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Modern manufacturers, who need reliable sources of materials and techn

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Modern manufacturers, who need reliable sources of materials and techn  [#permalink]

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New post 24 Sep 2014, 04:56
Question 1
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55% (02:46) correct 45% (03:07) wrong

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Modern manufacturers, who need reliable sources of materials and technologically advanced components to operate profitably, face an increasingly difficult choice between owning the producers of these items (a practice known as backward integration) and buying from independent producers. Manufacturers who integrate may reap short-term rewards, but they often restrict their future capacity for innovative product development.

Backward integration removes the need for some purchasing and marketing functions, centralizes overhead, and permits manufacturers to eliminate duplicated efforts in research and development. Where components are commodities (ferrous metals or petroleum, for example), backward integration almost certainly boosts profits. Nevertheless, because product innovation means adopting the most technologically advanced and cost-effective ways of making components, backward integration may entail a serious risk for a technologically active company - for example, a producer of sophisticated consumer electronics.

A company that decides to make rather than buy important parts can lock itself into an outdated technology. Independent suppliers may be unwilling to share innovations with assemblers with whom they are competing. Moreover, when an assembler sets out to master the technology of producing advanced components, the resulting demands on its resources may compromise its ability to assemble these components successfully into end products. Long-term contracts with suppliers can achieve many of the same cost benefits as backward integration without compromising a company's ability to innovate.

However, moving away from backward integration is not a complete solution either. Developing innovative technologies requires independent suppliers of components to invest huge sums in research and development. The resulting low profit margins on the sale of components threaten the long-term financial stability of these firms. Because the ability of end-product assemblers to respond to market opportunities depends heavily on suppliers of components, assemblers are often forced to integrate by purchasing the suppliers of components just to keep their suppliers in business.
Question:
Which of the following best describes the way the last paragraph functions in the context of the passage?

A. The last in a series of arguments supporting the central argument of the passage is presented.

B. A viewpoint is presented which qualifies one presented earlier in the passage.

C. Evidence is presented in support of the argument developed in the preceding paragraph.

D. Questions arising from the earlier discussion are identified as points of departure for further study of the topic.

E. A specific example is presented to illustrate the main elements of the argument presented in the earlier paragraphs.

OA:



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Re: Modern manufacturers, who need reliable sources of materials and techn  [#permalink]

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New post 24 Sep 2014, 04:59
Bunuel wrote:

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Modern manufacturers, who need reliable sources of materials and technologically advanced components to operate profitably, face an increasingly difficult choice between owning the producers of these items (a practice known as backward integration) and buying from independent producers. Manufacturers who integrate may reap short-term rewards, but they often restrict their future capacity for innovative product development.

Backward integration removes the need for some purchasing and marketing functions, centralizes overhead, and permits manufacturers to eliminate duplicated efforts in research and development. Where components are commodities (ferrous metals or petroleum, for example), backward integration almost certainly boosts profits. Nevertheless, because product innovation means adopting the most technologically advanced and cost-effective ways of making components, backward integration may entail a serious risk for a technologically active company - for example, a producer of sophisticated consumer electronics.

A company that decides to make rather than buy important parts can lock itself into an outdated technology. Independent suppliers may be unwilling to share innovations with assemblers with whom they are competing. Moreover, when an assembler sets out to master the technology of producing advanced components, the resulting demands on its resources may compromise its ability to assemble these components successfully into end products. Long-term contracts with suppliers can achieve many of the same cost benefits as backward integration without compromising a company's ability to innovate.

However, moving away from backward integration is not a complete solution either. Developing innovative technologies requires independent suppliers of components to invest huge sums in research and development. The resulting low profit margins on the sale of components threaten the long-term financial stability of these firms. Because the ability of end-product assemblers to respond to market opportunities depends heavily on suppliers of components, assemblers are often forced to integrate by purchasing the suppliers of components just to keep their suppliers in business.
Question:
Which of the following best describes the way the last paragraph functions in the context of the passage?

A. The last in a series of arguments supporting the central argument of the passage is presented.

B. A viewpoint is presented which qualifies one presented earlier in the passage.

C. Evidence is presented in support of the argument developed in the preceding paragraph.

D. Questions arising from the earlier discussion are identified as points of departure for further study of the topic.

E. A specific example is presented to illustrate the main elements of the argument presented in the earlier paragraphs.

OA:



This question asks you to choose the statement that best describes the function of the last paragraph of the passage. The best answer is B. At the end of the third paragraph, the author indicates that assemblers benefit from contracting with, rather than owning, independent suppliers. In the last paragraph however, the author indicates that contracting with independent suppliers can itself present problems. Thus the last paragraph qualifies the viewpoint presented at the end of the third paragraph. Choice A is not the correct answer because the passage makes several points about backward integration, but does not present a central argument about this topic. Choice C is not the correct answer because the final paragraph qualifies rather than supports an argument made in the third paragraph about contracting with independent suppliers. Choices D and E are incorrect because the final paragraph does not identify questions or present a specific example.
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Collection of Questions:
PS: 1. Tough and Tricky questions; 2. Hard questions; 3. Hard questions part 2; 4. Standard deviation; 5. Tough Problem Solving Questions With Solutions; 6. Probability and Combinations Questions With Solutions; 7 Tough and tricky exponents and roots questions; 8 12 Easy Pieces (or not?); 9 Bakers' Dozen; 10 Algebra set. ,11 Mixed Questions, 12 Fresh Meat

DS: 1. DS tough questions; 2. DS tough questions part 2; 3. DS tough questions part 3; 4. DS Standard deviation; 5. Inequalities; 6. 700+ GMAT Data Sufficiency Questions With Explanations; 7 Tough and tricky exponents and roots questions; 8 The Discreet Charm of the DS; 9 Devil's Dozen!!!; 10 Number Properties set., 11 New DS set.


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Re: Modern manufacturers, who need reliable sources of materials and techn  [#permalink]

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New post 25 Oct 2018, 01:30
Bunuel, or anyone,

what does 'to qualify' mean in this particular case?
thanks.

Quote:
B. A viewpoint is presented which qualifies one presented earlier in the passage.

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Re: Modern manufacturers, who need reliable sources of materials and techn  [#permalink]

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New post Updated on: 25 Oct 2018, 20:16
GMATNinja workout broall Gnpth
What actually " owning the producers " mean here can you please explain ?

Originally posted by teaserbae on 25 Oct 2018, 19:51.
Last edited by teaserbae on 25 Oct 2018, 20:16, edited 1 time in total.
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Re: Modern manufacturers, who need reliable sources of materials and techn  [#permalink]

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New post 25 Oct 2018, 23:19
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teaserbae wrote:
GMATNinja workout broall Gnpth
What actually " owning the producers " mean here can you please explain ?


I think it's about vertical acquisition. A company gains control over another company that operates within the same supply chain to mitigate expenditures.
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Re: Modern manufacturers, who need reliable sources of materials and techn  [#permalink]

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New post 03 Nov 2018, 09:06
teaserbae wrote:
GMATNinja workout broall Gnpth
What actually " owning the producers " mean here can you please explain ?

Kaczet has pointed out another common phrase in the business world used to describe this type of arrangement (thanks!).

But to make this incredibly simple: owning the producers means literally owning the companies that produce. It's as simple as that. And if you own the companies that produce, then you don't have to negotiate contracts to purchase the components produced by those companies. Everything produced is already property of your company. I hope this helps clarify!
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Re: Modern manufacturers, who need reliable sources of materials and techn &nbs [#permalink] 03 Nov 2018, 09:06
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