The modern multinational corporation is described as having originated when the owner-managers of nineteenth-century British firms carrying on international trade were replaced by teams of salaried managers organized into hierarchies. Increases in the volume of transactions in such firms are commonly believed to have necessitated this structural change. Nineteenth-century inventions like the steamship and the telegraph, by facilitating coordination of managerial activities, are described as key factors. Sixteenth- and seventeenth century chartered trading companies, despite the international scope of their activities, are usually considered irrelevant to this discussion: the volume of their transactions is assumed to have been too low and the communications and transport of their day too primitive to make comparisons with modern multinationals interesting. In reality, however, early trading companies successfully purchased and outfitted ships, built and operated offices and warehouses, manufactured trade goods for use abroad, maintained trading posts and production facilities overseas, procured goods for import, and sold those goods both at home and in other countries. The large volume of transactions associated with these activities seems to have necessitated hierarchical management structures well before the advent of modern communications and transportation. For example, in the Hudson's Bay Company, each far-flung trading outpost was managed by a salaried agent, who carried out the trade with the Native Americans, managed day-to-day operations, and oversaw the post's workers and servants. One chief agent, answerable to the Court of Directors in London through the correspondence committee, was appointed with control over all of the agents on the bay. The early trading companies did differ strikingly from modern multinationals in many respects. They depended heavily on the national governments of their home countries and thus characteristically acted abroad to promote national interests. Their top managers were typically owners with a substantial minority share, whereas senior managers' holdings in modern multinationals are usually insignificant. They operated in a pre-industrial world, grafting a system of capitalist international trade onto a pre-modern system of artisan and peasant production. Despite these differences, however, early trading companies organized effectively in remarkably modern ways and merit further study as analogues of more modern structures. 1 1. The author's main point is that (A) modern multinationals originated in the sixteenth and seventeenth centuries with the establishment of chartered trading companies (B) the success of early chartered trading companies, like that of modern multinationals, depended primarily on their ability to carry out complex operations (C) early chartered trading companies should be more seriously considered by scholars studying the origins of modern multinationals (D) scholars are quite mistaken concerning the origins of modern multinationals (E) the management structures of early chartered trading companies are fundamentally the same as those of modern multinationals 2 2. With which of the following generalizations regarding management structures would the author of the passage most probably agree? (A) Hierarchical management structures are the most efficient management structures possible in a modern context. (B) Firms that routinely have a high volume of business transactions find it necessary to adopt hierarchical management structures. (C) Hierarchical management structures cannot be successfully implemented without modern communications and transportation. (D) Modern multinational firms with a relatively small volume of business transactions usually do not have hierarchically organized management structures. (E) Companies that adopt hierarchical management structures usually do so in order to facilitate expansion into foreign trade. 3 3. The passage suggests that modern multinationals differ from early chartered trading companies in that (A) the top managers of modern multinationals own stock in their own companies rather than simply receiving a salary (B) modern multinationals depend on a system of capitalist international trade rather than on less modern trading systems (C) modern multinationals have operations in a number of different foreign countries rather than merely in one or two (D) the operations of modern multinationals are highly profitable despite the more stringent environmental and safety regulations of modern governments (E) the overseas operations of modern multinationals are not governed by the national interests of their home countries 4 4. According to the passage, early chartered trading companies are usually described as (A) irrelevant to a discussion of the origins of the modern multinational corporation (B) interesting but ultimately too unusual to be good subjects for economic study (C) analogues of nineteenth-century British trading firms (D) rudimentary and very early forms of the modern multinational corporation (E) important national institutions because they existed to further the political aims of the governments of their home countries 5 5. It can be inferred from the passage that the author would characterize the activities engaged in by early chartered trading companies as being (A) complex enough in scope to require a substantial amount of planning and coordination on the part of management (B) too simple to be considered similar to those of a modern multinational corporation (C) as intricate as those carried out by the largest multinational corporations today (D) often unprofitable due to slow communications and unreliable means of transportation (E) hampered by the political demands imposed on them by the governments of their home countries 6 6. The author lists the various activities of early chartered trading companies in order to (A) analyze the various ways in which these activities contributed to changes in management structure in such companies (B) demonstrate that the volume of business transactions of such companies exceeded that of earlier firms (C) refute the view that the volume of business undertaken by such companies was relatively low (D) emphasize the international scope of these companies’ operations (E) support the argument that such firms coordinated such activities by using available means of communication and transport 7 7. The author mentions the artisan and peasant production systems of early chartered trading companies as an example of (A) an area of operations of these companies that was unhampered by rudimentary systems of communications and transport (B) a similarity that allows fruitful comparison of these companies with modern multinationals (C) a positive achievement of these companies in the face of various difficulties (D) a system that could not have emerged in the absence of management hierarchies (E) a characteristic that distinguishes these companies from modern multinationals 8 8. The passage suggests that one of the reasons that early chartered trading companies deserve comparison with early modern multinationals is (A) the degree to which they both depended on new technology (B) the similar nature of their management structures (C) similarities in their top managements’ degree of ownership in the company (D) their common dependence on political stability abroad in order to carry on foreign operations (E) their common tendency to revolutionize systems of production Solve with timing. P.S.: guys I was stuck with Q-4marked E (Someone pls explain why its incorrect), DOUBT: according to passage and according to author , are they different? Someone explain.

