Reading Comprehension

Since the late 1970's, in the face of a severe loss of
market share in dozens of industries, manufacturers in
the United States have been trying to improve produc-
tivity-and therefore enhance their international
(5) competitiveness-through cost-cutting programs. (Cost-
cutting here is defined as raising labor output while
holding the amount of labor constant.) However, from
1978 through 1982, productivity-the value of goods
manufactured divided by the amount of labor input-
(10) did not improve; and while the results were better in the
business upturn of the three years following, they ran 25
percent lower than productivity improvements during
earlier, post-1945 upturns. At the same time, it became clear that the harder manufactures worked to imple-
(15) ment cost-cutting, the more they lost their competitive
edge.
With this paradox in mind, I recently visited 25
companies; it became clear to me that the cost-cutting
approach to increasing productivity is fundamentally
(20) flawed. Manufacturing regularly observes a "40, 40, 20"
rule. Roughly 40 percent of any manufacturing-based
competitive advantage derives from long-term changes
in manufacturing structure (decisions about the number,
size, location, and capacity of facilities) and in approaches
(25) to materials. Another 40 percent comes from major
changes in equipment and process technology. The final
20 percent rests on implementing conventional cost-
cutting. This rule does not imply that cost-cutting should
not be tried. The well-known tools of this approach-
(30) including simplifying jobs and retraining employees to
work smarter, not harder-do produce results. But the
tools quickly reach the limits of what they can
contribute.
Another problem is that the cost-cutting approach
(35) hinders innovation and discourages creative people. As
Abernathy's study of automobile manufacturers has
shown, an industry can easily become prisoner of its
own investments in cost-cutting techniques, reducing its
ability to develop new products. And managers under
(40) pressure to maximize cost-cutting will resist innovation
because they know that more fundamental changes in
processes or systems will wreak havoc with the results on
which they are measured. Production managers have
always seen their job as one of minimizing costs and
(45) maximizing output. This dimension of performance has
until recently sufficed as a basis of evaluation, but it has
created a penny-pinching, mechanistic culture in most
factories that has kept away creative managers.
Every company I know that has freed itself from the
(50) paradox has done so, in part, by developing and imple-
menting a manufacturing strategy. Such a strategy
focuses on the manufacturing structure and on equip-
ment and process technology. In one company a manu-
facturing strategy that allowed different areas of the
(55) factory to specialize in different markets replaced the
conventional cost-cutting approach; within three years
the company regained its competitive advantage.
Together with such strategies, successful companies are
also encouraging managers to focus on a wider set of
objectives besides cutting costs. There is hope for manufacturing, but it clearly rests on a different way of
managing.

1.The author of the passage is primarily concerned with
(A) summarizing a thesis
(B) recommending a different approach
(C) comparing points of view
(D) making a series of predictions
(E) describing a number of paradoxes

2. It can be inferred from the passage that the manufacturrs
mentioned in line 2 expected that the measures they
implemented would
(A) encourage innovation
(B) keep labor output constant
(C) increase their competitive advantage
(D) permit business upturns to be more easily predicted
(E) cause managers to focus on a wider set of objectives

3. The primary function of the first paragraph of the
passage is to
(A) outline in brief the author's argument
(B) anticipate challenges to the prescriptions that follow
(C) clarify some disputed definitions of economic terms
(D) summarize a number of long-accepted explanations
(E) present a historical context for the author's
observations

4. The author refers to Abernathy's study (line 36) most
probably in order to
(A) qualify an observation about one rule governing
manufacturing
(B) address possible objections to a recommendation
about improving manufacturing competitiveness
(C) support an earlier assertion about one method of
increasing productivity
(D) suggest the centrality in the United States economy
of a particular manufacturing industry
(E) given an example of research that has questioned the
wisdom of revising a manufacturing strategy

5. The author's attitude toward the culture in most factories
is best described as
(A) cautious
(B) critical
(C) disinterested
(D) respectful
(E) adulatory

6. In the passage, the author includes all of the following
EXCEPT
(A) personal observation
(B) a business principle
(C) a definition of productivity
(D) an example of a successful company
(E) an illustration of a process technology

7. The author suggests that implementing conventional
cost-cutting as a way of increasing manufacturing
competitiveness is a strategy that is
(A) flawed and ruinous
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate
(E) misunderstood but promising



I don't get why question 7 is D.
In the second paragraph the author states the tecnique to be flawed; so why isn't A correct?

THank you!

