Merger Analyst: Two long-time competitors, manufacturers of personal digital assistants- better known simply as PDAs-have agreed to merge their companies. The main purpose of the merger, put forth by outside analysts, would be to collaborate on the development of a PDA redesign that will allow the new merged company to manufacture PDAs at a lower cost.
Although the post-merger retail price, to be agreed on by the companies, will likely cut into the new company's overall profit margins, it will also eliminate the competition between these companies, two of the world's largest PDA manufacturers.
Given the above, which of the following statements, if true, as made by the president of one of the two companies, best illustrates the probable thinking behind the merger?
1 "By combining forces we will ensure that consumers pay the lowest possible cost for the next generation of Personal Digital Assistants."
2 We would rather secure relatively lower PDA profits than lose market share to a competitor."
3 Combining forces will be beneficial to the business climate in this country by setting a model of collaboration and goodwill as opposed to fostering the current competitive environment existing in the PDA industry."
4 "The best way to permanently lower the retail price of PDAs is to eliminate our most formidable competition."
5 "Although long-term PDA retail costs may rise, our next generation of PDAs will decrease in retail cost."
OA later
5-Day Free Trial
5-day free, full-access trial TTP
Available with Beat the GMAT members only code
MORE DETAILS
BTG-CR
This topic has expert replies
-
HSPA
- Legendary Member
- Posts: 1101
- Joined: Fri Jan 28, 2011 7:26 am
- Thanked: 47 times
- Followed by:13 members
- GMAT Score:640
A) Supporting analyst's assumption
B) Supporting the second paragraph post the word 'will'
'cut into the new company’s overall profit margins, it will also eliminate the competition between these companies'
C) They are not merging for goodwill ... they want money and market share
D) extreme
E)Dont care what happens in long term.. our analysis is about merger
For me it is between A& B
B) Supporting the second paragraph post the word 'will'
'cut into the new company’s overall profit margins, it will also eliminate the competition between these companies'
C) They are not merging for goodwill ... they want money and market share
D) extreme
E)Dont care what happens in long term.. our analysis is about merger
For me it is between A& B
-
AIM GMAT
- Legendary Member
- Posts: 857
- Joined: Wed Aug 25, 2010 1:36 am
- Thanked: 56 times
- Followed by:15 members
In my opinion A talk about the consumers which is not the prime agenda of merger .
Although the post-merger retail price, to be agreed on by the companies, will likely cut into the new company’s overall profit margins, it will also eliminate the competition between these companies, two of the world’s largest PDA manufacturers.
The main purpose of the merger, put forth by outside analysts, would be to collaborate on the development of a PDA redesign that will allow the new merged company to manufacture PDAs at a lower cost.
But is it mentioned that lower cost is required for sake of consumers ? No , but profit margin and competetion is explicitly mentioned , so B is better option.
Anyways whats the OA ?
Although the post-merger retail price, to be agreed on by the companies, will likely cut into the new company’s overall profit margins, it will also eliminate the competition between these companies, two of the world’s largest PDA manufacturers.
The main purpose of the merger, put forth by outside analysts, would be to collaborate on the development of a PDA redesign that will allow the new merged company to manufacture PDAs at a lower cost.
But is it mentioned that lower cost is required for sake of consumers ? No , but profit margin and competetion is explicitly mentioned , so B is better option.
Anyways whats the OA ?
Thanks & Regards,
AIM GMAT
AIM GMAT
-
ankurmit
- Legendary Member
- Posts: 516
- Joined: Mon Nov 02, 2009 6:42 am
- Location: Mumbai
- Thanked: 14 times
- Followed by:1 members
- GMAT Score:710
But in argument it is mentioned that this merger will reduce competition between two merging companies.
It is not mentioned that it will help merging companies to face competition efficiently with other market players.
It is not mentioned that it will help merging companies to face competition efficiently with other market players.
--------
Ankur mittal
Ankur mittal
-
bubbliiiiiiii
- Legendary Member
- Posts: 979
- Joined: Tue Apr 14, 2009 1:38 am
- Location: Hyderabad, India
- Thanked: 49 times
- Followed by:12 members
- GMAT Score:700
IMO B.
2 We would rather secure relatively lower PDA profits than lose market share to a competitor."
This appears to be the correct choice as it talks about competion and lowering the price of PDA. This gives both the companies an advantage of cutting competiotion while securing their profits.
2 We would rather secure relatively lower PDA profits than lose market share to a competitor."
This appears to be the correct choice as it talks about competion and lowering the price of PDA. This gives both the companies an advantage of cutting competiotion while securing their profits.
