In the early 1970s, a new system of organizing the grow- ing

Question

In the early 1970s, a new system of organizing the grow-
ing acquisitions of corporations was introduced. Called the
growth/share matrix, this tool seemed to operate on the
most logical of assumptions: Corporations should sell off
 (5)  their losing divisions as determined by the divisions’
positions on the matrix, and retain and increase those 
divisions that the matrix considered successful.

According to the  Harvard Business Review , the Boston
Consulting Group (BCG) introduced the matrix in response
 (10)  to corporations that had entered the heyday of acquisition
and diversification of the 1960s and early 1970s, and subse-
quently faltered with the energy crisis of 1973. The matrix
worked by ordering each division according to its position
within its industry overall. Thus, managers had a tool for un-

(15)  derstanding the relative success of those businesses with
whose fields they were unfamiliar. Enthusiasm over the
matrix and its simplicity and apparent logic obscured one of
the problems inherent in the initial situation: the wide range
of acquisitions these corporations had purchased.

(20)  The matrix evaluated the performance of the divisions in
terms of their competitiveness within their fields and their
cash value, but failed to analyze the relationships among di-
visions that made up a corporation's holdings. For instance,
a corporation that owned a newspaper chain and a paper
 (25)  mill would be advised to consider more than just the 
relation of the paper mill's performance to that of other mills.
Beyond this, the matrix underestimated the amount of debt
a corporation could safely assume. And finally, the matrix
was unable to provide information regarding the corporation's
 (30)  ability to manage even those successes identified by
the matrix.

Simply having a number of separately competitively suc-
cessful companies does not ensure that companies will be
able to support their owners without proper management
 (35)  and understanding. Despite the clarity and effectiveness of
the growth/share matrix as a tool for determining divisions’
performance, it could not long compensate for the difficul-
ties present in the initial situation it sought to alleviate: that
of corporations believing that their particular management
 (40)  styles would function effectively for any type of smaller
business they might acquire.   1  
 1. Which of the following best describes the main idea of the passage?

A. The growth/share matrix was a failure as an acquisition research tool, and hurt many corporations.
B. The growth/share matrix, though eagerly embraced at first, could not completely solve the problems it sought to address.
C. Corporations that acquire holdings that are both overly diversified and unrelated will not succeed in the business world.
D. Management style should be of primary concern when a corporation is deciding which divisions to retain and which to divest.
E. No one corporate tool can ever compensate for a lack of management skills and well-thought-out acquisition planning.

2  
 2. According to the passage, all of the following were problems associated with corporations’ reliance on the growth/share matrix EXCEPT

A. the overestimation by the matrix of the negative effect that debt might have on a corporation.
B. not considering divisions’ relation to one another within each corporation’s holdings.
C. the failure of the matrix to compensate for the lack of knowledge the corporations had about their own holdings.
D. the matrix’s inability to correctly order divisions within their overall industries.
E. the matrix’s lack of focus on a corporation’s ability to manage its acquisitions.

3  
 3. It can be inferred from the passage that the author suggests which of the following concerning some corporations during the energy crisis of 1973?

A. The troubles of these corporations were related to problems of conforming their management styles to their new holdings.
B. Lack of fuel led many companies to have trouble powering their acquisitions.
C. Corporations’ reliance on the growth/share matrix led them to mismanage their holdings.
D. Overenthusiastic buying of smaller companies left many corporations unwieldy and difficult to manage.
E. Too little diversification forced companies to find a tool to estimate the relative success of companies with whose fields they were unfamiliar.

4  
 4. It can be inferred from the passage that the original intention of the growth/share matrix was to

A. indicate which smaller companies were successes and thus good buys for corporations
B. counter the chaos of the heyday of acquisition and diversification of the 1960s and 1970s
C. inform parent companies which of their holdings were doing well in relation to their own fields
D. present companies with a way to counter the faltering of their successes during the energy crisis of 1973
E. alleviate the problems associated with corporations’ underestimation of the amount of debt they could acquire

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satyakota · Answer

Q1- B- Explanation-
Enthusiasm over the matrix and its simplicity and apparent logic obscured one of the problems inherent in the initial situation: the wide range of acquisitions these corporations had purchased.-> This statement shows that people liked the matrix at first but then the subsequent paragraph starts undermining it and brings out the drawbacks
Q2- D - Explanation
The matrix's failure to analyse the relationship among divisions is described but not about ordering the divisions within their overall industries.

