesn't "c" fit here? Can somebody explain...




Let me try to explain why C is wrong for Q37.

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


Task is to find what factor differentiate indirect purchase from other (direct) purchases? This is an inference question, hence we should be able to prove same in passage. As its mentioned in the passage highlighted below, basis is whether purchased item will be used for end products.

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.

Option C . Method of negotiation... is not mentioned in passage as a factor to differentiate between indirect purchase and other (direct) purchases.

Hint:
A real time scenario to make this passage easy: Think about a car manufacturing company, which purchases tires from suppliers. So tire supplier can be direct one.

Hope this helps :)
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Re: In corporate purchasing, competitive scrutiny is typically limited to  [#permalink]

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New post 10 Dec 2017, 02:20
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
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New post 19 Jul 2018, 04:40
ankit0411 wrote:
GMAT® Official Guide 2019

Practice Question
Question No.:
Online test bank question number : RC00394-02 ~ RC00394-06

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.

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.



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.



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



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.



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



Can anyone explain Q4.
I hope the below line is being used.
it is important to continuously test the market and use the results to secure concessions from existing supplier.
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New post 01 Aug 2018, 07:35
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. the second paragraph discusses hypothetical cases
(B) The second paragraph provides an explanation for the occurrence of a situation described in the first paragraph. the situation to which this choice likely refers to is one in which companies neglect to subject indirect product suppliers to comp. scrutiny. But the second para. talks about scenarios that would occur if the feasibility test was applied
(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. while neglecting to subject indirect product/service suppliers to competitive scrutiny may be a problem, the scenarios discussed in the paragraph are from the solution perspective
(E) The second paragraph discusses the contradictions inherent in a relationship described in the first paragraph. the information seems to to develop the idea discussed in the paragraph above

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. "“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"
(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. too strong: the partnership is not usually applied
(E) They are least appropriate when the purchasers' ability to change suppliers is limited. superficial word matches, since 'supplier partnership' does not even fit in to possible scenarios after subjecting the supplier to comp. scrutiny test

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 if anything, it's the other way around: you subject the supplier comp. scrutiny if the item is related to the production
(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 " items that are directly related to end products. With “indirect” purchases <...>, which are not directly related to production" - correct
(E) The degree of importance of the purchased item in the purchasing company's business operation

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. too hard to switch the supplier
(B) Obtain health care benefits from a provider that also provides other indirect products and services. superficial word matches
(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. "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" - correct
(D) Switch providers of health care benefits whenever a different provider offers a more competitive price. the switch is too difficult in this scenario
(E) Acknowledge the difficulties involved in replacing the current provider of health care benefits and offer to form a partnership with the provider. it's stated that in this case, the company should leverage the market prices and negotiate a better deal
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New post 01 Aug 2018, 18:21
HI GMATNinja , mikemcgarry , egmat , sayantanc2k, RonPurewal , DmitryFarber , MagooshExpert (Carolyn), ccooley , GMATNinjaTwo , SarahPurewal , EMPOWERgmatVerbal

Can you please help me with below questions

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


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
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Re: In corporate purchasing, competitive scrutiny is typically limited to  [#permalink]

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New post 01 Aug 2018, 23:44
NandishSS wrote:
HI GMATNinja , mikemcgarry , egmat , sayantanc2k, RonPurewal , DmitryFarber , MagooshExpert (Carolyn), ccooley , GMATNinjaTwo , SarahPurewal , EMPOWERgmatVerbal

Can you please help me with below questions

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


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


Q3 : It's in the first few lines of the first paragraph
"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"

Q5 : 2nd paragraph
Type 2 : where there are many alternatives but change is difficult
Type 4 : few alternatives and change is difficult
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New post 02 Aug 2018, 18:12
1
EMPOWERgmatVerbal Thank you for detailed analysis...
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Re: In corporate purchasing, competitive scrutiny is typically limited to &nbs [#permalink] 02 Aug 2018, 18:12
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