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GMAT OG 2019 In corporate purchasing, competitive scrutiny

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GMAT OG 2019 In corporate purchasing, competitive scrutiny

Post
In corporate purchasing, competitive scrutiny is
typically limited to suppliers of items that are directly
related to end products. With “indirect” purchases
(such as computers, advertising, and legal services),
(5) which are not directly related to production,
corporations often favor “supplier partnerships”
(arrangements in which the purchaser forgoes the
right to pursue alternative suppliers), which can
inappropriately shelter suppliers from rigorous
(10) competitive scrutiny that might afford the purchaser
economic leverage. There are two independent
variables‐availability of alternatives and ease of
changing suppliers‐that companies should use
to evaluate the feasibility of subjecting suppliers of
(15) indirect purchases to competitive scrutiny. This can
create four possible situations.
 In Type 1 situations, there are many alternatives
and change is relatively easy. Open pursuit of
alternatives‐by frequent competitive bidding, if
(20) possible-will likely yield the best results. In Type 2
situations, where there are many alternatives but
change is difficult-as for providers of employee
health-care benefits-it is important to continuously
test the market and use the results to secure
(25) concessions from existing suppliers. Alternatives
provide a credible threat to suppliers, even if the
ability to switch is constrained. In Type 3 situations,
there are few alternatives, but the ability to switch
without difficulty creates a threat that companies
(30) can use to negotiate concessions from existing
suppliers. In Type 4 situations, where there are few
alternatives and change is difficult, partnerships may
be unavoidable.

Q438) Which of the following can be inferred about supplier partnerships, as they are described in the passage?
A) They cannot be sustained unless the goods or services provided are available from a large number of suppliers.
B) They can result in purchasers paying more for goods and services than they would in a competitive-bidding situation.
C) They typically are instituted at the urging of the supplier rather than the purchaser.
D) They are not feasible when the goods or services provided are directly related to the purchasers' end products.
E) They are least appropriate when the purchasers' ability to change suppliers is limited.

Q439) Which of the following best describes the relation of the second paragraph to the first?
A) The second paragraph offers proof of an assertion made in the first paragraph.
B) The second paragraph provides an explanation for the occurrence of a situation described in the first paragraph.
C) The second paragraph discusses the application of a strategy proposed in the first paragraph.
D) The second paragraph examines the scope of a problem presented in the first paragraph.
E) The second paragraph discusses the contradictions inherent in a relationship described in the first paragraph.

Q440) It can be inferred that the author of the passage would be most likely to make which of the following recommendations to a company purchasing health care benefits for its employees?
A) Devise strategies for circumventing the obstacles to replacing the current provider of health care benefits.
B) Obtain health care benefits from a provider that also provides other indirect products and services.
C) Obtain bids from other providers of health care benefits in order to be in a position to negotiate a better deal with the current provider.
D) Switch providers of health care benefits whenever a different provider offers a more competitive price.
E) Acknowledge the difficulties involved in replacing the current provider of health care benefits and offer to form a partnership with the provider.

Q441) Which of the following is one difference between Type 2 situations and Type 4 situations, as they are described in the passage?
A) The number of alternative suppliers available to the purchaser
B) The most effective approach for the purchaser to use in obtaining competitive bids from potential suppliers
C) The degree of difficulty the purchaser encounters when changing suppliers
D) The frequency with which each type of situation occurs in a typical business environment
E) The likelihood that any given purchase will be an indirect purchase

Q442) According to the passage, which of the following factors distinguishes an indirect purchase from other purchases?
A) The ability of the purchasing company to subject potential suppliers of the purchased item to competitive scrutiny
B) The number of suppliers of the purchased item available to the purchasing company
C) The methods of negotiation that are available to the purchasing company
D) The relationship of the purchased item to the purchasing company's end product
E) The degree of importance of the purchased item in the purchasing company's business operations

Q438: B
Q439: C
Q440: C
Q441: A
Q442: D

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