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# To compete effectively in international markets, a nation's businesses

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Joined: 08 Oct 2019
Posts: 6
To compete effectively in international markets, a nation's businesses  [#permalink]

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02 Dec 2019, 04:08
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New Project RC Butler 2019 - Practice 2 RC Passages Everyday
Passage # 480, Date: 28-Nov-2019
This post is a part of New Project RC Butler 2019. Click here for Details

To compete effectively in international markets, a nation's businesses must sustain investment in intangible as well as physical assets. Although an enormous pool of investment capital exists in the United States, the country's capital investment practices put United States companies at a competitive disadvantage.

United States capital investment practices, shaped by sporadic and unpredictable changes in tax policy and high federal budget deficits, encourage both under-investment and over-investment. For example, United States companies invest at a low rate in internal development projects, such as improving supplier relations, that do not offer immediate profit, and systematically invest at a high rate in external projects, such as corporate takeovers, that yield immediate profit. Also, United States companies make too few linkages among different forms of investments. Such linkages are important because physical assets, such as factories, may not reach their potential level of productivity unless companies make parallel investments in intangible assets such as employee training and product redesign. In general, unlike Japanese and German investment practices, which focus on companies' long-term interests, United States investment practices favor those forms of investment for which financial returns are most readily available. By making minimal investments in intangible assets, United States companies reduce their chances for future competitiveness.

1. The passage is primarily concerned with

A. evaluating strategies for improving United States competitiveness in international markets
B. illustrating the possible uses of investment capital
C. analyzing some failings of capital investment practices in the United States
D. suggesting reasons for increasing linkages among different types of investments
E. contrasting the benefits of investment in physical assets with the benefits of investment in intangible assets

2. According to the passage, which of the following characterizes the capital allocation strategy of United States companies?

A. They tend to under-invest in intangible assets.
B. They tend to invest heavily in product redesign.
C. They tend to under-invest in physical assets.
D. They make parallel investments in internal and external projects.
E. They seek to allocate capital in ways that reduce their tax burden.

3. Which of the following best describes the purpose of the second paragraph?

A. To propose a solution to the problem introduced in the first paragraph
B. To provide support for an argument presented in the first paragraph
C. To provide data to refute an assertion made in the first paragraph
D. To discuss the sources of investment capital mentioned in the first paragraph
E. To discuss the competitiveness of international markets alluded to in the first paragraph

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Joined: 18 Dec 2017
Posts: 1053
Location: United States (KS)
GMAT 1: 600 Q46 V27
Re: To compete effectively in international markets, a nation's businesses  [#permalink]

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02 Dec 2019, 10:32
1
Quote:
To compete effectively in international markets, a nation's businesses must sustain investment in intangible as well as physical assets. Although an enormous pool of investment capital exists in the United States, the country's capital investment practices put United States companies at a competitive disadvantage.

United States capital investment practices, shaped by sporadic and unpredictable changes in tax policy and high federal budget deficits, encourage both under-investment and over-investment. For example, United States companies invest at a low rate in internal development projects, such as improving supplier relations, that do not offer immediate profit, and systematically invest at a high rate in external projects, such as corporate takeovers, that yield immediate profit. Also, United States companies make too few linkages among different forms of investments. Such linkages are important because physical assets, such as factories, may not reach their potential level of productivity unless companies make parallel investments in intangible assets such as employee training and product redesign. In general, unlike Japanese and German investment practices, which focus on companies' long-term interests, United States investment practices favor those forms of investment for which financial returns are most readily available. By making minimal investments in intangible assets, United States companies reduce their chances for future competitiveness.[/box_in][box_in]

Boil It Down: 1 | = | capital investment practices put United States companies at a competitive disadvantage.

Boil It Down: 2 | + | Author goes into detail about why and how those practices affect US companies and a very light comparison with Japanese and German practices.

