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B
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A
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The fact that superior service can generate a competitive advantage for a company does not mean that every attempt at improving service will create such an advantage. Investments in service, like those in production and distribution, must be balanced against other types of investments on the basis of direct, tangible benefits such as cost reduction and increased revenues. If a company is already effectively on a par with its competitors because it provides service that avoids a damaging reputation and keeps customers from leaving at an unacceptable rate, then investment in higher service levels may be wasted, since service is a deciding factor for customers only in extreme situations.
This truth was not apparent to managers of one regional bank, which failed to improve its competitive position despite its investment in reducing the time a customer had to wait for a teller. The bank managers did not recognize the level of customer inertia in the consumer banking industry that arises from the inconvenience of switching banks. Nor did they analyze their service improvement to determine whether it would attract new customers by producing a new standard of service that would excite customers or by proving difficult for competitors to copy. The only merit of the improvement was that it could easily be described to customers.
This truth was not apparent to managers of one regional bank, which failed to improve its competitive position despite its investment in reducing the time a customer had to wait for a teller. The bank managers did not recognize the level of customer inertia in the consumer banking industry that arises from the inconvenience of switching banks. Nor did they analyze their service improvement to determine whether it would attract new customers by producing a new standard of service that would excite customers or by proving difficult for competitors to copy. The only merit of the improvement was that it could easily be described to customers.
Q1. The primary purpose of the passage is to
(A) contrast possible outcomes of a type of business investment
(B) suggest more careful evaluation of a type of business investment
(C) illustrate various ways in which a type of business investment could fail to enhance revenues
(D) trace the general problems of a company to a certain type of business investment
(E) criticize the way in which managers tend to analyze the costs and benefits of business investments
(A) contrast possible outcomes of a type of business investment
(B) suggest more careful evaluation of a type of business investment
(C) illustrate various ways in which a type of business investment could fail to enhance revenues
(D) trace the general problems of a company to a certain type of business investment
(E) criticize the way in which managers tend to analyze the costs and benefits of business investments
Q2. According to the passage, investments in service are comparable to investments in production and distribution in terms of the
(A) tangibility of the benefits that they tend to confer
(B) increased revenues that they ultimately produce
(C) basis on which they need to be weighed
(D) insufficient analysis that managers devote to them
(E) degree of competitive advantage that they are likely to provide
(A) tangibility of the benefits that they tend to confer
(B) increased revenues that they ultimately produce
(C) basis on which they need to be weighed
(D) insufficient analysis that managers devote to them
(E) degree of competitive advantage that they are likely to provide
Q3. The passage suggests which of the following about service provided by the regional bank prior to its investment in enhancing that service?
(A) It enabled the bank to retain customers at an acceptable rate
(B) It threatened to weaken the bank’s competitive position with respect to other regional banks
(C) It had already been improved after having caused damage to the bank’s reputation in the past.
(D) It was slightly superior to that of the bank’s regional competitors.
(E) It needed to be improved to attain parity with the service provided by competing banks.
(A) It enabled the bank to retain customers at an acceptable rate
(B) It threatened to weaken the bank’s competitive position with respect to other regional banks
(C) It had already been improved after having caused damage to the bank’s reputation in the past.
(D) It was slightly superior to that of the bank’s regional competitors.
(E) It needed to be improved to attain parity with the service provided by competing banks.
Q4. The passage suggests that bank managers failed to consider whether or not the service improvement mentioned in lines 19
[Nor did they analyze their service improvement to determine whether it would attract new customers by producing a new standard of service that would excite customers or by proving difficult for competitors to copy.]
(A) was too complicated to be easily described to prospective customers
(B) made a measurable change in the experiences of customers in the bank’s offices
(C) could be sustained if the number of customers increased significantly
(D) was an innovation that competing banks could have imitated
(E) was adequate to bring the bank’s general level of service to a level that was comparable with that of its competitors
[Nor did they analyze their service improvement to determine whether it would attract new customers by producing a new standard of service that would excite customers or by proving difficult for competitors to copy.]
(A) was too complicated to be easily described to prospective customers
(B) made a measurable change in the experiences of customers in the bank’s offices
(C) could be sustained if the number of customers increased significantly
(D) was an innovation that competing banks could have imitated
(E) was adequate to bring the bank’s general level of service to a level that was comparable with that of its competitors
Q5. The discussion of the regional bank (line 13-24) serves which of the following functions within the passage as a whole?
(A) It describes an exceptional case in which investment in service actually failed to produce a competitive advantage.
