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Panda Corporation is a large American manufacurer of

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Panda Corporation is a large American manufacurer of [#permalink]

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New post 09 Oct 2011, 00:39
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Panda Corporation is a large American manufacurer of children's clothing that has recently undertaken sharp measures to remain competitive in todays global market. In response to offshore pricing pressures, Panda Corporation laid off over 500 employees, reducing operational expenses by 18%. Since clothing manufacturers realize a one percentage point increase in sales margins for every five percentage point decrease in operational expenses, the Board of directors is satisfied that these measures will ensure Panda Corporation's long-term sustainability.

Based on the passage, which of the following, if true, would most weaken Board's stance?

A. Panda corporations main competitor is also an American manufacturer.
B. Panda corporations main competitor is based in China.
C. The largest manufacturer of children's clothes in China has just reduced its operational expenses by 15%
D. US consumers do not want to buy clothes manufactured offshore.
E. A large US manufacturer of childeren's clothes plans to relocate its operations to China.
[Reveal] Spoiler: OA

Last edited by Mahmud6 on 22 Nov 2017, 21:49, edited 1 time in total.
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New post 09 Oct 2011, 01:19
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I pick C.

The offshore manufacturer ( a Chinese corp ) has also reduced the operational expenses by a similar percentage. Such a move will aggravate the pricing pressure to American manufacturers, beyond the compensatory action.

Last edited by DexDee on 09 Oct 2011, 04:02, edited 1 time in total.

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New post 13 Nov 2011, 21:25
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C

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New post 13 Nov 2011, 23:24
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+1 for C.

Crick

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Re: Panda Corporation is a large American manufacurer of [#permalink]

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New post 14 Nov 2011, 04:17
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straight C
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Re: Panda Corporation is a large American manufacurer of [#permalink]

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prashantbacchewar wrote:
Panda Corporation is a large American manufacurer of children's clothing that has recently undertaken sharp measures to remain competitive in todays global market. In response to offshore pricing pressures, Panda Corporation laid off over 500 employees, reducing operational expenses by 18%. Since clothing manufacturers realize a one percentage point increase in sales margins for every five percentage point decrease in operational expenses, the Board of directors is satisfied that these measures will ensure Panda Corporation's long-term sustainability.
.


based on bold lines, what's wrong with D, if consumers do not buy cloths manufactured offshore, it will decrease sales, since sales and operational expenses are proportional, No matter what % of operational expenses is reduced,if sales is not increasing then sustainability of corporation can be questioned.
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Re: Panda Corporation is a large American manufacurer of [#permalink]

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Hello from the GMAT Club VerbalBot!

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Re: Panda Corporation is a large American manufacurer of [#permalink]

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shrive555 wrote:
prashantbacchewar wrote:
Panda Corporation is a large American manufacurer of children's clothing that has recently undertaken sharp measures to remain competitive in todays global market. In response to offshore pricing pressures, Panda Corporation laid off over 500 employees, reducing operational expenses by 18%. Since clothing manufacturers realize a one percentage point increase in sales margins for every five percentage point decrease in operational expenses, the Board of directors is satisfied that these measures will ensure Panda Corporation's long-term sustainability.
.


based on bold lines, what's wrong with D, if consumers do not buy cloths manufactured offshore, it will decrease sales, since sales and operational expenses are proportional, No matter what % of operational expenses is reduced,if sales is not increasing then sustainability of corporation can be questioned.





I'll take a stab at explaining how I reached C as the final answer.

Panda Corporation is a large American manufacurer of children's clothing that has recently undertaken sharp measures to remain competitive in todays global market. In response to offshore pricing pressures, Panda Corporation laid off over 500 employees, reducing operational expenses by 18%. Since clothing manufacturers realize a one percentage point increase in sales margins for every five percentage point decrease in operational expenses, the Board of directors is satisfied that these measures will ensure Panda Corporation's long-term sustainability.

I understood the stimulus like so: Panda Corp is an American company that wants to stay competitve in the global market. PC believes the best course would be to cut operational costs. The board cuts operational costs by 18%-- knowing that every 5% cut corresponds with a 1% increase in sales. So basically they are expecting a 3%+ increase in sales.(margin = revenue - cost)

This is a weaken question - so we are looking for an answer that best attacks the stimulus.

Based on the passgae, which of the following, if true, would most weaken Board's stance?
A. Panda corporations main competitor is also an American manufacturer. Even if so, doesn't weaken or strenghten the argument whatsoever.
B. Panda corporations main competitor is based in China. Same as above. Doesn't deal with any questions why their plan will not work.
C. The largest manufacturer of children's clothes in China has just reduced its operational expenses by 15% Correct. PC was reducing its operational costs to keep up with other markets-- if other markets-whom are presumably doing better than PC cut operational costs even more, then PC is back where they started and thus not competitive.
D. US consumers do not want to buy clothes manufactured offshore. Tempting because it seems to imply that the sales will not show an increase, but this is wrong because it assumes that the primary market for PC is in America. Because we do not know how their sales are measured--besides in comparison with other markets, we cannot choose D.
E. A large US manufacturer of childerens clothes plans to relocate is operations to China. Completely out of scope.

Kudos if this helped! :)

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Re: Panda Corporation is a large American manufacurer of [#permalink]

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New post 20 Mar 2015, 06:11
Hello from the GMAT Club VerbalBot!

