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 primary purpose of the passage is to
Answer Choices
Correct answer marked belowA
explain why one kind of service alliance tends to be more profitable than another
B
classify several kinds of service alliances and describe how they improve a company's chances of success
C
identify some of the primary reasons why companies dissolve service alliances
D
explain why brand-sharing alliances have been more frequent than asset-sharing alliances and suggest that the benefits of asset-sharing alliances have been underestimated
describe the nature of service alliances and discuss some of their attendant risks
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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