Q3- A-

Management thought they had a tool to understand the business they were not aware of but the last para clarifies that the management style to the new holdings was the drawback of the matrix.

Sajjad1994 · Answer

Official Explanation

3. It can be inferred from the passage that the author suggests which of the following concerning some corporations during the energy crisis of 1973?

Explanation

Read closely around the words energy crisis of 1973. Remember that the credited response must be a paraphrase. Refer to the passage if you need to.

A.   Yes.  This is stated in the final sentence of the passage.

B.  No. This answer choice confuses two notions of  “powering.”

C.  No. Mismanagement due to the growth/share matrix and the matrix itself came into play only after 1973.

D.  This is never specifically related to the energy crisis of 1973.

E.  No. The problem was not one of the lack of diversification, but rather too much.

Answer: A

Hope it helps

Sajjad1994 · Answer

Official Explanation

2. According to the passage, all of the following were problems associated with corporations’ reliance on the growth/share matrix EXCEPT

Explanation

Since this is an EXCEPT question, keep in mind that four answer choices address the question, and the fifth one, which does not, is the credited response. This question also applies to the passage as a whole, so use each answer choice as your lead words.

A No.  Negative debt was discussed in the second paragraph of the passage.

B No.  Divisions’ relations to each other were also discussed in the  second paragraph.

C No.  Lack of knowledge was addressed at the end of the first paragraph:  “managers had a tool for understanding the relative success of those businesses with whose fields they were unfamiliar.”

D Yes.   “Inability to correctly order division”  was never mentioned as a problem in the passage, and so is a good answer for an EXCEPT question.

E No.  This is summarized in the last sentence of the passage.

Answer: D

naveenpatil1121 · Answer

Hi , I have a question regarding your explanation for option C which says
C. the failure of the matrix to compensate for the lack of knowledge the corporations had about their own holdings.

from passage, The matrix worked by ordering each division according to its position within its industry overall. 
Thus, managers had a tool for understanding the relative success of those businesses with whose fields they were unfamiliar

Basically the passage is saying people now understood if business A is successful (business A being a business they dont know), so IT IS compensating for their lack of knowledge right?
it is a problem that the matrix is solving. How is it failing to do so as in option C?

Sajjad1994 · Answer

No! the passage is not saying that, the passage actually highlights the failure of the growth/share matrix to provide information about the corporation's ability to manage even those divisions it identified as successful. In other words, the matrix did not compensate for the lack of knowledge that corporations had about their own holdings, particularly when it came to their ability to manage their acquisitions effectively. This is discussed in  lines 27-35  of the passage:  "And finally, the matrix was unable to provide information regarding the corporation's ability to manage even those successes identified by the matrix."

So,  option C  is a valid problem associated with the growth/share matrix, and it is mentioned in the passage as one of the limitations of the matrix.

Sajjad1994 · Answer

Explanation

4. It can be inferred from the passage that the original intention of the growth/share matrix was to

Explanation

A)  This option suggests that the original intention of the growth/share matrix was to identify successful smaller companies that would be good acquisitions for corporations. It implies that the matrix was designed to help corporations make strategic decisions about which divisions or companies to acquire. While the matrix did assess the performance of divisions, it didn't necessarily focus on identifying smaller companies for acquisitions. Instead, it evaluated the performance of existing divisions within a corporation.

B)  This option implies that the matrix was introduced to address the chaotic nature of the acquisition and diversification trends of the 1960s and 1970s. While it is true that the matrix was introduced in response to the rapid acquisition and diversification during that time, its primary purpose was not to counter chaos but to evaluate the performance of existing divisions within corporations and help with decision-making regarding those divisions.

