It is currently 20 Nov 2017, 06:57

### GMAT Club Daily Prep

#### Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# In corporate purchasing, competitive scrutiny is typically limited to

Author Message
TAGS:

### Hide Tags

Joined: 28 May 2012
Posts: 135

Kudos [?]: 74 [3], given: 11

Location: India
Concentration: General Management, Strategy
GPA: 3.33
WE: Information Technology (Retail)

### Show Tags

30 Sep 2012, 02:19
3
KUDOS
4
This post was
BOOKMARKED
Question 1
00:00

Question Stats:

53% (01:37) correct 47% (01:19) wrong based on 245

### HideShow timer Statistics

Question 2
00:00

Question Stats:

50% (00:38) correct 50% (00:35) wrong based on 240

### HideShow timer Statistics

Question 3
00:00

Question Stats:

57% (00:38) correct 43% (00:50) wrong based on 235

### HideShow timer Statistics

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.

[Reveal] Spoiler:
C

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.

[Reveal] Spoiler:
B

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.

[Reveal] Spoiler:
D

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

[Reveal] Spoiler: Question #1 OA
[Reveal] Spoiler: Question #2 OA
[Reveal] Spoiler: Question #3 OA

_________________

You want something, go get it . Period !

Last edited by hazelnut on 23 Sep 2017, 21:41, edited 1 time in total.
Edited the question.

Kudos [?]: 74 [3], given: 11

Manager
Status: Fighting again to Kill the GMAT devil
Joined: 02 Jun 2009
Posts: 135

Kudos [?]: 77 [0], given: 48

Location: New Delhi
WE 1: Oil and Gas - Engineering & Construction

### Show Tags

30 Sep 2012, 08:22
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!!!
_________________

Giving Kudos, is a great Way to Help the GC Community Kudos

Kudos [?]: 77 [0], given: 48

Joined: 28 May 2012
Posts: 135

Kudos [?]: 74 [2], given: 11

Location: India
Concentration: General Management, Strategy
GPA: 3.33
WE: Information Technology (Retail)

### Show Tags

30 Sep 2012, 08:25
2
KUDOS
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 ?
_________________

You want something, go get it . Period !

Kudos [?]: 74 [2], given: 11

Intern
Joined: 12 Feb 2013
Posts: 21

Kudos [?]: 6 [2], given: 7

### Show Tags

31 May 2015, 10:18
2
KUDOS
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..

Kudos [?]: 6 [2], given: 7

Intern
Joined: 02 Jan 2015
Posts: 9

Kudos [?]: [0], given: 45

### Show Tags

26 Apr 2017, 03:26
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.

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

Kudos [?]: [0], given: 45

Intern
Joined: 31 Jul 2017
Posts: 1

Kudos [?]: 0 [0], given: 0

### Show Tags

21 Oct 2017, 11:15
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.

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...

Kudos [?]: 0 [0], given: 0

Intern
Joined: 05 Mar 2017
Posts: 14

Kudos [?]: 1 [0], given: 177

### Show Tags

24 Oct 2017, 08:30
2
This post was
BOOKMARKED

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

Kudos [?]: 1 [0], given: 177

Re: In corporate purchasing, competitive scrutiny is typically limited to   [#permalink] 24 Oct 2017, 08:30
Display posts from previous: Sort by