A hospital plans to cut costs by employing an independent service company, rather than the manufacturer, to maintain some of...
GMAT Critical Reasoning : (CR) Questions
A hospital plans to cut costs by employing an independent service company, rather than the manufacturer, to maintain some of its technologically advanced diagnostic equipment. The independent company provides parts at cost, charges significantly less for labor, and maintains the equipment just as well as the manufacturer's service facilities.
The effectiveness of the hospital's plan is most vulnerable to which of the following moves by a manufacturer?
Passage Analysis:
| Text from Passage | Analysis |
|---|---|
| A hospital plans to cut costs by employing an independent service company, rather than the manufacturer, to maintain some of its technologically advanced diagnostic equipment. |
|
| The independent company provides parts at cost, charges significantly less for labor, and maintains the equipment just as well as the manufacturer's service facilities. |
|
Argument Flow:
The passage presents a straightforward plan where the hospital sees a way to cut costs by switching service providers. We get the plan first, then the supporting reasons for why this switch should work.
Main Conclusion:
The hospital's plan to use an independent service company instead of the manufacturer will successfully cut costs while maintaining quality.
Logical Structure:
This is a simple support structure - the plan (conclusion) is backed by three specific advantages the independent company offers: cheaper parts, lower labor costs, and equal service quality.
Prethinking:
Question type:
Weaken - We need to find what moves by the manufacturer would make the hospital's cost-cutting plan less effective or unsuccessful
Precision of Claims
The argument makes specific claims about cost advantages (parts at cost, significantly less labor charges) and quality (maintains equipment just as well). The plan's effectiveness depends on these advantages being maintained.
Strategy
Since this is a weaken question, we need to think about what the manufacturer could do to undermine the hospital's plan. The plan works because the independent company offers cheaper parts, lower labor costs, and equal quality. So we should look for manufacturer moves that could eliminate these advantages or create new problems that make the independent service less attractive.
This choice directly attacks the cost advantage that makes the hospital's plan work. If the manufacturer significantly increases prices for replacement parts (especially for parts they're the only source of), then the independent company's promise to provide 'parts at cost' becomes meaningless - those costs would now be much higher. Since the hospital switched specifically to cut costs, making the parts extremely expensive would eliminate the main benefit of the plan. This would force the hospital to either pay much more than expected or return to the manufacturer's service. This is a devastating move that directly undermines the plan's effectiveness.
This choice involves the manufacturer making claims about training differences between their staff and independent service company staff. However, the argument already establishes that the independent company 'maintains the equipment just as well as the manufacturer's service facilities.' Since the quality of service is already established as equal, mere claims about training levels wouldn't actually affect the plan's effectiveness - the hospital has evidence that the service quality is the same regardless of training differences.
This choice suggests the manufacturer would refuse to service equipment previously serviced by unauthorized personnel. While this might create some inconvenience, it doesn't directly impact the hospital's current plan. The hospital has already decided to use the independent company going forward, so the manufacturer's refusal to provide future service doesn't matter - they weren't planning to use manufacturer service anyway. This creates no immediate problem for the cost-cutting plan.
An advertising campaign promoting the manufacturer's service facilities is a weak response that doesn't address the fundamental cost advantage driving the hospital's decision. The hospital has already done the analysis showing the independent company charges significantly less for labor and provides parts at cost while maintaining quality. Marketing alone won't overcome these concrete financial benefits.
Offering bonuses to sales staff for selling maintenance contracts doesn't directly impact the hospital's plan. This is an internal incentive structure that might help the manufacturer win future clients, but it doesn't address the cost disadvantages that led this hospital to switch to the independent service company. The underlying cost structure remains unchanged.