Alliances between service businesses fall into two broad categories. Brand-sharing alliances involve some joint service offering but limited operation...
GMAT Reading Comprehension : (RC) Questions
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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.
Ques. 1/3
The primary purpose of the passage is to
Solution
1. Passage Analysis:
Progressive Passage Analysis
| Text from Passage | Analysis |
|---|---|
| Alliances between service businesses fall into two broad categories. | What it says: Service companies can form partnerships in two main ways. What it does: Introduces the main organizing concept for the entire passage Source/Type: Author's factual classification Connection to Previous Sentences: This is the opening sentence - establishes the framework we'll use to understand everything that follows Visualization: Service Business Alliances: • Category 1: [To be defined] • Category 2: [To be defined] Reading Strategy Insight: Great news! The author just told us there are only TWO types to learn about. This limits complexity from the start. |
| 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. | What it says: First type: Companies work together on customer offerings but don't deeply merge operations. Example: airline serves coffee chain's coffee on flights. What it does: Defines the first category and provides a concrete example Source/Type: Author's definition with illustrative example Connection to Previous Sentences: This directly fills in "Category 1" from our framework. The author helps us by immediately giving a real-world example we can picture. Visualization: Brand-Sharing Alliance Example: • Airline gets: Better customer appeal • Coffee chain gets: More brand recognition • Integration level: Limited (just serving coffee, not merging operations) Reading Strategy Insight: The author makes this easy by giving us both definition AND example together. We can understand this concept immediately. |
| 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. | What it says: Second type: Companies keep separate products but share expensive resources like buildings or tech systems. What it does: Defines the second category and contrasts it with the first Source/Type: Author's definition Connection to Previous Sentences: This fills in "Category 2" from our opening framework. Notice the contrast: brand-sharing = limited integration, asset-sharing = more complicated. Visualization: Asset-Sharing Alliance: • Company A: Keeps own products + shares assets • Company B: Keeps own products + shares assets • Shared items: Real estate, technology • Complexity level: Higher than brand-sharing What We Know So Far: Two alliance types, with asset-sharing being more complex What We Don't Know Yet: Specific example of asset-sharing, detailed pros/cons of each type Reading Strategy Insight: The author signals complexity ("more complicated") but immediately explains what makes it complex - shared assets vs. shared offerings. |
| Brand-sharing alliances seek to increase customer benefits, while usually delivering only minor cost savings; asset-sharing alliances aim at cost efficiencies. | What it says: Brand-sharing focuses on making customers happier (small cost savings). Asset-sharing focuses on reducing costs. What it does: Contrasts the primary goals of each alliance type Source/Type: Author's analysis of motivations Connection to Previous Sentences: This RESTATES and clarifies what we learned from the airline-coffee example. We already saw customer benefits (better coffee for passengers, brand recognition for coffee chain). Visualization: Alliance Goals: • Brand-sharing: Customer benefits = 90%, Cost savings = 10% • Asset-sharing: Cost efficiencies = Primary focus Reading Strategy Insight: Feel relieved here - this is simplification, not new complexity! The author is giving us the clean takeaway from the examples. |
| 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. | What it says: Example: convenience store + video rental store share building costs and get customers to buy from both businesses. What it does: Provides the concrete example we were waiting for to illustrate asset-sharing Source/Type: Author's illustrative example Connection to Previous Sentences: This gives us the asset-sharing example to match the brand-sharing airline-coffee example. Now we can picture both types clearly. Visualization: Asset-Sharing Example: • Convenience store: Pays 50% of rent + gains video customers • Video rental: Pays 50% of rent + gains convenience customers • Shared asset: Retail space • Benefit: Cost reduction + cross-buying What We Know So Far: Both alliance types, their goals, and clear examples of each Reading Strategy Insight: Perfect! Now we have symmetry - one example for each type. The concepts are complete and clear. |
| Service alliances should be entered into cautiously, however. | What it says: Companies need to be careful when forming these partnerships. What it does: Transitions to discussing potential problems/warnings Source/Type: Author's advisory opinion Connection to Previous Sentences: Shifts from explaining what alliances ARE to warning about potential issues. The "however" signals we're about to learn the downside. Visualization: ⚠️ CAUTION: Service alliances have risks Reading Strategy Insight: The author is being helpful by signaling the shift with "however." We're moving from benefits to potential problems. |
