Many companies today are making new product development a central element of their competitive strategy. Because the potential benefits of...
GMAT Reading Comprehension : (RC) Questions
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Many companies today are making new product development a central element of their competitive strategy. Because the potential benefits of successful product innovation are great-prolonged growth, superior financial returns, and strong investor interest-many companies offer employees incentives such as promotions and bonuses for developing new products, incentives not offered for innovations in other areas of the business. Firms' priorities can also be shaped by their measurement systems since these systems can directly measure returns from new products more immediately than they can measure returns from Investments in such areas as organizational restructuring or Innovations in marketing.
But the organizational culture of such companies can hurt them in the marketplace because a narrow focus on product development can ultimately detract from a firm's performance. For instance, a company's ability to profit from new products can be severely hampered if it has neglected other functions and business processes. If a company develops a superior new product but is unable to distribute and promote it rapidly, competitors with better distribution systems may copy the product and introduce it into the market before the innovator can profit from its innovation. In contrast, effective distribution, marketing, and accounting systems-that is, strong overall business systems-can act as entry barriers, deterring would-be competitors from entering a particular market
Ques. 1/3
It can be inferred from the passage that the author would be most likely to agree with which of the following statements about organizational culture?
Solution
1. Passage Analysis:
Progressive Passage Analysis
| Text from Passage | Analysis |
|---|---|
| Many companies today are making new product development a central element of their competitive strategy. | What it says: Companies are focusing heavily on creating new products as their main way to compete. What it does: Introduces the main topic - companies' emphasis on new product development Source/Type: Author's observation/factual claim Connection to Previous Sentences: This is our opening statement - sets the stage for the entire discussion Visualization: Think of 100 companies - maybe 70-80 of them now put "create new products" at the top of their strategy list What We Know So Far: Companies prioritize new product development What We Don't Know Yet: Why they do this, what the consequences are |
| Because the potential benefits of successful product innovation are great-prolonged growth, superior financial returns, and strong investor interest-many companies offer employees incentives such as promotions and bonuses for developing new products, incentives not offered for innovations in other areas of the business. | What it says: Companies focus on new products because the rewards are huge (growth, money, investor attention), so they give special rewards to employees who create new products What it does: Explains WHY companies prioritize new product development and gives specific examples of how they do it Source/Type: Author's explanation with factual examples Connection to Previous Sentences: This builds on sentence 1 by answering "Why do companies make new product development central?" - it's a direct explanation using "Because" Visualization: Company A gives $10,000 bonus for new product idea, $0 bonus for improving customer service. The new product might bring $50 million in revenue vs. $5 million from other improvements Reading Strategy Insight: Notice the clear "Because" connection - the author is building logically, not jumping topics |
| Firms' priorities can also be shaped by their measurement systems since these systems can directly measure returns from new products more immediately than they can measure returns from investments in such areas as organizational restructuring or innovations in marketing. | What it says: Companies can easily see and count profits from new products right away, but it's harder to measure profits from things like reorganizing the company or improving marketing What it does: Provides a SECOND reason why companies focus on new products (in addition to the "great benefits" from sentence 2) Source/Type: Author's explanation Connection to Previous Sentences: This builds on sentences 1-2 by adding another layer to the explanation. Sentence 2 said "benefits are great," now we learn "plus they're easier to measure" Visualization: New product launch: Month 1 = $2 million in sales (easy to see). Marketing improvement: Takes 18 months to see if customer satisfaction scores translate to profits (hard to measure) Reading Strategy Insight: The word "also" signals this is additional support for the same idea, not a new concept |
| But the organizational culture of such companies can hurt them in the marketplace because a narrow focus on product development can ultimately detract from a firm's performance. | What it says: However, when companies focus too much on just new products, this focus can actually hurt their business performance What it does: Introduces the COUNTERARGUMENT - shifts from "why companies do this" to "why this might be problematic" Source/Type: Author's main argument/thesis Connection to Previous Sentences: This contrasts with sentences 1-3. Those explained why companies focus on new products; this says that focus can backfire Visualization: Company spends 80% of effort on new products, 20% on everything else → performance drops because they neglected other important areas Reading Strategy Insight: The "But" signals the turn in argument - we're moving from setup to the author's main point What We Know So Far: Companies focus on new products for good reasons (benefits, measurability), BUT this focus can hurt them What We Don't Know Yet: Specific examples of how this focus hurts them |
| For instance, a company's ability to profit from new products can be severely hampered if it has neglected other functions and business processes. | What it says: Here's an example: if a company ignores other business areas while focusing on new products, it actually becomes harder for them to make money from those new products What it does: Begins to provide concrete support for the claim in sentence 4 Source/Type: Author's example/illustration Connection to Previous Sentences: This builds on sentence 4 by starting to explain HOW narrow focus hurts performance. "For instance" clearly signals this is an example of the previous claim Visualization: Company creates amazing new smartphone but ignored their shipping department → can't get the phone to stores fast enough Reading Strategy Insight: Feel relieved here - "For instance" means the author is about to make the abstract claim concrete with examples |