C)  This option accurately reflects the main purpose of the growth/share matrix, as discussed in the passage. The matrix was introduced to help parent companies assess the performance of their various divisions and determine which ones were considered successful, especially in relation to their respective industries or fields.

D)  This option suggests that the matrix was introduced to help companies respond to the challenges of the energy crisis of 1973. While the passage does mention the energy crisis as a backdrop for the introduction of the matrix, the primary purpose of the matrix was to evaluate division performance and identify successes rather than directly countering the effects of the crisis.

E)  This option implies that the matrix was introduced to address issues related to corporations' debt management and their underestimation of debt limits. The passage does mention that the matrix underestimated the amount of debt corporations could safely assume, but this was not the primary focus or intention behind the matrix's introduction. Its primary goal was to assess division performance.

In light of the passage's emphasis,  option C  is the correct choice, as it aligns with the stated purpose of the growth/share matrix.

Answer: C

WeakSteel · Answer

4. It can be inferred from the passage that the original intention of the growth/share matrix was to

A. indicate which smaller companies were successes and thus good buys for corporations
B. counter the chaos of the heyday of acquisition and diversification of the 1960s and 1970s
C. inform parent companies which of their holdings were doing well in relation to their own fields
D. present companies with a way to counter the faltering of their successes during the energy crisis of 1973
E. alleviate the problems associated with corporations??? underestimation of the amount of debt they could acquire

In this question Why ans. is C ?
Plz explain this question

guddo · Answer

4. It can be inferred from the passage that the original intention of the growth/share matrix was to

The passage says the matrix was created to help corporations evaluate many different acquired divisions. It ordered each division according to its position within its own industry, so managers could understand businesses in fields they did not know well.  The original purpose  was therefore to show parent companies how each holding was performing  relative to its own industry .

(A) indicate which smaller companies were successes and thus good buys for corporations

This is incorrect. The matrix was not originally meant to identify outside companies to buy. It was meant to evaluate divisions corporations already owned.

(B) counter the chaos of the heyday of acquisition and diversification of the 1960s and 1970s

This is too broad. The matrix was introduced in response to that situation, but its specific function was to evaluate the performance of divisions.

(C) inform parent companies which of their holdings were doing well in relation to their own fields

This is correct. The passage says the matrix ordered each division according to its position within its industry, helping managers understand the relative success of businesses in unfamiliar fields.

(D) present companies with a way to counter the faltering of their successes during the energy crisis of 1973

This is not precise. The energy crisis is part of the background, but the matrix was not specifically about fixing the energy crisis. It was about evaluating corporate divisions.

(E) alleviate the problems associated with corporations’ underestimation of the amount of debt they could acquire

This is incorrect. The passage says the matrix itself underestimated how much debt a corporation could safely assume. That was a weakness, not the original intention.

Answer: (C)

TheAdmissionHub · Answer

Paragraph 1:  Introduces the  growth/share matrix  and explains its basic purpose: helping corporations decide which divisions to keep and which to sell.  
 
  Paragraph 2:  Explains  why the matrix was created , how it worked, and why companies initially found it appealing.  
 
  Paragraph 3:  Describes the  limitations of the matrix , showing that it ignored relationships between divisions, underestimated debt, and overlooked management ability.  
 
  Paragraph 4:  Presents the  author's conclusion : although the matrix was useful for evaluating performance, it could not solve the broader management problems caused by corporate acquisitions and diversification.

1. Which of the following best describes the main idea of the passage? 
 A.  The growth/share matrix  was a failure as an acquisition research tool, and hurt many corporations. 
 INCORRECT : The passage never states that the growth/share matrix was a complete failure or that it harmed many corporations. Instead, the author acknowledges that it was a clear and effective tool for evaluating divisions, but argues  that it could not solve  all the problems associated with corporate acquisitions. EXTREME, DOSN’T REFLECT HE WORDING

B . The growth/share matrix, though eagerly embraced at first, could not completely solve the problems it sought to address.
 CORRECT:  The author explains that the growth/share matrix was initially welcomed because of its simplicity and apparent logic. However, the passage goes on to describe its limitations, noting that it ignored relationships among divisions, underestimated debt, and failed to account for management ability. The conclusion emphasizes that, despite its usefulness, the matrix could not fully solve the problems it was designed to address.

