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.
Which of the following business alliances is most clearly an example of a sensible asset-sharing service alliance, as such alliances are described in the passage?
Answer Choices
Correct answer marked belowA
A candy company that purchases generic small toys from a wholesale toy manufacturer to include in packages of itscandy
A gas station located on a major inbound commuter route that co-owns its premises with a fast-food restaurant specializing in quick breakfasts
Correct
C
A discount dry cleaning establishment located next door to a busy coin laundry in a large shopping mall
D
A home carpet cleaning service that sometimes rents its trucks to a furniture store for deliveries
E
A service station that advertises that it uses only a premium brand of spark plug when doing tune-ups on customers' cars
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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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Difficulty
555-605
Type
RC
Category