Re: The fact that reducing price can generate a competitive advantage for
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18 Jan 2022, 22:59
Paraphrasing:
Para 1: Deciding factor of Price reduction by any organization to compete with competitors may or may not be effective
Par 2: example of software vendor, analysing will it, attract new customers by producing a new standard of price that would excite customers or by proving difficult for competitors to copy.
1. According to the passage, reduction in price is comparable
to improvement in service in terms of the
First of all, Eliminate B, and D, distraction,
Option B is one of the balancing factors, loss of price reduction, compensating by increased revenue.
Option D deals with insufficient analysis of particular product by manager – Irrelevant
(B) increased revenues that they ultimately produce
(D) insufficient analysis that managers devote to them
Eliminate Option E: degree of competitive advantage that they are likely to provide
Is Circle of concern, which cannot be balanced price reduction by circle of influence,
Eg. Today price reduction by XYZ to gain customer, another ABC can also reduce for same, and so shall go on
This is circle of concern
Between A, and C – as mentioned in passage,
1st line,” The fact that reducing price can generate a competitive advantage for a company
does not mean that every reduction in (price will create such an advantage)”
Intended meaning: it is not necessary all that benefits will connect in actual profit to compensate, price reduction, it has to be balanced well.
2nd line – “Price reduction, like improvement in service, (must be balanced against other types of efforts) on the basis of direct, tangible benefits such as increased revenues.”
Intended meaning: Price reduction must be balanced against other efforts direct or tangible
Last line of passage – “then reduction in price may not be effective, since price is not necessarily the deciding factor for any customer in any situation”
(A) tangibility of the benefits that they tend to confer
Option A, speaks more on Line 1, and line 2, which gives you understanding,
How Price reduction can be compensated or balanced or managed,
but fails to give you reason, does it really require?
As price reduction is one among the factors, which is required in service improvement,
Trap here is understanding need of - service improvement,
which is used to attract customer, not about managing the fund pockets of an organisation.
(C) basis on which they need to be weighed – Correct
2. The passage suggests which of the following about price charged
by an operating system software vendor
prior to its strategy in reducing its price?
Explanation: from para 2, we can infer about software vendor
1. failed to improve its competitive position
2. did not recognize the level of inconvenience by switching operating system
3. would fail to attract new customers by producing a new standard of price
(A) It was slightly low to that of the vendor's competitors
Wrong - Out of scope, not mentioned in the passage
(B) It threatened to weaken the vendor's competitive position
with respect to other operating system software vendor
Wrong - software vendor want to threaten by price reduction, not with other operating system
(C) It had already been reduced after having caused damage to the vendor's reputation in the past.
Wrong - Out of scope, not mentioned in the passage
(D) It enabled the vendor to retain customers at an acceptable rate
Correct: as mentioned in the passage, “This truth was not apparent to managers of one operating system software vendor, which failed to improve its competitive position despite its attempt to reduce price”
(E) It needed to be reduced to attain parity with the software provided by competing vendors.
Wrong -Out of scope, no such details in the passage to inference
3. The discussion of the operating system software vendor last paragraph serves which of the following functions within the passage as a whole?
(A) It describes an exceptional case in which reduction in price actually failed to produce a competitive advantage.
Wrong - Trap! Passage is in description tone, it highlights general information with an example in the end of the passage, Trap here is, if one misses the eyesight “exceptional case”, its not only example specifically of price reduction, but also example of strategic failure by not understanding concern of customer, This stem has a opposite view too, what is the plan would have be successful, then this would not have to be exceptional case.
(B) It illustrates the pitfalls of choosing to reduce price at a time when business strategy is needed more urgently in another area.
Wrong - Irrelevant, as it diverts the discussion topic to strategy implementation from one area to another, which is not mentioned in the second passage
(C) It demonstrates the kind of analysis that managers apply when they choose one kind of business strategy over another
Wrong - Irrelevant, as it diverts the discussion topic to strategy implementation from one analysis to another, which is not mentioned in the second passage
(D) It supports the argument that strategies in certain aspects are more advantageous than strategies in other aspects.
Wrong - yes, second para, does support the 1st paragraph, but para 2 highlights only about price reduction as a strategy, it doesn’t not counter or show same price reduction is benefits to another aspects
(E) It provides an example of the point about reduction in price made in the first paragraph - Correct
4. The passage suggests that operating system software managers failed to consider whether or not the price reduction mentioned last sentence
Explanation: as mentioned in the passage,
there are 2 things manager failed to consider whether or not,
“Nor did they analyse their reduction in price
- to determine whether it would attract new customers
1. by producing a new standard of price that would excite customers or
2. by proving difficult for competitors to copy
(A) was too complicated to be easily described to prospective customers
Wrong - passage doesn’t mention about definition of prospective customers
(B) made a measurable change in the experiences of customers purchasing
Wrong - yes, it was a experiment, but no where it mentions the measurable changes in it, for customer purchase
(C) could be sustained if the number of customers increased significantly
Wrong - Might be, has not justification or explanation mentioned in the passage – Out of scope
(D) was an innovation that competing vendors could have imitated
Correct: Yes, as mentioned above, it is one of the two analyse, which software manager missed.
(E) was adequate to bring the vendor's general level of price to a level that was comparable with that of its competitors
Wrong - Irrelevant, not inclined with the tone of passage
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