Hi Karishma,

Doesn't C act as a defender to eliminate the possible exploitation of a potential opportunity by the independent supplier?
I mean, how could this choice be Out of Scope? It is mentioned about PROFITS in the conclusion. But Revenues affect Profits too. The company might loose revenue if the independent supplier uses the company product's knowledge to use against it in the market by competing directly with it. Please help me on this.

exactly my point is the same as Saiganesh999

kindly help to explain this point... thanks

Premise: Outsourcing is the practice of obtaining from an independent supplier a product or service that a company has previously provided for itself.

Premise: Vernon, Inc, a small manufacturing company that has in recent years experienced a decline in its profits, plans to boost its profits by outsourcing those parts of its business that independent suppliers can provide at a lower cost than Vernon can itself.

Which of the following, if true, most strongly supports the prediction that Vernon's plan will achieve its goal?

Basically the first premise tells use the definition of outsourcing then shares with us an example of Vernon, which saw decline in profits and then turned to outsourcing to do that business turnaround. There’s not really the author’s conclusion but the one Vernon has: which is outsourcing —> lower cost —> boost profits. We are tasked to find out what will support the fact that the plan will do just that…. maybe if we know that outsourcing won’t affect our product quality? Or the actually cost of outsourcing compared to our current? Etc.

(A) Among the parts of its business that Vernon does not plan to outsource are some that require standards of accuracy too high for most independent suppliers to provide at a lower cost than Vernon can.
This discusses other parts of the business “not plan[ned] to [be] outsource[d]” so why do we care. How does knowing what’s not outsourced affect how we boost profit from outsourcing? No.

(B) Vernon itself acts as an independent supplier of specialised hardware items to certain manufacturers that formerly made those items themselves.
So what if Vernon was a supplier to certain manufacturer? Does this mean that outsourcing won’t improve their profits? No.


(C) Relatively few manufacturers that start as independent suppliers have been able to expand their business and become direct competitors of the companies they once supplied.
OK, this is telling us that few manufacturers have been successfulling at expanding business. Does expanding business = boosting profit? Maybe. Not certainly though. The second half is not relevant.

(D) Vernon plans to select the independent suppliers it will use on the basis of submitted bids.
Maybe. If Vernon can attest to the bidding, they can control the cost of the supplies….but does that ensure that profits will be boosted? No. Maybe it will stay the same because the bids are the same. HOW Vernon selects suppliers has 0 effect on profit.

(E) Attending to certain tasks that Vernon performs relatively inefficiently has taken up much of the time and effort of top managers whose time would have been better spent attending to Vernon's core business.
OK, so we have inefficient business models to fix….and if time is saved —> we save money.
_________________

E is true of course, outsourcing is a great tool widely used in business nowadays, because the costs of development, training the employees, and post production, with all the experience needed for success is too big sometimes, especially when products may become irrelevant in a short time and the company may rake up losses. I work in a team of devs and we take outsource projects and depending on the outsourcing cost, they can save more than 50% of the cost if they had their own team, and that's excluding all the time to search competent workers that are competent in these positions, all the training and such. Outsource comes with a risk as well, that's true, but business is a risk itself.

Option e accurately mentions why the profits will be boosted

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Plan: Vernon has experienced a decline in profits and plans to boost profits by outsourcing parts of its business that other people can do more cheaply.

How do you boost profits? You increase revenues or decrease costs.

a) this is just adding additional info about parts of the business Vernon is not going to outsource. The answer doesn’t say anything about whether the plan to outsource parts of its business will help boost profits.

b) great that Vernon is a supplier, but again, says nothing about Vernon’s plan to outsource parts of its business.

c) this talks about moving from supplier to competing with those you supply; this is interesting, but says nothing about the proposed plan.

d) this talks about how it’s going to choose suppliers, but again, says nothing about whether it will boost profits.

e) interesting. this suggests managers are spending time inefficiently. If we take those managers, focus on the core business, and outsource these inefficient parts, we may in fact cut costs and thereby boost profits.

GMATNinja

I picked C

Doesnt the fact that there will be relatively few competiters as a result of outsourcing a way to strengthen the argument?

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If C is not true and the suppliers Vernon finds can potentially become competitors - that would definitely harm its goal of increasing its profits. Thus, it supports the argument when C is TRUE - only few competitors would take Vernon's market share.

As for E - the OA, Vernon wants to increase its profit, but E states that outsourcing could merely give managers more time and efforts to work on something else - which NOT NECESSARILY can be transferred to profit generation!! Can we really put a equal sign between "manager working more on core business" and "greater profits" ??