Question 6 Question 6 asks us why the author included certain details. How do those details fit into the author's overall point? To answer questions like this, first think about the big picture purpose of each paragraph: In paragraph 1, the author introduces a conventional assumption : that 16th century chartered companies can't be compared with modern corporations because of low volume and primitive communications. In paragraph 2, the author argues against the assumption from paragraph 1 : THIS is where he/she lists the activities of charter company, so this is where we're looking to answer question 6. In paragraph 3, the author admits that there are differences between the two types of company. So, why did the author list the activities of chartered companies? As seen above, the purpose of including those examples was to argue that chartered companies CAN be compared to multinational corporations. That's because chartered companies DID actually deal with lots of volume. Only (C) captures this intent, so (C) is the correct answer to question 6. I hope that helps!

Last visit was: 27 Apr 2026, 05:59

It is currently 27 Apr 2026, 05:59

Toolkit

Reading Comprehension (RC)

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Go to My Error Log Learn more

Request Expert Reply

Confirm Cancel

Apr 27
Try OnDemand GMAT Masterclass
11:00 AM EDT
-
12:00 PM EDT
Prefer video-based learning? The Target Test Prep OnDemand course is a one-of-a-kind video masterclass featuring 400 hours of lecture-style teaching by Scott Woodbury-Stewart, founder of Target Test Prep and one of the most accomplished GMAT instructors
Apr 28
Join - GMAT Day!
08:00 AM PDT
-
11:00 AM PDT
Whether you are just beginning your MBA journey or fine-tuning your path to a 700+ score, GMAT Day is designed to give you a competitive edge.

Back to Forum

Create Topic

The modern multinational corporation is described as having

1 2

GMATNinja

GMAT Club Verbal Expert

Joined: 13 Aug 2009

Last visit: 24 Apr 2026

Posts: 7,390

Own Kudos:

70,820

[1]

Given Kudos: 2,132

Status: GMAT/GRE/LSAT tutors

Location: United States (CO)

GMAT 1: 780 Q51 V46 Verified score

GMAT 2: 800 Q51 V51 Verified score

GRE 1: Q170 V170 Verified score

GRE 2: Q170 V170 Verified score

Products:

Expert

Expert reply

GMAT 2: 800 Q51 V51 Verified score

GRE 1: Q170 V170 Verified score

GRE 2: Q170 V170 Verified score

Posts: 7,390

Kudos: 70,820

[1]

20 Jan 2023, 14:18

Kudos

Bookmarks

Question 6

Question 6 asks us why the author included certain details. How do those details fit into the author's overall point?