(B) It illustrates the pitfalls of choosing to invest in service at a time when investment is needed more urgently in another area.
(C) It demonstrates the kind of analysis that managers apply when they choose one kind of service investment over another
(D) It supports the argument that investments in certain aspects of service are more advantageous than investments in other aspects of service.
(E) It provides an example of the point about investment in service made in the first paragraph.
(A) It describes an exceptional case in which investment in service actually failed to produce a competitive advantage.
(B) It illustrates the pitfalls of choosing to invest in service at a time when investment is needed more urgently in another area.
(C) It demonstrates the kind of analysis that managers apply when they choose one kind of service investment over another
(D) It supports the argument that investments in certain aspects of service are more advantageous than investments in other aspects of service.
(E) It provides an example of the point about investment in service made in the first paragraph.
Q6. The author uses the word “only” in line 23 most likely in order to
(A) highlight the oddity of the service improvement
(B) emphasize the relatively low value of the investment in service improvement
(C) distinguish the primary attribute of the service improvement from secondary attributes
(D) single out a certain merit of the service improvement from other merits
(E) point out the limited duration of the actual service improvement
(A) highlight the oddity of the service improvement
(B) emphasize the relatively low value of the investment in service improvement
(C) distinguish the primary attribute of the service improvement from secondary attributes
(D) single out a certain merit of the service improvement from other merits
(E) point out the limited duration of the actual service improvement
05 Feb 2018, 22:33
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TaN1213
The passage says that investments in service, production, and distribution "must be balanced against other types of investments on the basis of direct, tangible benefits such as cost reduction and increased revenues." In other words, when compare your investment options, you have to look at the tangible benefits of each option.
However, that does NOT imply that the benefits of service investments are just as tangible as investments in production and distribution. For example, investments in service might confer a greater degree of INTANGIBLE benefits than investments in production and distribution. That's nice, but, according to the author, when deciding between different investment types, you have to look at the tangible benefits.
In other words, each option needs to be weighed on the BASIS of tangible benefits, but the tangibility of the benefits of each option might vary. Hence, (C) is a better choice than (A).
Similarly, revenue is an example of a tangible benefit that SHOULD be compared when weighing your options. However, that does not imply that each option will produce comparable increases in revenue. Eliminate (B).
(C) is the best answer.
Quote:
The regional bank made an investment in service in order to reduce the time a customer had to wait for a teller. This would certainly result in a measurable change in the customers' experiences, so (B) can be eliminated.
For example, the bank could measure average wait times to see whether those times are reduced after the investment. That might be a nice change for existing customers, but will it attract new ones? According to the passage, the bank did NOT determine whether it would attract new customers either 1) by producing a new standard of service that would excite customers or 2) by proving difficult for competitors to copy.
In other words, the bank managers failed to consider whether the service improvement was an innovation that competing banks could have imitated.
Choice (D) matches the underlined portion and is the best answer.
longhaul123
Quote:
Yes, the passage does describe one way that service investments can fail to enhance revenues (by failing to attract new customers). But does the passage illustrate VARIOUS ways in which service investments can fail to enhance revenues?
Also, does the author want you to walk away from this passage thinking, "Ah yes, now I understand several different ways in which service investments can fail to enhance revenues."? That might be PART of the author's argument, but the author wants to warn the reader that service investments don't always work.
The author doesn't think that companies should think, "Hey, let's make a service investment to generate a competitive advantage!" Instead, the author thinks that companies should carefully evaluate service investments before making them, just as they would carefully evaluate production and distribution investments.
The author hopes that, after reading this passage, the reader will think twice (i.e. perform a careful analysis) before making a service investment. Thus, (B) is the best answer.
I hope that helps!
17 Aug 2017, 08:02
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T700ISB
Quote:
Refer to the first sentence of the second paragraph: "This truth was not apparent to managers of one regional bank, which failed to improve its competitive position despite its investment in reducing the time a customer had to wait for a teller."
This statement tells us that the bank already had a competitive position prior to its investment in enhancing service.
Now refer back to the following statement in the first paragraph: "If a company is already effectively on a par with its competitors because it provides service that avoids a damaging reputation and keeps customers from leaving at an unacceptable rate."
This implies that if a bank is competitive (i.e. "on a par with its competitors"), it provides service that keeps customers from leaving at an unacceptable rate. Since the bank was competitive prior to its investment in enhancing service, we can infer that, prior to that investment, the bank had already been providing service that kept customers from leaving at an acceptable rate. Thus, (A) is the best choice.
I hope that helps!
