An executive of ZCCorp has proposed that the company buy PondGen, a small company that has developed an algae-based process...
GMAT Critical Reasoning : (CR) Questions
An executive of ZCCorp has proposed that the company buy PondGen, a small company that has developed an algae-based process to produce biodiesel fuel for cars and trucks. In support of the proposal, the executive notes that initial pilot projects show that the process may provide much more energy per acre than non-algae sources of biofuels, reducing the need for land. Also, the algae help absorb greenhouse gases, and ZCCorp already has close relationships with fuel distributors. The executive's proposal advocates that, after buying the company, ZCCorp should invest heavily in PondGen's process, in order to become a serious player in the biofuel market.
Which of the following would, if true, most strongly suggest that the executive's proposal should not be adopted?
Passage Analysis:
| Text from Passage | Analysis |
| An executive of ZCCorp has proposed that the company buy PondGen, a small company that has developed an algae-based process to produce biodiesel fuel for cars and trucks. |
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| In support of the proposal, the executive notes that initial pilot projects show that the process may provide much more energy per acre than non-algae sources of biofuels, reducing the need for land. |
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| Also, the algae help absorb greenhouse gases, and ZCCorp already has close relationships with fuel distributors. |
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| The executive's proposal advocates that, after buying the company, ZCCorp should invest heavily in PondGen's process, in order to become a serious player in the biofuel market. |
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Argument Flow:
The argument starts with the executive's proposal to buy PondGen, then stacks up three supporting reasons: higher energy efficiency per acre, environmental benefits, and ZCCorp's existing market connections. It concludulates by revealing the full scope - not just buying but heavily investing in the technology.
Main Conclusion:
ZCCorp should buy PondGen and invest heavily in their algae-based biodiesel process to become a major player in the biofuel market.
Logical Structure:
The executive uses a benefits-based approach: efficiency advantage + environmental benefit + strategic fit = justification for acquisition and heavy investment. The argument assumes these benefits will translate into market success.
Prethinking:
Question type:
Weaken - We need to find information that would reduce belief in the executive's proposal to buy PondGen and invest heavily in their algae-based biodiesel process
Precision of Claims
The executive's proposal has specific claims about energy efficiency (more energy per acre), environmental benefits (greenhouse gas absorption), strategic advantages (existing distributor relationships), and a concrete plan (buy company then invest heavily to become serious market player)
Strategy
To weaken this proposal, we need to find information that undermines either the viability of the algae process itself, the business case for heavy investment, or ZCCorp's ability to succeed in the biofuel market. We should look for scenarios that directly challenge the assumptions behind the proposal while respecting the facts already given in the passage
This choice says the energy yield per amount of fuel won't be significantly higher than non-algae sources. However, this misses the key advantage mentioned in the passage. The executive specifically highlighted energy per acre (land efficiency), not energy per amount of fuel. Even if the energy content per gallon is similar, producing more gallons per acre of land is still a significant competitive advantage. This doesn't strongly undermine the proposal.
The fact that ZCCorp lacks biofuel production experience is a concern, but it's not a deal-breaker. Companies regularly enter new industries by acquiring expertise through acquisitions and hiring. In fact, buying PondGen would be one way to gain that expertise. The executive's proposal already addresses this by acquiring an existing company with the technology. This creates a moderate concern but doesn't destroy the business case.
Not owning sufficient land for large-scale algae production is a logistical challenge, but it's solvable. Companies can lease land, form partnerships, or purchase additional property as needed. ZCCorp presumably has the financial resources to address land requirements if they're considering heavy investment in the technology. This is an operational hurdle, not an insurmountable barrier to the proposal.
Stable biofuel prices might reduce profit margins, but this doesn't eliminate the business opportunity. If ZCCorp can produce biofuel more efficiently (more energy per acre), they could still be profitable even with stable or lower prices. Additionally, environmental regulations and corporate sustainability initiatives provide demand drivers beyond just price. This weakens the urgency but doesn't eliminate the strategic value.
This choice reveals a fatal flaw in the proposal. If no research has demonstrated that PondGen's process can scale up to industrial production levels, then the entire investment strategy becomes extremely risky. The executive's plan depends on becoming a 'serious player' in the biofuel market, which requires producing commercial quantities. All the pilot project benefits become meaningless if the technology can't transition from small-scale testing to full commercial production. This creates fundamental doubt about whether the heavy investment can ever generate returns.