| If a company develops a superior new product but is unable to distribute and promote it rapidly, competitors with better distribution systems may copy the product and introduce it into the market before the innovator can profit from its innovation. | What it says: If you make a great new product but can't get it to customers quickly because your distribution and marketing are weak, competitors will steal your idea and beat you to market What it does: Provides the specific, detailed example that sentence 5 promised Source/Type: Author's hypothetical example Connection to Previous Sentences: This elaborates on sentence 5's general statement with a specific scenario. Shows exactly how "neglecting other functions" leads to problems Visualization: Company A invents revolutionary fitness tracker, takes 8 months to reach stores due to poor distribution. Company B copies design, gets it to market in 3 months using superior distribution network Reading Strategy Insight: This is pure clarification - turning the abstract "hampered" concept into a concrete story we can visualize |
| In contrast, effective distribution, marketing, and accounting systems-that is, strong overall business systems-can act as entry barriers, deterring would-be competitors from entering a particular market. | What it says: On the flip side, when you have strong systems in all business areas (not just product development), these systems actually protect you from competitors What it does: Provides the positive counterexample - shows what happens when companies DON'T neglect other business functions Source/Type: Author's contrasting example Connection to Previous Sentences: This restates the main argument by showing the opposite scenario. If sentence 6 showed the bad outcome of narrow focus, this shows the good outcome of broad focus Visualization: Company C has amazing distribution reaching 10,000 stores nationwide. Even if competitors copy their products, competitors can't compete because they can only reach 1,000 stores Reading Strategy Insight: "In contrast" signals we're seeing the flip side of the same coin - this reinforces rather than complicates the argument Final Takeaway: The passage makes one clear point: while companies focus on new product development for understandable reasons, this narrow focus can backfire. Companies need strong systems across ALL business areas to truly succeed. |
2. Passage Summary:
Author's Purpose:
To show why companies' heavy focus on new product development, while understandable, can actually hurt their business performance in the marketplace.
Summary of Passage Structure:
The author builds their argument by first explaining why companies focus on new products, then revealing why this focus can backfire:
- First, the author observes that many companies today make new product development their main competitive strategy.
- Next, the author explains why companies do this by giving two clear reasons: the potential benefits are huge (growth, profits, investor interest) and the results are easier to measure compared to other business improvements.
- Then, the author introduces their main argument with a clear shift, stating that this narrow focus on product development can actually hurt company performance.
- Finally, the author supports this claim with a concrete example showing how companies that neglect other business areas (like distribution and marketing) while focusing on products can lose out to competitors, while companies with strong overall business systems are better protected.
Main Point:
While companies focus on new product development for good reasons, this narrow focus can backfire because neglecting other business functions can prevent companies from successfully bringing products to market and competing effectively.
3. Question Analysis:
This inference question asks us to identify which statement about organizational culture the author would most likely agree with. We need to find the choice that best aligns with the author's perspective on how organizational culture affects company performance.
Connecting to Our Passage Analysis:
From our passage analysis, several key insights are relevant:
- The author explains that companies reward employees for new product development with "incentives such as promotions and bonuses for developing new products, incentives not offered for innovations in other areas of the business"
- The author's main argument is that "a narrow focus on product development can ultimately detract from a firm's performance"
- The passage shows how neglecting other business functions (distribution, marketing, accounting) can hurt competitiveness
- The author demonstrates that strong overall business systems are crucial for market success
Prethinking:
Based on the passage structure, the author would likely agree with a statement that reflects the core problem identified: companies create organizational cultures that reward only certain types of contributions (new products) while failing to reward other valuable contributions (distribution, marketing, organizational improvements). This creates a cultural imbalance that can hurt competitiveness. The correct answer should capture this idea that the reward system creates blind spots in what companies value and incentivize.
Answer Choices Explained
A
Organizational culture is the primary determinant of a company's competitive position in a given market.
Why It's Wrong:
• The passage never suggests organizational culture is the "primary" determinant of competitive position
• The author focuses on one specific aspect of culture (reward systems) rather than claiming culture is the main factor
• The passage discusses multiple factors affecting competitiveness, not just culture
Common Student Mistakes:
1. Does the author's criticism of narrow focus mean culture is the most important factor? → No, the author is pointing out one problematic aspect, not ranking culture above all other business factors
2. Since the passage talks a lot about organizational culture, isn't it the primary factor? → The passage uses culture as a lens to examine reward systems, but doesn't claim it's more important than product quality, market conditions, etc.