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Re: Panda Corporation is a large American manufacurer of [#permalink]

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New post 15 Oct 2016, 14:36
TAL010 wrote:
shrive555 wrote:
prashantbacchewar wrote:
Panda Corporation is a large American manufacurer of children's clothing that has recently undertaken sharp measures to remain competitive in todays global market. In response to offshore pricing pressures, Panda Corporation laid off over 500 employees, reducing operational expenses by 18%. Since clothing manufacturers realize a one percentage point increase in sales margins for every five percentage point decrease in operational expenses, the Board of directors is satisfied that these measures will ensure Panda Corporation's long-term sustainability.
.


based on bold lines, what's wrong with D, if consumers do not buy cloths manufactured offshore, it will decrease sales, since sales and operational expenses are proportional, No matter what % of operational expenses is reduced,if sales is not increasing then sustainability of corporation can be questioned.




Lets go
I'll take a stab at explaining how I reached C as the final answer.

Panda Corporation is a large American manufacurer of children's clothing that has recently undertaken sharp measures to remain competitive in todays global market. In response to offshore pricing pressures, Panda Corporation laid off over 500 employees, reducing operational expenses by 18%. Since clothing manufacturers realize a one percentage point increase in sales margins for every five percentage point decrease in operational expenses, the Board of directors is satisfied that these measures will ensure Panda Corporation's long-term sustainability.

I understood the stimulus like so: Panda Corp is an American company that wants to stay competitve in the global market. PC believes the best course would be to cut operational costs. The board cuts operational costs by 18%-- knowing that every 5% cut corresponds with a 1% increase in sales. So basically they are expecting a 3%+ increase in sales.(margin = revenue - cost)

This is a weaken question - so we are looking for an answer that best attacks the stimulus.

Based on the passgae, which of the following, if true, would most weaken Board's stance?
A. Panda corporations main competitor is also an American manufacturer. Even if so, doesn't weaken or strenghten the argument whatsoever.
B. Panda corporations main competitor is based in China. Same as above. Doesn't deal with any questions why their plan will not work.
C. The largest manufacturer of children's clothes in China has just reduced its operational expenses by 15% Correct. PC was reducing its operational costs to keep up with other markets-- if other markets-whom are presumably doing better than PC cut operational costs even more, then PC is back where they started and thus not competitive.
D. US consumers do not want to buy clothes manufactured offshore. Tempting because it seems to imply that the sales will not show an increase, but this is wrong because it assumes that the primary market for PC is in America. Because we do not know how their sales are measured--besides in comparison with other markets, we cannot choose D.
E. A large US manufacturer of childerens clothes plans to relocate is operations to China. Completely out of scope.

Kudos if this helped! :)


with the same logic, but where does it mentioned that Chinese company has got market in US or the chinese largest manufacturing company is equivalent to that of US.It could be that chinese is much much smaller compared to that of US. Secondly there could be other largest market in Europe or in India where US company clothes can be sold.

I don't think this question atleast is valid for GMAT just by comparing US companies with that of Chinese even though in reality it might be right.

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Re: Panda Corporation is a large American manufacurer of [#permalink]

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New post 21 Oct 2016, 09:24
ravikrishna1979

Please find the reply :-

Panda Corporation is a large American manufacurer of children's clothing that has recently undertaken sharp measures to remain competitive in Todays global market

Note the word "GLOBAL MARKET"

Today's global market here is implied as panda corporation's competition with a similar competitor in china.

so option c tells that :

The largest manufacturer of children's clothes in China has just reduced its operational expenses by 15%

This means that if the Chinese manufacturer employs a similar strategy as that of the panda corporation ,clearly sales margin of Chinese manufacturer will increase and hence the panda corporation cannot become more competitive globally.

Hope it makes sense.

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Re: Panda Corporation is a large American manufacurer of [#permalink]

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New post 28 Nov 2016, 03:33
How can a Global Clothes manufacturing company is affected by operational changes by a company in China, What if this "Global company" does not sell its products in China , and sells everywhere else apart from China. This question makes us assume that , the company in argument has a market in China, the information nowhere mentioned in the question. VeritasPrepKarishma can you please guide on this ?

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Re: Panda Corporation is a large American manufacurer of [#permalink]

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New post 09 Nov 2017, 04:51
jayantheinstein wrote:
ravikrishna1979

Please find the reply :-

Panda Corporation is a large American manufacurer of children's clothing that has recently undertaken sharp measures to remain competitive in Todays global market

Note the word "GLOBAL MARKET"

Today's global market here is implied as panda corporation's competition with a similar competitor in china.

so option c tells that :

The largest manufacturer of children's clothes in China has just reduced its operational expenses by 15%

This means that if the Chinese manufacturer employs a similar strategy as that of the panda corporation ,clearly sales margin of Chinese manufacturer will increase and hence the panda corporation cannot become more competitive globally.

Hope it makes sense.






ravikrishna1979

In addition to explanation above


Yes, partially your argument seems reasonable.

But, the reason why the company cut off their expenses is to keep their competitive advantage.


Therefore, C is better option.

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Re: Panda Corporation is a large American manufacurer of   [#permalink] 09 Nov 2017, 04:51
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