| In a brand-sharing alliance, partners' relative risks and benefits are often disproportionate. | What it says: In brand-sharing partnerships, one company usually faces more risk or gets fewer benefits than the other. What it does: States the first specific risk/problem with brand-sharing alliances Source/Type: Author's analytical observation Connection to Previous Sentences: This builds on the caution warning by identifying the first specific problem. Focuses on brand-sharing (the first type we learned). Visualization: Brand-Sharing Risk: Partner A: Risk = 30%, Benefits = 70% Partner B: Risk = 70%, Benefits = 30% Result: Unequal partnership Reading Strategy Insight: We're getting organized warnings - first the general caution, now specific brand-sharing risks. |
| 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. | What it says: Using our airline-coffee example: bad coffee won't hurt the airline much, but could badly damage the coffee company's reputation. What it does: Proves the "disproportionate risk" claim using our familiar example Source/Type: Author's logical analysis Connection to Previous Sentences: This EXPLAINS the previous sentence using the example we already know well. The author makes the abstract concept concrete. Visualization: Disproportionate Risk Example: • Airline risk from bad coffee: Very low (customers won't switch) • Coffee chain risk: High (reputation damage) • Conclusion: Coffee chain takes much bigger risk Reading Strategy Insight: Excellent! The author uses our familiar example to explain the new concept. This makes it much easier to understand. |
| 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. | What it says: For asset-sharing, companies need similar customer types. Budget restaurant + luxury hotel = bad match. Two budget businesses = good match. What it does: States the main risk for asset-sharing alliances with good/bad examples Source/Type: Author's analytical guidance with examples Connection to Previous Sentences: Parallel structure to brand-sharing risks. Now we're getting the asset-sharing problems to match. Visualization: Asset-Sharing Compatibility: ❌ Bad: Budget restaurant + Luxury hotel (different customer types) ✅ Good: Budget business + Budget business (similar customers) Reading Strategy Insight: Great parallel structure! Brand-sharing has disproportionate risk problems, asset-sharing has compatibility problems. Clean organization. |
| Asset-sharing alliances also require time-consuming negotiations to determine how the two companies will share decision-making and operations costs. | What it says: Asset-sharing partnerships need long, complex negotiations about who makes decisions and who pays for what. What it does: Adds a second specific problem with asset-sharing alliances Source/Type: Author's practical observation Connection to Previous Sentences: This adds to the asset-sharing problems ("also require"). Now we have compatibility issues AND negotiation complexity. Visualization: Asset-Sharing Challenges: 1. Market compatibility matching 2. Time-consuming negotiations: • Decision-making authority • Operations cost splitting What We Know So Far: • Two alliance types with clear examples • Brand-sharing risk: Disproportionate consequences • Asset-sharing risks: Compatibility + complex negotiations Reading Strategy Insight: The passage is complete and well-organized! We understand both types, their benefits, and their specific risks. No surprises or sudden complexity. |
2. Passage Summary:
Author's Purpose:
To explain how service business alliances work by categorizing them into two types and warning about the potential problems companies should watch out for.
Summary of Passage Structure:
The author builds their explanation in a clear, organized way:
- First, the author introduces the basic framework by stating there are two main types of service business alliances
- Next, the author defines and explains each type with concrete examples - brand-sharing alliances (like airlines serving coffee chain coffee) and asset-sharing alliances (like convenience stores and video rental stores sharing retail space)
- Then, the author contrasts the primary goals of each type, showing that brand-sharing focuses on customer benefits while asset-sharing focuses on cost savings
- Finally, the author shifts to warning about risks, explaining specific problems with each alliance type - brand-sharing can create unequal risk between partners, while asset-sharing requires careful market matching and complex negotiations
Main Point:
While service business alliances can be beneficial, companies need to be careful because each type of alliance has specific risks that can make partnerships unfair or difficult to manage.
3. Question Analysis:
The question asks us to identify the primary purpose of the entire passage. This requires understanding the author's main goal - what they set out to accomplish in writing this piece.
Connecting to Our Passage Analysis:
From our detailed passage analysis, we can see the author follows a clear organizational pattern:
- Introduction and Classification: The author begins by establishing a framework - "Alliances between service businesses fall into two broad categories"
- Explanation of Each Type: The author defines brand-sharing and asset-sharing alliances with concrete examples (airline-coffee chain, convenience store-video rental)
- Benefits Discussion: The author explains the goals of each type (customer benefits vs. cost efficiencies)
- Risk Warning: The passage shifts with "Service alliances should be entered into cautiously, however" and then details specific risks for each type
Prethinking:
The passage structure shows the author's purpose is educational but with a cautionary tone. The author isn't just explaining what service alliances are - they're specifically warning about problems. The passage spends significant time on risks: disproportionate risks in brand-sharing, compatibility issues and complex negotiations in asset-sharing. This suggests the primary purpose involves both describing the nature of these alliances AND discussing their attendant risks.
