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Knewton Competitive Advantage

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Knewton Competitive Advantage

by mundasingh123 » Fri Aug 19, 2011 4:55 am
Top Line Technologies and Eureka Industries distribute the same kind of rechargeable batteries to national electronic store chains. Employee wages comprise 38 percent of each company's total annual costs. In order to gain a competitive advantage over Eureka Industries, Top Line Technologies has proposed slashing employee wages by 10 percent.

Which of the following, if true, would most strengthen the argument above?

A)Top Line Technologies' rechargeable batteries have received more consistent consumer approval ratings than have Eureka Industries'.
B)Top Line Technologies will have to reduce the number of rechargeable batteries it distributes to client stores.
C)Eureka Industries is headquartered in a city that has a higher cost of living than does the city where Top Line Technologies is headquartered.
D)Top Line Technologies will begin distributing lower-quality rechargeable batteries.
E)Lowered employee wages have no effect on the quantity of rechargeable batteries that can be distributed to the client stores.

Two companies distribute the same product and spend the exact same percentage of costs on employee wages. One wants to gain a competitive edge and proposes spending less money on employee wages. In order for this strategy to be advantageous, the company's ability to do business cannot be negatively effected by the wage cut.

So we need an answer choice that's going to restate or strengthen the author's assumption that cutting employee wages will not hurt business.

Since we're only concerned with the effect of lowered employee wages on business, choice A, which discusses consumer approval ratings, and choice C, which mentions the importance of the cost of living in the city where Top Line is located, are irrelevant.

Answer choices B and D would weaken the argument. If Top Line is forced to reduce the number of batteries it distributes to stores, as choice B suggests, Top Line's business would suffer. Likewise, if Top Line starts distributing poorer quality batteries, this is similarly bad for business.

We're left with answer choice E, which restates our assumption. If lowering wages has no effect on battery quality or distribution, it will not have a negative effect on Top Line's business.
The correct answer is E.

Is the explanation for E correct ?
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by killer1387 » Fri Aug 19, 2011 6:32 am
E is the assumption, if that is negated the TLT's prediction is rendered invalid. Besides it can also be said one of the loopholes that wud weaken the prediction has been closed by E. Hence E.
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by mundasingh123 » Fri Aug 19, 2011 6:48 am
killer1387 wrote:E is the assumption, if that is negated the TLT's prediction is rendered invalid. Besides it can also be said one of the loopholes that wud weaken the prediction has been closed by E. Hence E.
E only considers quantity . What if the quality suffers
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by Ozlemg » Fri Aug 19, 2011 7:36 am
I totally agree! If it is assumed by the company that all things will be the same as before after slashing, a fall in the wages can save some money to the firm and it can get a competitive advangate over the rival...
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by HSPA » Fri Aug 19, 2011 7:48 am
what is bad with C.. this is what happens in thi practical world. E seems weak. +1 for Munda
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by mundasingh123 » Fri Aug 19, 2011 8:33 am
HSPA wrote:what is bad with C.. this is what happens in thi practical world. E seems weak. +1 for Munda
LOL
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by mundasingh123 » Fri Aug 19, 2011 8:35 am
Ozlemg wrote:I totally agree! If it is assumed by the company that all things will be the same as before after slashing, a fall in the wages can save some money to the firm and it can get a competitive advangate over the rival...
does quantity alone define competitive advantage ?
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by saketk » Fri Aug 19, 2011 9:29 am
Stuck between C and E. I'll pick C. Reason why I did not pick E is that it talks in General. Means, If lowered employee wages have no effect on the quantity then obviously both the companies can choose this option. This way Top line will not have any advantage over Eureka.

Whereas, If you look at the option C, it says the cost of living in the city where Eureka is located has higher costs of living as compared to the city where Top line is located. Therefore, Eureka cannot choose that option, and the money thus saved can be put in for use in different areas within the company.

What's the OA?
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by mundasingh123 » Fri Aug 19, 2011 9:47 am
saketk wrote:Stuck between C and E. I'll pick C. Reason why I did not pick E is that it talks in General. Means, If lowered employee wages have no effect on the quantity then obviously both the companies can choose this option. This way Top line will not have any advantage over Eureka.

Whereas, If you look at the option C, it says the cost of living in the city where Eureka is located has higher costs of living as compared to the city where Top line is located. Therefore, Eureka cannot choose that option, and the money thus saved can be put in for use in different areas within the company.

What's the OA?
Good one Oa E
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by AN24 » Fri Aug 19, 2011 11:53 am
Hi,
We're left with answer choice E, which restates our assumption. If lowering wages has no effect on battery quality or distribution, it will not have a negative effect on Top Line's business.
The correct answer is E.


E doesn't mention about the quality at all...it speaks about the quantity only.
E)Lowered employee wages have no effect on the quantity of rechargeable batteries that can be distributed to the client stores.
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by mundasingh123 » Fri Aug 19, 2011 11:58 am
AN24 wrote:Hi,
We're left with answer choice E, which restates our assumption. If lowering wages has no effect on battery quality or distribution, it will not have a negative effect on Top Line's business.
The correct answer is E.


E doesn't mention about the quality at all...it speaks about the quantity only.
E)Lowered employee wages have no effect on the quantity of rechargeable batteries that can be distributed to the client stores.
if i continue to create the same quantity of products at a cheaper cost , would i gain a competitive advantage?
If my products were bad in quality , would i gaina competitive advantage
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by AN24 » Fri Aug 19, 2011 12:40 pm
if i continue to create the same quantity of products at a cheaper cost , would i gain a competitive advantage?
Agreed...if the quality remains the same.
But aren't we assuming too much here. The quality might remain the same, improve or deteriorate.
the Option does not mention anything about the quality standard.

whereas 'c' gives me a believable answer.
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by saketk » Fri Aug 19, 2011 9:14 pm
Worried!!! Don't you think this question involves lot of assumptions? I can also support Option E as well, as you did. Looks tricky to me.
mundasingh123 wrote:
saketk wrote:Stuck between C and E. I'll pick C. Reason why I did not pick E is that it talks in General. Means, If lowered employee wages have no effect on the quantity then obviously both the companies can choose this option. This way Top line will not have any advantage over Eureka.

Whereas, If you look at the option C, it says the cost of living in the city where Eureka is located has higher costs of living as compared to the city where Top line is located. Therefore, Eureka cannot choose that option, and the money thus saved can be put in for use in different areas within the company.

What's the OA?
Good one Oa E
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by samyukta » Sat Aug 20, 2011 3:23 am
mundasingh123 wrote:
if i continue to create the same quantity of products at a cheaper cost , would i gain a competitive advantage?
If my products were bad in quality , would i gaina competitive advantage
Top Line Technologies and Eureka Industries distribute the same kind of rechargeable batteries to national electronic store chains.

It has already been stated in the premise that both the companies maintian the same Kind of RB.
I suppose same kind means same quality.
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by killer1387 » Sat Aug 20, 2011 4:42 am
HSPA wrote:what is bad with C.. this is what happens in thi practical world. E seems weak. +1 for Munda
hey,
For C i think we need to have the total no. of employees and the annual cost to each company beforehand.Without these factors how can we decide the effect of this option. Furthermore neither of these is mentioned in the argument.
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