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hard question

by bupbebeo » Mon May 17, 2010 11:56 pm
Panda Corporation is a large manufacturer of children's clothing that has recently undertaken sharp measures to remain competitive in today's global market. In response to offshore pricing pressures, Panda Corporation laid off over 500 employees, reducing operational expenses by 18%. Since manufactures realize a one percentage point increase in sales margins for every five percentage point decrease in operational expenses, the Board of Directors is satisfied that these measures will ensure Panda Corporation's long-term sustainability.

Based on the passage, which of the following, if true, would most weaken the Board's stance.

A, A panda's main rival is also an American manufacturers.
B, Panda Corporation's main rival is based in China
C, the largest manufactures of Children's clothes in China has just reduced it's operational expenses by 15%
D, Us Consumers do not want to buy clothes manufactured offshore
E, A large US manufacturer of children's clothes plans to relocate its operation to China.

Please explain with reasons
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by bupbebeo » Tue May 18, 2010 4:33 am
bupbebeo wrote:Panda Corporation is a large manufacturer of children's clothing that has recently undertaken sharp measures to remain competitive in today's global market. In response to offshore pricing pressures, Panda Corporation laid off over 500 employees, reducing operational expenses by 18%. Since manufactures realize a one percentage point increase in sales margins for every five percentage point decrease in operational expenses, the Board of Directors is satisfied that these measures will ensure Panda Corporation's long-term sustainability.

Based on the passage, which of the following, if true, would most weaken the Board's stance.

A, A panda's main rival is also an American manufacturers.
B, Panda Corporation's main rival is based in China
C, the largest manufactures of Children's clothes in China has just reduced it's operational expenses by 15%
D, Us Consumers do not want to buy clothes manufactured offshore
E, A large US manufacturer of children's clothes plans to relocate its operation to China.

Please explain with reasons
Hey guys, no one can help me this question, can you?
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by bupbebeo » Tue May 18, 2010 8:01 am
please help me answer this question.
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by boazkhan » Tue May 18, 2010 11:42 am
This question doesn't resemble a gmat style question. What is the source?

If I really have to choose - I'd go with A
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by kevincanspain » Tue May 18, 2010 2:05 pm
18% sounds impressive, but if the largest manfacturer in China has achieved a 15% decrease in operating expenses, the Board would do well not to assume that Panda's long-term sustainability is assured: after all, other competitors may have cut operating expenses as well, and sales margins may decline as a result of lower prices. I like D

A is irrelevant
B does not, in itself, scare me

D US Consumers are not everything, and this fact would give Panda a reason to be optimistic
E does not add to the pricing pressures

PS. You really should quote the source, you know. I propose that people not answer questions that do not credit the source.
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by bupbebeo » Tue May 18, 2010 6:10 pm
kevincanspain wrote:18% sounds impressive, but if the largest manfacturer in China has achieved a 15% decrease in operating expenses, the Board would do well not to assume that Panda's long-term sustainability is assured: after all, other competitors may have cut operating expenses as well, and sales margins may decline as a result of lower prices. I like D

A is irrelevant
B does not, in itself, scare me

D US Consumers are not everything, and this fact would give Panda a reason to be optimistic
E does not add to the pricing pressures

PS. You really should quote the source, you know. I propose that people not answer questions that do not credit the source.
Hey Kevinspain, this question comes from Veritas Free Practive Test.

You say you like D, but D is not correct answer.

Moverover, I really confuse the answer choice C. if a large manufacturer in Chine reduces its operational expenses. if this company doesn't operate in America. what this american company have to worry about.
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by kevincanspain » Tue May 18, 2010 11:53 pm
Sorry, I meant C
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by bupbebeo » Wed May 19, 2010 12:05 am
kevincanspain wrote:Sorry, I meant C
kevincanspain, could you help me address the concern relating to answer C in the above quote.
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by Sidjain85 » Wed May 19, 2010 2:43 am
IMO E ..

I didn't selected c b'coz if chinese firm in not operating in america, then how is it going to matter ... its a assumption at my end..... but if we select c we are are also making an assumption that chinese firm is operating in america

I selected E because -
1) the Board of Directors is satisfied that these measures will ensure Panda Corporation's long-term sustainability.

2) A large US manufacturer of children's clothes plans to relocate its operation to China ... so in long term they will negate the cost cutting efforts of panda corporation ... again in this we have to assume that china is cheap (i know in reality it is cheap)

i don't think this question qualifies as a gmat question ... i have hardly seen gmat questions in which we have to make any assumptions to support answers .....
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by kevincanspain » Wed May 19, 2010 3:49 am
bupbebeo wrote:
kevincanspain wrote:Sorry, I meant C
kevincanspain, could you help me address the concern relating to answer C in the above quote.
In order to be convinced that this company has ensured its long-term sustainability by lowering operating costs by 18%, we would need to assume that its competitors have not achieved similar savings. C casts doubt on that assumption. E simply says that an American manufacturer is in effect joining the ranks of Panda's offshore competitors, but it's hard for me to see how it would thus become a more formidable competitor than are companies already operating offshore.

The key here is not to be convinced by numerical evidence without the proper context
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by ThiMBA » Wed May 19, 2010 12:45 pm
I went with C based on the fact that the conclusion talked about long term sustainability and if the manufacturer in China reduced its operational costs by 15%, the 18% reduction by Panda would not represent a long term solution
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by paddle_sweep » Wed May 19, 2010 9:52 pm
Is this a typical GMAT CR qn? I don't think so.
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by ballubalraj » Thu May 20, 2010 12:15 am
Sidjain85 wrote:IMO E ..

I didn't selected c b'coz if chinese firm in not operating in america, then how is it going to matter ... its a assumption at my end..... but if we select c we are are also making an assumption that chinese firm is operating in america
The passage says that Panda corporation needs to take steps to remain compititive in the GLOBAL market. I believe this indication in enough to assume that the firm in China will definitely have impact in american market as well.

Any other thoughts?
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