C.  Corporations that acquire holdings that are both overly diversified and unrelated  will not succeed in the business world. 
 INCORRECT:  The passage suggests that excessive and unrelated diversification can create problems, but it does not claim that such corporations are destined to fail. Instead, the author argues that the matrix was unable to evaluate the complexities created by these acquisitions. EXTREME,DORSN’T MATCH THE WORDING

D. Management style should be of primary concern when a corporation is deciding which divisions to retain and which to divest.
 INCORRECT:  Although the passage stresses the importance of management ability, this is presented as only one limitation of the growth/share matrix. The main focus of the passage is the matrix's overall inability to address all the challenges of corporate acquisitions, not that management should be the primary consideration.

E. No one corporate tool can ever compensate for a lack of management skills and well-thought-out acquisition planning.
 INCORRECT:  The passage concludes that the growth/share matrix could not compensate for poor management or flawed acquisition strategies. However, the author does not extend this claim to all corporate tools.  This choice is therefore too broad and generalizes beyond what the passage states .

2. According to the passage, all of the following were problems associated with corporations’ reliance on the growth/share matrix EXCEPT 
 A.  the overestimation by the matrix of the negative effect that debt might have on a corporation.
 INCORRECT:  The passage actually states the opposite. It says that the matrix underestimated the amount of debt a corporation could safely assume (lines 27–29). Although this choice misstates the direction of the error, it still refers to the passage's discussion of debt as one of the matrix's limitations.

B . not considering divisions’ relation to one another within each corporation’s holdings.
 INCORRECT:  The author explicitly states that the matrix evaluated divisions individually but failed to analyze the relationships among the divisions within a corporation (lines 20–27). This is presented as one of its major weaknesses.

C . the failure of the matrix to compensate for the lack of knowledge the corporations had about their own holdings.
 INCORRECT:  The passage concludes that the matrix could not compensate for the broader management problems and lack of understanding that corporations had about the businesses they acquired (lines 33–40). This is one of the reasons the matrix could not fully solve the problems it was designed to address.

D.  the matrix’s inability to correctly order divisions within their overall industries.
 CORRECT:  The passage states that the matrix did order each division according to its position within its industry (lines 13–17). The author never suggests that it was unable to do this correctly.  Instead, the criticism is that this evaluation alone was insufficient. 
 E.  the matrix’s lack of focus on a corporation’s ability to manage its acquisitions.

INCORRECT:  The passage explicitly states that the matrix could not provide information about a corporation's ability to manage even its successful divisions (lines 29–35). This is identified as one of the matrix's limitations.

It can be inferred from the passage that the author suggests which of the following concerning some corporations during the energy crisis of 1973? 
 A . The troubles of these corporations were related to problems of conforming their management styles to their new holdings.
 CORRECT:  The passage concludes that the underlying problem was corporations' belief that their management styles would work equally well for any business they acquired (lines 38–40). Since the matrix could not solve this problem, it can be inferred that these management issues contributed to the corporations' difficulties during the 1973 energy crisis.

B.  Lack of fuel led many companies to have trouble powering their acquisitions.
 INCORRECT:  Although the passage mentions the  energy crisis  of 1973, it never suggests that fuel shortages physically affected the corporations' acquisitions. The energy crisis is mentioned only as the period during which many diversified corporations began to struggle. BE CAREFUL ABOUT THE MEANING

C . Corporations’ reliance on the growth/share matrix led them to mismanage their holdings.
 INCORRECT:  The passage does not claim that reliance on the matrix  caused  mismanagement. Instead, it argues that the matrix  could not compensate  for existing management weaknesses and therefore could not solve the corporations' underlying problems.  IT WAS NOT THE CAUSE

D.  Overenthusiastic buying of smaller companies left many corporations unwieldy and difficult to manage.
 INCORRECT : The passage explains that corporations acquired many diverse businesses and later experienced difficulties, but it does not state that the acquisitions themselves made the corporations unwieldy. Rather, the problem was the assumption that the same management style would work across all acquired businesses . It was not the cause

E . Too little diversification forced companies to find a tool to estimate the relative success of companies with whose fields they were unfamiliar.
 INCORRECT:   The passage states the opposite . The growth/share matrix was introduced because corporations had entered a period of extensive acquisition and diversification, not because they lacked diversification.