Anyone taking a stub at it?

ironsferri wrote:Since the late 1970's, in the face of a severe loss of
market share in dozens of industries, manufacturers in
the United States have been trying to improve produc-
tivity-and therefore enhance their international
(5) competitiveness-through cost-cutting programs. (Cost-
cutting here is defined as raising labor output while
holding the amount of labor constant.) However, from
1978 through 1982, productivity-the value of goods
manufactured divided by the amount of labor input-
(10) did not improve; and while the results were better in the
business upturn of the three years following, they ran 25
percent lower than productivity improvements during
earlier, post-1945 upturns. At the same time, it became clear that the harder manufactures worked to imple-
(15) ment cost-cutting, the more they lost their competitive
edge.
With this paradox in mind, I recently visited 25
companies; it became clear to me that the cost-cutting
approach to increasing productivity is fundamentally
(20) flawed. Manufacturing regularly observes a "40, 40, 20"
rule. Roughly 40 percent of any manufacturing-based
competitive advantage derives from long-term changes
in manufacturing structure (decisions about the number,
size, location, and capacity of facilities) and in approaches
(25) to materials. Another 40 percent comes from major
changes in equipment and process technology. The final
20 percent rests on implementing conventional cost-
cutting. This rule does not imply that cost-cutting should
not be tried. The well-known tools of this approach-
(30) including simplifying jobs and retraining employees to
work smarter, not harder-do produce results. But the
tools quickly reach the limits of what they can
contribute.
Another problem is that the cost-cutting approach
(35) hinders innovation and discourages creative people. As
Abernathy's study of automobile manufacturers has
shown, an industry can easily become prisoner of its
own investments in cost-cutting techniques, reducing its
ability to develop new products. And managers under
(40) pressure to maximize cost-cutting will resist innovation
because they know that more fundamental changes in
processes or systems will wreak havoc with the results on
which they are measured. Production managers have
always seen their job as one of minimizing costs and
(45) maximizing output. This dimension of performance has
until recently sufficed as a basis of evaluation, but it has
created a penny-pinching, mechanistic culture in most
factories that has kept away creative managers.
Every company I know that has freed itself from the
(50) paradox has done so, in part, by developing and imple-
menting a manufacturing strategy. Such a strategy
focuses on the manufacturing structure and on equip-
ment and process technology. In one company a manu-
facturing strategy that allowed different areas of the
(55) factory to specialize in different markets replaced the
conventional cost-cutting approach; within three years
the company regained its competitive advantage.
Together with such strategies, successful companies are
also encouraging managers to focus on a wider set of
objectives besides cutting costs. There is hope for manufacturing, but it clearly rests on a different way of
managing.

7. The author suggests that implementing conventional
cost-cutting as a way of increasing manufacturing
competitiveness is a strategy that is
(A) flawed and ruinous
(B) shortsighted and difficult to sustain
(C) popular and easily accomplished
(D) useful but inadequate
(E) misunderstood but promising



I don't get why question 7 is D.
In the second paragraph the author states the tecnique to be flawed; so why isn't A correct?

THank you!

Hi, what we need to consider here as per the entire RC is that the author is not against the cost cutting technique but feels that it restricts companies from taking on their strengths which has been quoted here
(Abernathy's study of automobile manufacturers has
shown, an industry can easily become prisoner of its
own investments in cost-cutting techniques, reducing its
ability to develop new products. And managers under
(40) pressure to maximize cost-cutting will resist innovation
because they know that more fundamental changes in
processes or systems will wreak havoc with the results on
which they are measured.)

this shows that the author is suggesting that if industries would like to succeed they should look beyond the cost cutting techniques and innovate to develop new products and gain more market share. B is a close contender for the similar philosophy but D is a stronger contender in this regard with the information provided and the author does not call the approach which cannot work in the long run, though it would be better for them to innovate for their own success, but they will not wither away with this approach is the point to be kept in mind.

Hope this is helpful.
Preet

Hi Preet,
thank you for your reply!
I definitely see your point.

Since the question asks for "suggest", it's an inference question, so FLAWED, which is mentioned in the passage, rule out the answer choice directly, correct?

Also, A is still to extreme as the author is not completely against this programs , but only half and half. So B and D are the only contenders.

Just want to get your feedback on my thought process.
Thanks

ironsferri wrote:Hi Preet,
thank you for your reply!
I definitely see your point.

Since the question asks for "suggest", it's an inference question, so FLAWED, which is mentioned in the passage, rule out the answer choice directly, correct?

Also, A is still to extreme as the author is not completely against this programs , but only half and half. So B and D are the only contenders.

Just want to get your feedback on my thought process.
Thanks

Yea seems fine...B again can be ruled out as it is leaning towards a negative approach which is shortsighted and difficult to sustain.. and is our own evaluation used to trick us..the favourite pass time of the GMAT which is a more subtle word usage for ruinous in A. Both A and B eventually hint that this approach will stall the company and force it to shut down in the future. i hope that made sense to you.
best of luck buddy.

Preet

it's amazing how subtle one can play with meanings.....i start seeing the code...!
Thanks Preet, great explanation!
Good luck on your studying and I'm sure we'll crack the gmat!
C-

Please post the correct answers for the above questions and also kindly verify my anwers.

My Answers are,

1. B
2. C
3. E
4. B
5. C
6. E

What are the OA's?

sorry guys, here the OA

BCECBED

I couldn't arrive with right answers for 4,5 and 6.

For Q.4, Abernathy's study states that cost-cutting approach will hinder innovation, and discourages people to bring creativity in their work.

How it is supporting the earlier assertion about one method of increasing productivity?

For Q.5, I couldn't understand how B is the answer?

For Q.6, I thought D is the answer?

I would be glad if anyone can sort out my queries.

Thanks,
Viju