Product innovation at a grand scale has been the primary mechanism using which companies come to dominate a sector and

[BTGmoderatorDC]

Product innovation at a grand scale has been the primary mechanism using which companies come to dominate a sector and garner more than 70 percent of a sector’s profit, gaining monopoly over that sector. Over the last few years, Business Model Innovation has shown to deliver similar results as well. However, a research by Harvard Business concluded that of all the S&P 500 companies, fewer than 5 percent have the management structure and scale that is required to successfully pull off Business Model Innovation. Hence, for the near future, most of the companies that dominate a sector and garner a lion’s share of its profits will be those that demonstrate impeccable product innovation capability.

A major flaw in author’s reasoning above is that
(A) It discounts the profitability potential of any company that garners less than 70 percent of a sector’s profit but may be more profitable than a virtual monopoly in another sector.
(B) It does not take into account whether the stock market is able to account for disproportionate earning potential of a virtual monopoly in its stock price.
(C) Information about the proportion of companies that have the potential to engage in impeccable Product Innovation is not compared with those that have the potential to engage in Business Model Innovation.
(D) Does not take into account companies that can be candidates for both Product and Business Model Innovation.
(E) Does not define Impeccable Product Innovation precisely.

OA C

Source: e-GMAT