4. It can be inferred from the passage that the original intention of the growth/share matrix was to

A.  indicate which smaller companies were successes and thus good buys for corporations.
 INCORRECT:  The passage explains that the growth/share matrix was designed to evaluate divisions that corporations already owned, not to identify which companies would be good acquisition targets.

B.  counter the chaos of the heyday of acquisition and diversification of the 1960s and 1970s.
 INCORRECT:  The passage states that the matrix was introduced in response to corporations' rapid acquisition and diversification, but its purpose was not simply to "counter the chaos." Rather, it was intended to help managers evaluate the performance of their existing divisions.

C.  inform parent companies which of their holdings were doing well in relation to their own fields.
 CORRECT:  The passage explains that the matrix ordered each division according to its position within its industry, giving managers a way to understand the relative success of businesses whose fields were unfamiliar to them (lines 13–17 ). This was its original purpose.

D . present companies with a way to counter the faltering of their successes during the energy crisis of 1973.
 INCORRECT:  Although the matrix was introduced after corporations began to falter during the 1973 energy crisis, the passage does not say it was intended to reverse those struggles. Instead, it was meant to evaluate the performance of corporate divisions.  SO be careful because information are mentioned, but some of them they are details and don’t represent teh main focus.

E.  alleviate the problems associated with corporations’ underestimation of the amount of debt they could acquire.
 INCORRECT:  The passage identifies the matrix's underestimation of safe debt levels  as one of its limitations, not as the problem it was originally designed to solve.

egmat · Answer

Hi WeakSteel,

This one turns on a single line, so let's anchor right there. Lines  13 - 16  tell us exactly what the matrix was  built to do :

"The matrix worked by ordering each division according to its position within its industry overall. Thus, managers had a tool for  understanding the relative success of those businesses with whose fields they were unfamiliar ."

That is the matrix's original intention: to let a parent company see how well each division it  already owned  was doing compared with rivals in that division's own industry. Choice  C  - "inform parent companies which of their holdings were doing well in relation to their own fields" - is just a plain paraphrase of that sentence. "Holdings" = the divisions they own; "in relation to their own fields" = position within its industry.

Why the others miss

A  talks about "smaller companies... good buys." That's about deciding what to  purchase . But the matrix evaluated divisions the corporation  already held , not shopping targets. Out of scope.

B  ("counter the chaos") and  D  ("counter the faltering during the energy crisis") both describe the  backdrop  that led BCG to create the matrix (lines  8 - 12 ). That's  why the situation arose , not what the tool itself was designed to do. The question asks for the matrix's intention, not the historical setting.

E  (debt underestimation) is one of the matrix's  shortcomings  listed in paragraph  2 , not its purpose. That's the opposite of an "intention."

The trap here is mixing up three different things the passage mentions: the  circumstances  that prompted the matrix (B, D), its  flaws  (E), and its actual  job  (C). The stem asks only for the job - so send yourself back to "managers had a tool for understanding the relative success..." and pick the choice that restates it. That's C.

Answer: C

ShadeNet · Answer

IMO, option 1 : has extreme word like failure which is not said. Incorrect
2; Yes, the matrix can't solve the problem fully as it can only tell good divisions but has various limitation
3. This again nowhere stated that overly diversified and unrelated will not succeed. Incorrect
4. management is imp but its imp for the business which are successful and need to maintain the success. Incorrect
5. again nowhere stated

so 2 is the only options we are left with

In the early 1970s, a new system of organizing the grow- ing

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GMAT Reading Comprehension (RC) Questions

In the early 1970s, a new system of organizing the grow- ing

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