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# Since the late 1970 s, in the face of a severe loss of

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Intern
Joined: 06 Apr 2011
Posts: 17
Since the late 1970 s, in the face of a severe loss of  [#permalink]

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19 Jun 2012, 02:12
2
Question 1
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75% (03:12) correct 25% (01:24) wrong

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Question 2
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Question 3
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Question 5
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Question 6
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50% (00:44) correct 50% (01:17) wrong

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Question 7
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20% (00:43) correct 80% (00:43) wrong

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Since the late 1970’s, in the face of a severe loss of market share in dozens of industries, manufacturers in the United States have been trying to improve productivity—and therefore enhance their international competitiveness—through cost-cutting programs. (Cost-cutting here is defined as raising labor output while holding the amount of labor constant.) However, from 1978 through 1982, productivity—the value of goods manufactured divided by the amount of labor input—did not improve; and while the results were better in the business upturn of the three years following, they ran 25 percent lower than productivity improvements during earlier, post-1945 upturns. At the same time, it became clear that the harder manufactures worked to implement cost-cutting, the more they lost their competitive edge.

With this paradox in mind, I recently visited 25 companies; it became clear to me that the cost-cutting approach to increasing productivity is fundamentally flawed. Manufacturing regularly observes a “40, 40, 20” rule. Roughly 40 percent of any manufacturing-based competitive advantage derives from long-term changes in manufacturing structure (decisions about the number, size, location, and capacity of facilities) and in approaches to materials. Another 40 percent comes from major changes in equipment and process technology. The final 20 percent rests on implementing conventional cost-cutting. This rule does not imply that cost-cutting should not be tried. The well-known tools of this approach—including simplifying jobs and retraining employees to work smarter, not harder—do produce results. But the tools quickly reach the limits of what they can contribute.

Another problem is that the cost-cutting approach hinders innovation and discourages creative people. As Abernathy’s study of automobile manufacturers has shown, an industry can easily become prisoner of its own investments in cost-cutting techniques, reducing its ability to develop new products. And managers under pressure to maximize cost-cutting will resist innovation because they know that more fundamental changes in processes or systems will wreak havoc with the results on which they are measured. Production managers have always seen their job as one of minimizing costs and maximizing output. This dimension of performance has until recently sufficed as a basis of evaluation, but it has created a penny-pinching, mechanistic culture in most factories that has kept away creative managers.

Every company I know that has freed itself from the paradox has done so, in part, by developing and implementing a manufacturing strategy. Such a strategy focuses on the manufacturing structure and on equipment and process technology. In one company a manufacturing strategy that allowed different areas of the factory to specialize in different markets replaced the conventional cost-cutting approach; within three years the company regained its competitive advantage. Together with such strategies, successful companies are also encouraging managers to focus on a wider set of objectives besides cutting costs. There is hope for manufacturing, but it clearly rests on a different way of managing.
1. The author of the passage is primarily concerned with
(A) summarizing a thesis
(B) recommending a different approach
(C) comparing points of view
(D) making a series of predictions
(E) describing a number of paradoxes

2. It can be inferred from the passage that the manufacturers mentioned in line 2 expected that the measures they implemented would
(A) encourage innovation
(B) keep labor output constant
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives

3. The primary function of the first paragraph of the passage is to
(A) outline in brief the author’s argument
(B) anticipate challenges to the prescriptions that follow
(C) clarify some disputed definitions of economic terms
(D) summarize a number of long-accepted explanations
(E) present a historical context for the author’s observations

4. The author refers to Abernathy’s study (line 36) most probably in order to
(A) qualify an observation about one rule governing manufacturing
(C) support an earlier assertion about one method of increasing productivity
(D) suggest the centrality in the United States economy of a particular manufacturing industry
(E) given an example of research that has questioned the wisdom of revising a manufacturing strategy

5. The author’s attitude toward the culture in most factories is best described as
(A) cautious
(B) critical
(C) disinterested
(D) respectful

6. In the passage, the author includes all of the following EXCEPT
(A) personal observation
(C) a definition of productivity
(D) an example of a successful company
(E) an illustration of a process technology

7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is
(A) flawed and ruinous
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(E) misunderstood but promising

Need Explaination..............
Manager
Joined: 25 Jun 2012
Posts: 55

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19 Jun 2012, 21:16
1. The author of the passage is primarily concerned with
(A) summarizing a thesis
(B) recommending a different approach - The overall aim of the passage is to encourage companies to shy away from traditional cost-cutting measures.
(C) comparing points of view
(D) making a series of predictions
(E) describing a number of paradoxes

