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30 Oct 2020, 05:50
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B
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Difficulty:
85%
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Question Stats:
55% (02:25) correct
45%
(02:38)
wrong
based on 939
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Products that are high performance and full of features generally provide higher profit margins than simpler products. Because stock market rewards higher returns on research and development and a company’s decisions are driven by stock prices, incumbents in any industry invest their research and development efforts on making products more complex, leaving the products that provide the lowest profit margins to competitors. However, such a strategy often backfires since it allows competitors to build competence and slowly come after those high margin products. Therefore, the best strategy for an incumbent is to invest to maintain leading positions in both low margin and high margin products.
In the argument given, the two boldfaced portions play which of the following roles?
A. The first is an assumption that forms the basis for a course of action that the argument criticizes; the second presents the course of action endorsed by the argument.
B. The first is a consideration raised to explain the appeal of a certain strategy; the second presents that strategy
C. The first is an assumption that has been used to justify a certain strategy; the second is a consideration that is used to cast doubt on that assumption.
D. The first is a consideration raised in support of a strategy the argument endorses; the second presents grounds in support of that consideration.
E. The first is a consideration that has been used to justify pursuing a goal that the argument rejects; the second presents a course of action that has been adopted in pursuit of a goal.
In the argument given, the two boldfaced portions play which of the following roles?
A. The first is an assumption that forms the basis for a course of action that the argument criticizes; the second presents the course of action endorsed by the argument.
B. The first is a consideration raised to explain the appeal of a certain strategy; the second presents that strategy
C. The first is an assumption that has been used to justify a certain strategy; the second is a consideration that is used to cast doubt on that assumption.
D. The first is a consideration raised in support of a strategy the argument endorses; the second presents grounds in support of that consideration.
E. The first is a consideration that has been used to justify pursuing a goal that the argument rejects; the second presents a course of action that has been adopted in pursuit of a goal.
Updated on: 16 Apr 2025, 15:39
Originally posted by chillbrorelax on 30 Oct 2020, 08:26.
Last edited by Bunuel on 16 Apr 2025, 15:39, edited 2 times in total.
Last edited by Bunuel on 16 Apr 2025, 15:39, edited 2 times in total.
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Let's understand the logical structure of the passage. Once you have read the entire passage, you will understand that two strategies are explained and compared.
First strategy is to make more complex products by investing in R&D, leaving the less complex products for competitors. This is based on the premise that the stock market favors companies which invest in R&D to make such products. Also, such products command high prices.
Second strategy is to make both simple and complex kind of products. This way the competitors are less likely to eventually catch up.
Notice that the second strategy is the main argument whereas the first strategy is the counterargument because second strategy is proposed to overcome the drawbacks of the first. That's how we know that the whole passage is to put forward the second strategy against the first.
Let's look at the options.
A - Role of the second is clearly incorrect.
B - Yes this fits our understanding. Let's keep.
C - Role of the second is again incorrect.
D - Second boldface is not the endorsed strategy. Incorrect.
E - Role of the second is again incorrect.
As you have observed, understanding the structure was very helpful here. The correct answer is option B.
First strategy is to make more complex products by investing in R&D, leaving the less complex products for competitors. This is based on the premise that the stock market favors companies which invest in R&D to make such products. Also, such products command high prices.
Second strategy is to make both simple and complex kind of products. This way the competitors are less likely to eventually catch up.
Notice that the second strategy is the main argument whereas the first strategy is the counterargument because second strategy is proposed to overcome the drawbacks of the first. That's how we know that the whole passage is to put forward the second strategy against the first.
Let's look at the options.
A - Role of the second is clearly incorrect.
B - Yes this fits our understanding. Let's keep.
C - Role of the second is again incorrect.
D - Second boldface is not the endorsed strategy. Incorrect.
E - Role of the second is again incorrect.
As you have observed, understanding the structure was very helpful here. The correct answer is option B.
DinoPen
Joined: 02 Jul 2019
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Concentration: Finance, Strategy
Schools: CBS '25 (A) Booth '25 (II) Fuqua '25 (I) Wharton '25 (II) Kellogg '25 (I) HBS '25 (D) Sloan '25 (WL) Cornell '25 (II) Darden '25 (WL)
GMAT 1: 630 Q48 V28
GMAT 2: 640 Q48 V28
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Schools: CBS '25 (A) Booth '25 (II) Fuqua '25 (I) Wharton '25 (II) Kellogg '25 (I) HBS '25 (D) Sloan '25 (WL) Cornell '25 (II) Darden '25 (WL)
GMAT 2: 640 Q48 V28
Posts: 252
30 Oct 2020, 09:58
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IMO E
It was between B and E for me.
Fact: High performance = high return
BF1: Strategy -> Invest in R&D = potential for high returns
BF2: As a result of this strategy, forget the low margin business in pursuit of the higher, riskier business (R&D)
Fact: Strategy backfires because the low margin business provides competitors a foundation and start to branch off for R&D
Conclusion: Best strategy is do pursue both low margin and R&D business (high end products).
In the argument given, the two boldfaced portions play which of the following roles?
A. The first is an assumption that forms the basis for a course of action that the argument criticizes; the second presents the course of action endorsed by the argument.
Does not discuss this as the 'best course of action'
B. The first is a consideration raised to explain the appeal of a certain strategy; the second presents that strategy
The second part does not present the strategy. It moreso speaks in terms of 'as a result'...
C. The first is an assumption that has been used to justify a certain strategy; the second is a consideration that is used to cast doubt on that assumption.
The second part is not casting any doubt.
D. The first is a consideration raised in support of a strategy the argument endorses; the second presents grounds in support of that consideration.
The first part of the argument does not endorse this strategy.
E. The first is a consideration that has been used to justify pursuing a goal that the argument rejects; the second presents a course of action that has been adopted in pursuit of a goal.
Fits with the line of thinking
It was between B and E for me.
Fact: High performance = high return
BF1: Strategy -> Invest in R&D = potential for high returns
BF2: As a result of this strategy, forget the low margin business in pursuit of the higher, riskier business (R&D)
Fact: Strategy backfires because the low margin business provides competitors a foundation and start to branch off for R&D
Conclusion: Best strategy is do pursue both low margin and R&D business (high end products).
In the argument given, the two boldfaced portions play which of the following roles?
A. The first is an assumption that forms the basis for a course of action that the argument criticizes; the second presents the course of action endorsed by the argument.
Does not discuss this as the 'best course of action'
B. The first is a consideration raised to explain the appeal of a certain strategy; the second presents that strategy
The second part does not present the strategy. It moreso speaks in terms of 'as a result'...
C. The first is an assumption that has been used to justify a certain strategy; the second is a consideration that is used to cast doubt on that assumption.
The second part is not casting any doubt.
D. The first is a consideration raised in support of a strategy the argument endorses; the second presents grounds in support of that consideration.
The first part of the argument does not endorse this strategy.
E. The first is a consideration that has been used to justify pursuing a goal that the argument rejects; the second presents a course of action that has been adopted in pursuit of a goal.
Fits with the line of thinking