Answer Choices Explained
A
explain why one kind of service alliance tends to be more profitable than another
Why It's Wrong:
• The passage doesn't compare profitability between alliance types
• No financial data or profit analysis is provided
• The author focuses on goals (customer benefits vs. cost efficiencies) but never discusses which is more profitable
Common Student Mistakes:
• The passage doesn't compare profitability between alliance types
• No financial data or profit analysis is provided
• The author focuses on goals (customer benefits vs. cost efficiencies) but never discusses which is more profitable
Common Student Mistakes:
- Did the author's mention of "cost efficiencies" mean asset-sharing is more profitable?
→ Cost efficiency goals don't equal higher profitability - this is just stating what companies aim for - Doesn't "minor cost savings" for brand-sharing suggest it's less profitable?
→ This describes the type of benefit, not comparative profitability between alliance types
B
classify several kinds of service alliances and describe how they improve a company's chances of success
Why It's Wrong:
• While the passage does classify alliance types, it doesn't focus on improving success chances
• The passage emphasizes risks and cautions, not success strategies
• The tone is more warning-based than success-oriented
Common Student Mistakes:
• While the passage does classify alliance types, it doesn't focus on improving success chances
• The passage emphasizes risks and cautions, not success strategies
• The tone is more warning-based than success-oriented
Common Student Mistakes:
- Doesn't explaining alliance types help companies succeed?
→ The passage focuses more on pitfalls to avoid rather than paths to success - Aren't the examples showing successful alliances?
→ The examples illustrate concepts, but the author quickly shifts to discussing risks and problems
C
identify some of the primary reasons why companies dissolve service alliances
Why It's Wrong:
• The passage doesn't discuss dissolving or ending alliances
• The risks mentioned are about formation and operation challenges, not dissolution
• No mention of why partnerships might be terminated
Common Student Mistakes:
• The passage doesn't discuss dissolving or ending alliances
• The risks mentioned are about formation and operation challenges, not dissolution
• No mention of why partnerships might be terminated
Common Student Mistakes:
- Don't the risks discussed lead to alliance dissolution?
→ The passage discusses risks during alliance formation and operation, not reasons for ending them - Isn't "disproportionate risk" a reason to dissolve partnerships?
→ This is presented as a challenge to be aware of when forming alliances, not a dissolution cause
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
Why It's Wrong:
• No comparison of frequency between brand-sharing and asset-sharing alliances
• No suggestion that asset-sharing benefits are underestimated
• The passage treats both types equally in terms of presentation
Common Student Mistakes:
• No comparison of frequency between brand-sharing and asset-sharing alliances
• No suggestion that asset-sharing benefits are underestimated
• The passage treats both types equally in terms of presentation
Common Student Mistakes:
- Doesn't calling asset-sharing "more complicated" suggest it's less frequent?
→ Complexity doesn't equal frequency - this just describes the nature of asset-sharing - Isn't the focus on cost efficiencies underestimating asset-sharing benefits?
→ The author presents this as the primary goal, not as an underestimation
E
describe the nature of service alliances and discuss some of their attendant risks
Why It's Right:
• The passage clearly describes both types of service alliances with definitions and examples
• Significant portion discusses risks: "Service alliances should be entered into cautiously, however"
• Covers specific risks for each type: disproportionate risks in brand-sharing, compatibility and negotiation issues in asset-sharing
Key Evidence: "Service alliances should be entered into cautiously, however. In a brand-sharing alliance, partners' relative risks and benefits are often disproportionate... Asset-sharing alliances require careful matching to ensure compatibility... also require time-consuming negotiations"
• The passage clearly describes both types of service alliances with definitions and examples
• Significant portion discusses risks: "Service alliances should be entered into cautiously, however"
• Covers specific risks for each type: disproportionate risks in brand-sharing, compatibility and negotiation issues in asset-sharing
Key Evidence: "Service alliances should be entered into cautiously, however. In a brand-sharing alliance, partners' relative risks and benefits are often disproportionate... Asset-sharing alliances require careful matching to ensure compatibility... also require time-consuming negotiations"
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