2. It can be inferred from the passage that the manufacturers mentioned in line 2 expected that the measures they implemented would
(A) encourage innovation
(B) keep labor output constant
(C) increase their competitive advantage - Ideally, I would look for an answer along the lines of "improve productivity" or "increase labour output while keeping amount of labour constant". In the absence of such a response, this would be what I would pick.
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives

3. The primary function of the first paragraph of the passage is to
(A) outline in brief the author’s argument
(B) anticipate challenges to the prescriptions that follow
(C) clarify some disputed definitions of economic terms
(D) summarize a number of long-accepted explanations
(E) present a historical context for the author’s observations - The first paragraph gives a brief background of the situation, which eventually ties into the author's arguments and observations.

4. The author refers to Abernathy’s study (line 36) most probably in order to
(A) qualify an observation about one rule governing manufacturing
(C) support an earlier assertion about one method of increasing productivity - Here, the "one method" is cost-cutting. The assertion, meanwhile, is that cost-cutting hinders innovation. Abernathy's study supports the assertion.
(D) suggest the centrality in the United States economy of a particular manufacturing industry
(E) given an example of research that has questioned the wisdom of revising a manufacturing strategy

5. The author’s attitude toward the culture in most factories is best described as
(A) cautious
(B) critical - This question appears to test vocabulary more than anything else. None of the other responses make any sense as an answer to this question, so one only needs to know the meaning of these words to answer the question.
(C) disinterested
(D) respectful

6. In the passage, the author includes all of the following EXCEPT
(A) personal observation
(C) a definition of productivity
(D) an example of a successful company
(E) an illustration of a process technology - Answers A to D can all be found within the passage. E, however, does not appear to be present.

7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is
(A) flawed and ruinous
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate - To me, this one's a bit of a hard fight. A and B could reasonably be seen as acceptable responses; however, I feel that they do not quite fit the tone of the passage as well as D does. The author notes that cost-cutting does provide some results, but that it is limited in its ability to improve competitiveness. This makes D, in my opinion, the most suitable answer.
(E) misunderstood but promising
Senior Manager
Joined: 13 Jan 2012
Posts: 282
Weight: 170lbs
GMAT 1: 740 Q48 V42
GMAT 2: 760 Q50 V42
WE: Analyst (Other)

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19 Jun 2012, 22:52
1
My shorthand notes:

Paragraph #1:
- US manufacturers have been losing market share since 70's
- To gain market share, they're trying to improve productivity through cost-cutting
- However, not working, and fact it seems counterproductive

Paragraph #2:
- Author visited 25 companies to get sense of the paradox mentioned in P1
- Finds cost-cutting approach is flawed
- 40/40/20 rule explains manufacturing. cost-cutting is only 20% of puzzle

Paragraph #3:
- Also, cost-cutting slows down innovation
- Shown in Abernathy's study
- Creative managers stay away b/c of focus on cost-cutting

Pargraph #4:
- US companies that escape cost-cuttign paradox develop fuller strategy
- This strategy uses other 80% of puzzle (manuf. structure and equip. and process tech.)
- example: focus on a niche
- Cost-cutting works only when it's just part of the strategy

1) B - taking the notes ingrained this one
2) C - just glance at the sentence. answer is clear.
3) A or E after quick glance at the paragraph summary. Glance back up at the paragraph and noticed the many dates mentioned. Let's go with E.
4) A or C seem best from notes. This is the trickiest problem thus far. Fortunately, our notes actually make this simple. The answer is C as the observation is that cost-cutting slows down innovation. The study supports that assertion.
5) B - taking the notes ingrained this one
6) B or E from reading the passage. I think E as 40/40/20 is a business principle.
7) D - totally D; very much ingrained from taking the notes
Manager
Joined: 07 Nov 2009
Posts: 242

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21 Jun 2012, 02:24
Manager
Joined: 19 Apr 2011
Posts: 190
Schools: Booth,NUS,St.Gallon

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21 Jun 2012, 05:56
BCABBDA
someone please post the OA 's
_________________

+1 if you like my explanation .Thanks

Manager
Joined: 10 Sep 2015
Posts: 71
Location: India
Concentration: Finance, Human Resources
GMAT 1: 640 Q47 V31
GPA: 4
Since the late 1970 s, in the face of a severe loss of  [#permalink]

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12 May 2018, 02:58
Hi GMATNinja
Could you please explain ques 3,4 and 5?
Since the late 1970 s, in the face of a severe loss of &nbs [#permalink] 12 May 2018, 02:58
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