Quote:

1. The passage is primarily concerned with

A. evaluating strategies for improving United States competitiveness in international markets The author does not talk about how to improve
B. illustrating the possible uses of investment capital True but not the primary concern.
C. analyzing some failings of capital investment practices in the United States Talks about US. Mentions some failings. Looks good.
D. suggesting reasons for increasing linkages among different types of investments No such mention
E. contrasting the benefits of investment in physical assets with the benefits of investment in intangible assets Mentioned but not the primary purpose.

Quote:
2. According to the passage, which of the following characterizes the capital allocation strategy of United States companies?

A. They tend to under-invest in intangible assets. - Supported in the passage. " United States companies make too few linkages among different forms of investments. Such linkages are important because physical assets, such as factories, may not reach their potential level of productivity unless companies make parallel investments in intangible assets such as employee training and product redesign."

B. They tend to invest heavily in product redesign. - No
C. They tend to under-invest in physical assets. - No
D. They make parallel investments in internal and external projects. - They do but it is provided as an example of capital investment.
E. They seek to allocate capital in ways that reduce their tax burden. - No such mention.

Quote:
3. Which of the following best describes the purpose of the second paragraph?

A. To propose a solution to the problem introduced in the first paragraph - No Solution
B. To provide support for an argument presented in the first paragraph - Yes. Author provides supports to the point made in Para 1.
C. To provide data to refute an assertion made in the first paragraph - Author doesn't refute
D. To discuss the sources of investment capital mentioned in the first paragraph - Clearly not the case
E. To discuss the competitiveness of international markets alluded to in the first paragraph - Clearly No.

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Joined: 27 Oct 2018
Posts: 820
Location: Egypt
Concentration: Strategy, International Business
GPA: 3.67
WE: Pharmaceuticals (Health Care)
Re: To compete effectively in international markets, a nation's businesses  [#permalink]

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03 Dec 2019, 02:38
1
Summarizing the Article:
Paragraph 1: US companies are suffering disadvantage due to some investment practices
Paragraph 2: Details about these investment practices and their driving factors.

1. The passage is primarily concerned with "C"

A. evaluating strategies for improving United States competitiveness in international markets
--> no such strategies mentioned
B. illustrating the possible uses of investment capital
--> It is briefly mentioned in the first paragraph, but it is not the main concern.
C. analyzing some failings of capital investment practices in the United States
--> Details of disadvantageous practices in US is what the two paragraphs are about
D. suggesting reasons for increasing linkages among different types of investments
--> Linkages are briefly mentioned, but this only covers a small part of the second paragraph
E. contrasting the benefits of investment in physical assets with the benefits of investment in intangible assets
--> there is no contrast mentioned between physical and intangible asset investing

2. According to the passage, which of the following characterizes the capital allocation strategy of United States companies? "A"

A. They tend to under-invest in intangible assets. --> Clearly mentioned in last sentence of the article.
B. They tend to invest heavily in product redesign. --> NO, Internal development projects are minimal
C. They tend to under-invest in physical assets. --> No, over-investment also happen
D. They make parallel investments in internal and external projects. --> No, external is much higher
E. They seek to allocate capital in ways that reduce their tax burden. --> Not mentioned (it just said that Tax policy has an effect)

3. Which of the following best describes the purpose of the second paragraph? "B"

A. To propose a solution to the problem introduced in the first paragraph --> No solutions discussed
B. To provide support for an argument presented in the first paragraph --> Details in paragraph 2 are supporting the claim in paragraph 1
C. To provide data to refute an assertion made in the first paragraph --> No, Paragraph 1 & 2 are on the same side of the argument
D. To discuss the sources of investment capital mentioned in the first paragraph --> No mention for source of investment, but for allocation
E. To discuss the competitiveness of international markets alluded to in the first paragraph --> not discussing the competitiveness, but the investment practices.
Re: To compete effectively in international markets, a nation's businesses   [#permalink] 03 Dec 2019, 02:38
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# To compete effectively in international markets, a nation's businesses

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