• The passage never suggests organizational culture is the "primary" determinant of competitive position
• The author focuses on one specific aspect of culture (reward systems) rather than claiming culture is the main factor
• The passage discusses multiple factors affecting competitiveness, not just culture
Common Student Mistakes:
1. Does the author's criticism of narrow focus mean culture is the most important factor? → No, the author is pointing out one problematic aspect, not ranking culture above all other business factors
2. Since the passage talks a lot about organizational culture, isn't it the primary factor? → The passage uses culture as a lens to examine reward systems, but doesn't claim it's more important than product quality, market conditions, etc.
B
Many companies' organizational cultures are such that employee contributions in certain areas that might enhance those companies' competitiveness are not rewarded.
Why It's Right:
• Directly supported by the passage's explanation of reward systems
• Captures the core problem the author identifies: companies reward new product development but not other valuable contributions
• Aligns with the author's argument that this selective rewarding creates competitive disadvantages
Key Evidence: "many companies offer employees incentives such as promotions and bonuses for developing new products, incentives not offered for innovations in other areas of the business"
• Directly supported by the passage's explanation of reward systems
• Captures the core problem the author identifies: companies reward new product development but not other valuable contributions
• Aligns with the author's argument that this selective rewarding creates competitive disadvantages
Key Evidence: "many companies offer employees incentives such as promotions and bonuses for developing new products, incentives not offered for innovations in other areas of the business"
C
The narrowness of many companies' organizational cultures is evident in those companies' failure to reward sufficiently those employees who help to develop successful new products.
Why It's Wrong:
• Contradicts the passage's perspective on rewards for product development
• The passage suggests companies actually reward product developers too much, not too little
• Misses the author's point that the problem is imbalanced rewards, not insufficient product rewards
Common Student Mistakes:
1. Since the author criticizes the focus on products, does this mean product developers aren't rewarded enough? → No, the author's criticism is that product developers get special rewards while other contributors don't
2. Does "narrow focus" mean companies don't value product development sufficiently? → "Narrow focus" means they focus too much on products at the expense of other areas
• Contradicts the passage's perspective on rewards for product development
• The passage suggests companies actually reward product developers too much, not too little
• Misses the author's point that the problem is imbalanced rewards, not insufficient product rewards
Common Student Mistakes:
1. Since the author criticizes the focus on products, does this mean product developers aren't rewarded enough? → No, the author's criticism is that product developers get special rewards while other contributors don't
2. Does "narrow focus" mean companies don't value product development sufficiently? → "Narrow focus" means they focus too much on products at the expense of other areas
D
A company's organizational culture is likely to undergo significant change if the company is able to develop a new product and market it successfully.
Why It's Wrong:
• The passage doesn't suggest that successful product development changes organizational culture
• Confuses cause and effect - the passage shows how culture affects product success, not how product success affects culture
• No evidence in the passage supports the idea of culture changing due to successful products
Common Student Mistakes:
1. If companies succeed with new products, wouldn't this change their culture? → The passage doesn't address culture change; it shows how existing culture creates problems
2. Does success in one area lead to organizational changes? → The passage focuses on how current cultural priorities create competitive problems, not on cultural evolution
• The passage doesn't suggest that successful product development changes organizational culture
• Confuses cause and effect - the passage shows how culture affects product success, not how product success affects culture
• No evidence in the passage supports the idea of culture changing due to successful products
Common Student Mistakes:
1. If companies succeed with new products, wouldn't this change their culture? → The passage doesn't address culture change; it shows how existing culture creates problems
2. Does success in one area lead to organizational changes? → The passage focuses on how current cultural priorities create competitive problems, not on cultural evolution
E
The nature of a company's organizational culture tends to be more evident in its distribution system than in its degree of commitment to new product development.
Why It's Wrong:
• The passage doesn't compare where culture is "more evident" between different business functions
• No evidence suggesting distribution systems reveal culture more than product development commitment
• Misinterprets the author's discussion of distribution as being about cultural visibility rather than competitive importance
Common Student Mistakes:
1. Since the passage emphasizes distribution problems, does this show culture is more visible there? → The passage uses distribution as an example of what gets neglected, not as a window into culture
2. Does the contrast between product focus and distribution problems suggest where culture shows up most? → The contrast illustrates competitive consequences, not cultural visibility
• The passage doesn't compare where culture is "more evident" between different business functions
• No evidence suggesting distribution systems reveal culture more than product development commitment
• Misinterprets the author's discussion of distribution as being about cultural visibility rather than competitive importance
Common Student Mistakes:
1. Since the passage emphasizes distribution problems, does this show culture is more visible there? → The passage uses distribution as an example of what gets neglected, not as a window into culture
2. Does the contrast between product focus and distribution problems suggest where culture shows up most? → The contrast illustrates competitive consequences, not cultural visibility
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