C - Losing businesses to your suppliers is common and can be dangerous - it surely will harm the profits. Please convince me otherwise.

prediction : chances ; no need to be 100% confirmed truth or false
Vernon's plan will achieve its goal: what goal? goal to boost its profits by outsourcing those parts of its business that independent suppliers can provide at a lower cost than Vernon can itself.



If relatively few become direct competitors it may harm. True
Harm or not harm : it does not matter to our scope of discussion. Our scope of discussion is GOAL.
We are leaping one step further in future instead of discussing increasing profits at first that are currently falling . It is more sever issue at hand to discuss
So , C is irrelevant option for this argument.


Too much critical information pointing in the right direction.
Inefficiently: lose of time, efforts of resources
top managers: manager who are critical to direct the company or business
core business: it is more critical to focus your energy on something useful that can bring more ROI rather than something that can be handled by low level employees or outsourcing company
These highlighted words point in the direction that PROBABLY V can achieve its goal. Probably means chances.
We need to find out PREDICTION in the question.
All words hand in hand without leaving any gap with option E
Hence, E is the right answer.

Hope you are convinced.

Esshhhh,

It’s never wise to argue with an official question. It is absolutely pointless and you gain nothing.

But are we sure this is an official question?

Someone posted a weird official explanation maybe as a joke. If there exists an official explanation I would love to see it

Edit: now I see the question that this is linked to. There is a good chance that this is not an official question. Until an official explanation for this exact question is posted (and not a link to a “similar” official question that makes perfect logical sense), I might be a little wary about following this question.


Edit edit: What is “IvyGMAT”?
Where is my friend AndrewN

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Good catch, Fdambro294. I doubt this question ever existed in the OG 10, as it is labeled, since its sister question has multiple sources (OGs from different years) and is more logically sound. Furthermore, I agree that the OE provided by avohden on page 1 does not connect to the question at hand, although there are some similarities. Until someone with an old OG can confirm that this iteration of the question appeared therein, we can only wonder.

As for Ivy GMAT, I came across this old thread in which two people have some not-so-positive things to say about the materials the company used. Make of this what you will.

- Andrew

Thanks 🙏

I was wary about the exact words of answer E. The most helpful community reply says it best.


I’m not on a mission to find every error in every posted question lol. Recently, I have broadened my search to include more questions.

When you have become accustomed to the logical patterns and “style” of the official questions, you start to get a sense when something seems a little off.

Since I am not an expert, I decided to call one in . Thank you for replying!

I guess for me ... having more competitors is not so much of a leap to "losing market share" - lose profits. That can have a more straightforward consequence than having more efficient leadership. Corporate bureaucracy (although being efficient) may not always lead to profits.

Another side note, I've probably seen multiple questions regarding supporting/weakening someone's idea of boosting profits - the answer would rarely be related to efficient management. I thought GMAC has sortof implied that the two are not necessarily correlated in many occasions.

Check the official question that is linked at the bottom of the question. In an attempt to make the official question harder, it appears that someone changed the passage and answer choices just enough to leave open a few logical holes.

In a way, I’m in agreement with you. We aren’t really supplied any actual evidence that the inefficient management discussed in answer E is related to the business the company is outsourcing.

I wouldn’t rely too much on this question. We are not even sure whether it is an official question (but I’m not an expert).



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If we can eliminate a potential issue that would undermine or weaken the conclusion, I believe we can add support to the conclusion.

In this manner, C is not as unrelated to the argument as it seems when you first read it.

If manufacturers were able to become direct competitors of the company they once supplied, this action would make it less likely that outsourcing would lead to increased profits.

However, the issue with C is again the exact wording. “A few” can mean 2 companies or 3 companies or more.


Does showing that relatively few companies can later become direct competitors strengthen the support for the argument that outsourcing will lead to increased profits? Possibly....but there a few minor assumptions that we would need to add to the answer.


Answer E tells us that these managers could better spend their time working on the core business. If the parts of the business the managers work on in an inefficient manner can be outsourced to allow them to work on the core business, then this would add support to the conclusion.

Again though, there are a few minor assumptions that would have to be made.

Arguably, you could say either provides anywhere from “a little” to “some” support for the argument.

When it comes down to it, which is the better answer? I believe it is E. Answer E seems to tie in “better” with the flow of the argument and the logic.


But, considering the way the answers are written, the question appears to be unofficial from a questionable source: not a GMAC written question as the headline states.

I could be wrong.....

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After reading the argument, one of the possible gaps is that the suppliers may become direct competitors and affect the profits.
Option C indicates that very few suppliers turn into direct competitors. Hence strengthens the argument.

On what basis is the option rejected hence?

I don’t quite agree that A is out of scope. If you’re going to outsource based on costs a function where quality and precision matters, the company will lose out. We need the assumption of A to ensure that it’s not going to happen.

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