Ask Questions, Discuss Approaches & No Clutter
PhiPhi
0

The investment in service are comparable to investments in production and distribution in terms of

Open 1 Answers 1227 Views

This is from OG 13rd - Reading Comprehension - Quesiton number 51. Please help me with your explanation

The fact that superior service can generate a competitive advantage for a company does not mean that every attempt at improving service will createsuch anadvantage. Investments inservice, like those in production and distribution, must be balanced against other types of investments on the basis of direct,tangible benefits such as cost reduction and increased revenues. If a company is already effectively on a par with its competitors because it provides service that avoids a damaging reputation and keeps customers from leaving at an unacceptable rate,then investment in higher service levels may be wasted, since service is a deciding factor for customers only in extreme situations.

This truth was not apparent to managers of one regional bank, which failed to improve its competitive position despite its investment in reducing the time a customer had to wait for a teller. The bank managers did not recognize the level of customer inertia in the consumer banking industry that arises from the inconvenience of switching banks. Nor did they analyze their service improvement to determine whether it would attract new customers by producing a new standard of service that would excite customers or by proving difficult for competitors to copy. The only merit of the improvement was that it could easily be described to customers .

 

Question 2:

According to the passage, investments in service are comparable to investments in production and distribution in terms of the 

(A) tangibility of the benefits that they tend to confer
(B) increased revenues thattheyultimately produce
(C) basis on which they need to be weighed
(D) insufficient analysis that managers devote to them
(E) degree of competitive advantage that they are likely to provide 

I chose A, but the OA is C.

Please help me this questions, I m so confused .

 

Thanks guys

Official Answer
1Comments
@Phiphi: please illustrate your approach as well, so we can disucss this in detail and help to figure why you got it wrong.
Best way would be to write down your notes in the answer box. pick choice by choice and reason out why it is wrong or right.
commented Oct 26, 2014 by Guru (5,599 points)

1 Answer

flamingo
0

Looking at the options you could easily eleminate B, D, C. 

If you read carefully " Investments inservice, like those in production and distribution, must be balanced against other types ofinvestments on the basiof direct,tangible benefits such as cost reduction and increased revenues". It says that the investment must be balanced against the tangibility etc in terms of what will be overall gain. If we pick up A, tangibility othe benefitthat they tend tconfer, it will narrow down the scope of the answer. However in C, it keeps the broad scope of the argument. 

answered Oct 28, 2014 by Guru (5,599 points)
Student Speaks

Jyotsna Mehta

Indian School of Business, Co'18

I am very thankful to Gmatxchange and would definitely recommend Gmatxchange mentors to all those students applying for MBA admissions

Your Tentative GMAT Score
Estimate your GMAT score.
700
The scorer helps you to determine your current level within a few questions you solve.Read More
Please log in or register to use the Scoring Feature
Confused about your profile & colleges, Get FREE profile evaluation today from over 10 consultants.
Follow us and get quick prep updates on Facebook
...