To answer questions like this, first think about the big picture purpose of each paragraph:

In paragraph 1, the author introduces a conventional assumption: that 16th century chartered companies can't be compared with modern corporations because of low volume and primitive communications.
In paragraph 2, the author argues against the assumption from paragraph 1: THIS is where he/she lists the activities of charter company, so this is where we're looking to answer question 6.
In paragraph 3, the author admits that there are differences between the two types of company.

So, why did the author list the activities of chartered companies? As seen above, the purpose of including those examples was to argue that chartered companies CAN be compared to multinational corporations. That's because chartered companies DID actually deal with lots of volume.

Only (C) captures this intent, so (C) is the correct answer to question 6.

I hope that helps!

nikitathegreat

Joined: 16 Dec 2021

Last visit: 15 Apr 2026

Posts: 176

Own Kudos:

Given Kudos: 110

Location: India

Schools: ISB '23 LBS '24 NTU NUS Said '23

GMAT 1: 630 Q45 V31 Verified score

Products:

Schools: ISB '23 LBS '24 NTU NUS Said '23

GMAT 1: 630 Q45 V31 Verified score

Posts: 176

Kudos: 23

30 Jan 2023, 19:17

Kudos

Bookmarks

GMATNinja

Question 8

Dhwanii

I want to understand why for the 8th question answer is B and not C

Here's question 8:

Quote:

8. The passage suggests that one of the reasons that early chartered trading companies deserve comparison with early modern multinationals is

The author describes similarities between early chartered trading companies and modern multinationals in the second paragraph. Then, he/she describes differences between the two in the third paragraph.

So, to answer this question, we'll likely draw our evidence from the second paragraph.

Here's (B):

Quote:

(B) the similar nature of their management structures

In the second paragraph, the author states that the complexity of trading by chartered companies "seems to have necessitated hierarchical management structures."

This is similar to how the author describes the structure of modern multinationals in paragraph 1. There, he/she says that these modern companies are run by "teams of salaried managers organized into hierarchies."

So, the passage suggests that both types of companies had similar management structures. Keep (B).

Here's (C):

Quote:

Degree of ownership is discussed in the third paragraph, where the author talks about differences between the two types of company. Specifically, we learn that in early chartered companies "top managers were typically owners with a substantial minority share," while in modern multinationals, "senior managers' holdings[...] are usually insignificant."

So, top management had very different degrees of ownership, rather than similar degrees of ownership.

(C) is out, and (B) is the correct answer to question 8.

I hope that helps!

Basis Q8 analysis, why isnt option E of the 1st question correct?? Please explain Q1 and E option choice too ?

GMATNinja

GMAT Club Verbal Expert

Joined: 13 Aug 2009

Last visit: 24 Apr 2026

Posts: 7,390

Own Kudos:

70,820

[1]

Given Kudos: 2,132

Status: GMAT/GRE/LSAT tutors

Location: United States (CO)

GMAT 1: 780 Q51 V46 Verified score

GMAT 2: 800 Q51 V51 Verified score

GRE 1: Q170 V170 Verified score

GRE 2: Q170 V170 Verified score

Products:

Expert

Expert reply

GMAT 2: 800 Q51 V51 Verified score

GRE 1: Q170 V170 Verified score

GRE 2: Q170 V170 Verified score

Posts: 7,390

Kudos: 70,820

[1]

06 Feb 2023, 09:06

Kudos

Bookmarks

Question 1

nikitathegreat

GMATNinja

Question 8

Dhwanii

I want to understand why for the 8th question answer is B and not C

Here's question 8:

Quote:

8. The passage suggests that one of the reasons that early chartered trading companies deserve comparison with early modern multinationals is

Quote:

the similar nature of their management structures

Quote:

similarities in their top managements’ degree of ownership in the company

Basis Q8 analysis, why isnt option E of the 1st question correct?? Please explain Q1 and E option choice too ?

