Free Practice Question
RC · Reading Comprehension
555-605
Short Passage - Humanities
Reading Passage
Alliances between service businesses fall into two broad categories. Brand-sharing alliances involve some joint service offering but limited operational integration, as when an airline serves the coffee of a famous chain of coffeehouses on its flights to increase its appeal to customers while the coffeehouse company enjoys enhanced brand recognition. Asset-sharing is a more complicated form of alliance in which partners maintain distinct product offerings but share some assets such as real estate or technology. Brand-sharing alliances seek to increase customer benefits, while usually delivering only minor cost savings; asset-sharing alliances aim at cost efficiencies. An alliance between a convenience store chain and a video rental chain allows the two companies to share retail space costs while encouraging cross-buying among customers.
Service alliances should be entered into cautiously, however. In a brand-sharing alliance, partners' relative risks and benefits are often disproportionate. In the example cited above, passengers are unlikely to switch airlines if the coffee on a flight is poorly brewed, but the coffeehouse chain's reputation could be seriously damaged. Asset-sharing alliances require careful matching to ensure compatibility of the businesses' target markets: an alliance between a budget restaurant and a luxury hotel would likely be less successful than an alliance between two budget-oriented businesses. Asset-sharing alliances also require time-consuming negotiations to determine how the two companies will share decision-making and operations costs.
Service alliances should be entered into cautiously, however. In a brand-sharing alliance, partners' relative risks and benefits are often disproportionate. In the example cited above, passengers are unlikely to switch airlines if the coffee on a flight is poorly brewed, but the coffeehouse chain's reputation could be seriously damaged. Asset-sharing alliances require careful matching to ensure compatibility of the businesses' target markets: an alliance between a budget restaurant and a luxury hotel would likely be less successful than an alliance between two budget-oriented businesses. Asset-sharing alliances also require time-consuming negotiations to determine how the two companies will share decision-making and operations costs.
The author of the passage implies that which of the following is true of the service alliance between the restaurant and the hotel described in the highlighted text?
Answer Choices
Correct answer marked belowIts success would be limited by the fact that customers likely to patronize one company's services would not be likely to patronize the other company's.
Correct
B
Its success would be limited because the risks to the two companies involved in the alliance would be disproportionate.
C
It would be likely to succeed provided that the companies planned carefully about how to share decision-making and financial accountability.
D
It would fail because the benefits to one company would far outweigh the benefits to the other.
E
It would be unsuccessful primarily because the cost efficiencies achieved would not offset the initial costs of entering into the alliance.
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What it tests
Your ability to understand a passage, its structure, and what the author is really saying. At the 555-605 level, accuracy and speed both matter.
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Answering from memory or outside knowledge instead of strictly from the passage.
Details
Difficulty
555-605
Type
RC
Category