Regards,
Pranay
Pranay
-
mundasingh123
- Legendary Member
- Posts: 2330
- Joined: Fri Jan 15, 2010 5:14 am
- Thanked: 56 times
- Followed by:26 members
Why B?
The stimulus talks abt competion between the 2 big manufactures and not with respect to any third manufacturer .Nowhere in the stimulus is there anything mentioned about a third manufacturer
The stimulus talks abt competion between the 2 big manufactures and not with respect to any third manufacturer .Nowhere in the stimulus is there anything mentioned about a third manufacturer
I Seek Explanations Not Answers
-
bubbliiiiiiii
- Legendary Member
- Posts: 979
- Joined: Tue Apr 14, 2009 1:38 am
- Location: Hyderabad, India
- Thanked: 49 times
- Followed by:12 members
- GMAT Score:700
The idea behind 'cutting the competition' is competition between the two companies if they were not merged with each other.
Regards,
Pranay
Pranay
-
mundasingh123
- Legendary Member
- Posts: 2330
- Joined: Fri Jan 15, 2010 5:14 am
- Thanked: 56 times
- Followed by:26 members
The line it
is specific to these companies and not applicable in general to all companies.will also eliminate the competition between these companies, two of the world's largest PDA manufacturers.
I Seek Explanations Not Answers
-
rohu27
- Legendary Member
- Posts: 586
- Joined: Tue Jan 19, 2010 4:38 am
- Thanked: 31 times
- Followed by:5 members
- GMAT Score:730
B in my view. whs the OA and OE?ankurmit wrote:Merger Analyst: Two long-time competitors, manufacturers of personal digital assistants- better known simply as PDAs-have agreed to merge their companies. The main purpose of the merger, put forth by outside analysts, would be to collaborate on the development of a PDA redesign that will allow the new merged company to manufacture PDAs at a lower cost.
Although the post-merger retail price, to be agreed on by the companies, will likely cut into the new company's overall profit margins, it will also eliminate the competition between these companies, two of the world's largest PDA manufacturers.
Given the above, which of the following statements, if true, as made by the president of one of the two companies, best illustrates the probable thinking behind the merger?
1 "By combining forces we will ensure that consumers pay the lowest possible cost for the next generation of Personal Digital Assistants." - lowest possible cost- no where does the argument say tht the new retail price would be the lowest one. it may well be tht thr is a 3rd company which offers lowest price though the quality is not good. Competitors are compnies who are at the same level in temrs of price,quality etc. so we are only talking abt the price, profit and merger betwen competitors A and B. cant imply the new retail price calls for the lowest of all.
2 We would rather secure relatively lower PDA profits than lose market share to a competitor."
3 Combining forces will be beneficial to the business climate in this country by setting a model of collaboration and goodwill as opposed to fostering the current competitive environment existing in the PDA industry."
4 "The best way to permanently lower the retail price of PDAs is to eliminate our most formidable competition."
5 "Although long-term PDA retail costs may rise, our next generation of PDAs will decrease in retail cost."
OA later
-
newton9
- Senior | Next Rank: 100 Posts
- Posts: 71
- Joined: Wed Mar 17, 2010 1:31 pm
- Thanked: 5 times
- Followed by:1 members
P : Competitors have decided to merge to work together on PDA re-design. PDA's can be manfactured at a lower cost. Profit margin is going to reduce, but it will eliminate competition between two largest manufacturers.
A) This looks logical to me. The main purpose of the merger is to collaborate on the development of PDA to manufacture PDA's at a lower cost. So combining forces will ensure that customers will pay lowest cost for next generation of PDA's.
B) Argument doesn't talk about loosing the market share to competitors.
C) Seems a bit extreme -- beneficial to business climate in the country etc...
D) This is not supported by information in the passage. We don't know if this is the best way to permanently lower the price.
E) Stretch.
I am going with A. Please suggest any solid explanation for B.
A) This looks logical to me. The main purpose of the merger is to collaborate on the development of PDA to manufacture PDA's at a lower cost. So combining forces will ensure that customers will pay lowest cost for next generation of PDA's.
B) Argument doesn't talk about loosing the market share to competitors.
C) Seems a bit extreme -- beneficial to business climate in the country etc...
D) This is not supported by information in the passage. We don't know if this is the best way to permanently lower the price.
E) Stretch.
I am going with A. Please suggest any solid explanation for B.
