Paragraph 1) In corporate purchasing, competitive scrutiny

Paragraph 1) In corporate purchasing,
competitive scrutiny is typically
limited to suppliers of items that are
directly related to end products.
(5) With “indirect” purchases (such as
computers, advertising, and legal
services), which are not directly
related to production, corporations
often favor “supplier partnerships”
(10) (arrangements in which the
purchaser forgoes the right to
pursue alternative suppliers), which
can inappropriately shelter suppliers
from rigorous competitive scrutiny
(15) that might afford the purchaser
economic leverage. There are two
independent variables—availability
of alternatives and ease of changing
suppliers—that companies should
(20) use to evaluate the feasibility of
subjecting suppliers of indirect
purchases to competitive scrutiny.
This can create four possible
situations.


(25) In Type 1 situations, there are
many alternatives and change is
relatively easy. Open pursuit of
alternatives—by frequent com-
petitive bidding, if possible—will
(30) 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
(35) 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
(40) the ability to switch is constrained.
In Type 3 situations, there ate few
alternatives, but the ability to switch
without difficulty creates a threat that
companies can use to negotiate
(45) concessions from existing suppliers.
In Type 4 situations, where there
are few alternatives and change
is difficult, partnerships may be
unavoidable.

Q35:
Which of the following best describes the relation of the second paragraph to the first?
•The second paragraph offers proof of an assertion made in the first paragraph.
•The second paragraph provides an explanation for the occurrence of a situation described in the first paragraph.
•The second paragraph discusses the application of a strategy proposed in the first paragraph.
•The second paragraph examines the scope of a problem presented in the first paragraph.
•The second paragraph discusses the contradictions inherent in a relationship described in the first paragraph.
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Q36:
Which of the following can be inferred about supplier partnerships, as they are described in the passage?
•They cannot be sustained unless the goods or services provided are available from a large number of suppliers.
•They can result in purchasers paying more for goods and services than they would in a competitive-bidding situation.
•They typically are instituted at the urging of the supplier rather than the purchaser.
•They are not feasible when the goods or services provided are directly related to the purchasers’ end products.
•They are least appropriate when the purchasers’ ability to change suppliers is limited.
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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 degree of importance of the purchased item in the purchasing company’s business operations