Question 8 asks us for something pretty narrow -- it asks for one reason that chartered trading companies deserve comparison with early modern multinationals.

Question 1, on the other hand, is very broad. It asks us to find the author's main point in the passage as a whole.

Does (E) capture that overall main point?

Quote:

the management structures of early chartered trading companies are fundamentally the same as those of modern multinationals

The author does compare these management structures in the second paragraph. However, saying that there are similarities in the structures isn't saying that these structures are fundamentally the same. In fact, the author goes on to note a difference in the structures in the third paragraph. So, (E) is a bit of a stretch on those grounds.

Perhaps more importantly, the author's overall point in the passage isn't just about management structures. It's about a more broad comparison between chartered companies and modern multinationals, including aspects such as volume, complexity of transactions, etc. The author's overall argument is most clearly stated in the last line of the passage: "Despite these differences, however, early trading companies organized effectively in remarkably modern ways and merit further study as analogues of more modern structures."

That point aligns nicely with answer choice (C) for question 1:

Quote:

(C) early chartered trading companies should be more seriously considered by scholars studying the origins of modern multinationals

(E) is out because it's too narrow, and (C) is the correct answer to question 1.

I hope that helps!

Usernamevisible

Joined: 09 Jun 2022

Last visit: 27 Apr 2026

Posts: 54

Own Kudos:

Given Kudos: 179

Products:

Posts: 54

Kudos: 2

17 Apr 2026, 22:12

Kudos

Bookmarks

Can someone help with the understanding of why Q2 option E is wrong ? and option 8 Option E

guddo

Joined: 25 May 2021

Last visit: 27 Apr 2026

Posts: 1,034

Own Kudos:

11,393

[2]

Given Kudos: 32

Posts: 1,034

Kudos: 11,393

[2]

18 Apr 2026, 06:30

Kudos

Bookmarks

2. With which of the following generalizations regarding management structures would the author of the passage most probably agree?

The passage argues that early trading companies had a large volume of transactions and that this seems to have required hierarchical management structures even before modern communications and transportation existed. So the author’s main point is that high transaction volume can make hierarchical organization necessary, and that this was true even in earlier centuries.

(A) Hierarchical management structures are the most efficient management structures possible in a modern context.

This is too strong. The author does not claim they are the most efficient possible, only that they were needed in certain firms.

(B) Firms that routinely have a high volume of business transactions find it necessary to adopt hierarchical management structures.

This is the best answer. That is exactly the pattern the author supports: large transaction volume seems to require hierarchical management, both in early trading companies and in later multinationals.

(C) Hierarchical management structures cannot be successfully implemented without modern communications and transportation.

This is the opposite of the author’s point. The passage argues that early companies used such structures successfully even without modern technology.

(D) Modern multinational firms with a relatively small volume of business transactions usually do not have hierarchically organized management structures.

The passage does not make this claim. It talks about high-volume firms, not low-volume modern firms.

(E) Companies that adopt hierarchical management structures usually do so in order to facilitate expansion into foreign trade.

This is not the author’s point. The passage connects hierarchical structure mainly to transaction volume, not specifically to expansion into foreign trade.

Answer: (B)

GG27

Joined: 08 Jun 2024

Last visit: 26 Apr 2026

Posts: 8

Given Kudos: 9

Products:

Posts: 8

Kudos: 0

21 Apr 2026, 00:47

Kudos

Bookmarks

It took me around 7 minutes to answer the first question - the split was 6:15 to read the passage and then averaged around 0:58 seconds to answer the rest of the questions, and I still got Q6 and Q7 wrong. I see myself writing too much, maybe because it helps me understand the passage better, but it also takes a lot of my time. Any advice on how to get better?

1 2

Moderators:

GMATNinja

GMAT Club Verbal Expert

7390 posts

AbhishekP220108

507 posts

bhanu29

361 posts