Many economists have held that competition among multiple domestic rivals within a given industry tends to weaken a nation's competitive...
GMAT Reading Comprehension : (RC) Questions
Many economists have held that competition among multiple domestic rivals within a given industry tends to weaken a nation's competitive advantage internationally within that industry: such rivalry leads to duplication of effort and prevents companies from lowering costs through large-scale production. Therefore, according to conventional wisdom, a government should embrace one or two national champions-companies with the scale and strength to tackle foreign competitors-and guarantee them the necessary resources for international operation.
In fact, though, most such heavily subsidized and protected champions are uncompetitive internationally, for they fail to benefit from domestic rivalry, which spurs companies to lower costs, improve quality and service, and create new products and processes. Unlike rivalries with foreign competitors, which tend to be abstract and distant, domestic rivalries involve direct competition for talented employees, for technical excellence, and for quantifiable success. Domestic competition automatically cancels the types of advantage that come from simply being in a particular nation-labor and supply costs, or access to and preference in the home market-and forces companies to develop other advantages. True, vigorous domestic competition ultimately pressures domestic companies to look toward global markets; however, domestic rivalry is precisely the condition that helps make international success possible.
The last sentence of the passage can be most accurately characterized as pointing out the
1. Passage Analysis:
Progressive Passage Analysis
| Text from Passage | Analysis |
|---|---|
| Many economists have held that competition among multiple domestic rivals within a given industry tends to weaken a nation's competitive advantage internationally within that industry | What it says: Traditional economic wisdom says that having multiple companies in one country competing with each other makes that country weaker in global competition. What it does: Introduces the conventional economic view that will be challenged Source/Type: Many economists' conventional belief Connection to Previous Sentences: First sentence - establishes the starting point Visualization: Country A has 5 car companies competing domestically → According to economists, this makes Country A weaker against foreign car companies Reading Strategy Insight: This is setting up a viewpoint that we should expect to be challenged. The phrase "Many economists have held" signals this isn't necessarily the author's view. |
| such rivalry leads to duplication of effort and prevents companies from lowering costs through large-scale production. | What it says: The reason for the economists' belief: domestic competition wastes resources and stops companies from getting big enough to be cost-efficient. What it does: Provides the reasoning behind the conventional wisdom Source/Type: Explanation of economists' logic Connection to Previous Sentences: This builds on sentence 1 by explaining WHY economists think domestic competition is bad Visualization: 5 car companies each building their own factories (duplication) + none getting big enough for maximum efficiency = higher costs than 1 large company Reading Strategy Insight: This is clarification, not new complexity. We're still in the "setup" phase of the argument. |
| Therefore, according to conventional wisdom, a government should embrace one or two national champions-companies with the scale and strength to tackle foreign competitors-and guarantee them the necessary resources for international operation. | What it says: The economists' solution: governments should pick 1-2 companies to support and give them everything they need to compete globally. What it does: States the policy recommendation that follows from the conventional wisdom Source/Type: Conventional wisdom's policy prescription Connection to Previous Sentences: This completes the conventional argument: Problem (sentence 1) + Reason (sentence 2) + Solution (sentence 3) Visualization: Government chooses Toyota and Honda, gives them subsidies and protection, while letting smaller car companies fail Reading Strategy Insight: We now have the complete conventional view. Expect the author to challenge this next with "However" or "But" or "In fact." |
| In fact, though, most such heavily subsidized and protected champions are uncompetitive internationally | What it says: REALITY CHECK: These government-backed "champion" companies usually fail in global markets. What it does: Directly contradicts the conventional wisdom with real-world evidence Source/Type: Author's challenge based on observed facts Connection to Previous Sentences: This CONTRASTS sharply with sentences 1-3. "In fact, though" signals the author is about to prove the economists wrong Visualization: Government-backed champions like France's state-supported companies vs. independent companies - the champions often lose in global competition Reading Strategy Insight: Feel confident here! The author is taking a clear stance. The complexity decreases because we now know which side the author supports. |
| for they fail to benefit from domestic rivalry, which spurs companies to lower costs, improve quality and service, and create new products and processes. | What it says: The protected champions fail because they miss out on the benefits of domestic competition, which forces companies to get better in multiple ways. What it does: Explains WHY the champions fail and introduces the author's core argument Source/Type: Author's reasoning Connection to Previous Sentences: This provides the reasoning for sentence 4's claim and directly opposes sentence 2's logic Visualization: Protected company (lazy, high costs, poor quality) vs. Company facing domestic rivals (efficient, innovative, high quality) → The competitive company wins internationally Reading Strategy Insight: Key insight: Domestic competition is actually GOOD, not bad. This is the author's main thesis. What We Know So Far: Economists wrong, domestic competition helps international success What We Don't Know Yet: Specific details about how domestic competition helps |
| Unlike rivalries with foreign competitors, which tend to be abstract and distant, domestic rivalries involve direct competition for talented employees, for technical excellence, and for quantifiable success. | What it says: Domestic competition is more intense and concrete than foreign competition - companies fight directly for workers, technology leadership, and measurable results. What it does: Elaborates on why domestic competition is particularly effective Source/Type: Author's detailed explanation Connection to Previous Sentences: This builds on sentence 5 by explaining the specific mechanism - WHY domestic rivalry is so effective at spurring improvement Visualization: Foreign competition: "We heard Company X overseas is doing well" vs. Domestic competition: "Company Y down the street just hired our best engineer and launched a better product" Reading Strategy Insight: This is elaboration and support, not new complexity. The author is helping us understand the mechanism behind the main argument. |
| Domestic competition automatically cancels the types of advantage that come from simply being in a particular nation-labor and supply costs, or access to and preference in the home market-and forces companies to develop other advantages. | What it says: When companies compete domestically, they can't rely on basic national advantages (cheap labor, local market preference) and must develop real competitive strengths. What it does: Explains another mechanism by which domestic competition strengthens companies Source/Type: Author's explanation Connection to Previous Sentences: This continues building on sentences 5-6, providing another reason why domestic competition helps international success Visualization: Two domestic companies can't compete on "we're both American with cheap American labor" - they must compete on innovation, efficiency, service quality Reading Strategy Insight: Still elaborating the same point. The author is thoroughly explaining one clear idea rather than jumping to new topics. |
| True, vigorous domestic competition ultimately pressures domestic companies to look toward global markets; however, domestic rivalry is precisely the condition that helps make international success possible. | What it says: Yes, domestic competition does push companies to seek global markets, BUT this is exactly what makes them successful internationally. What it does: Acknowledges and resolves a potential counterargument while reinforcing the main thesis Source/Type: Author's final synthesis and conclusion Connection to Previous Sentences: This RESTATES and reinforces the entire argument from sentences 4-7. "However" shows the author is concluding, not introducing new complexity Visualization: Tough domestic market → Company seeks easier global markets → But the toughening from domestic competition → Makes global success achievable Reading Strategy Insight: RELIEF POINT: This is the author's clear conclusion, restating the main argument in simple terms. The passage is wrapping up, not getting more complex. Final Summary: Conventional wisdom says domestic competition hurts international competitiveness, but the author argues (with evidence) that domestic competition actually helps international success. |
2. Passage Summary:
Author's Purpose:
To challenge the conventional economic wisdom about domestic competition by showing that it actually helps rather than hurts a nation's international competitiveness.
Summary of Passage Structure:
In this passage, the author builds their argument by first presenting the traditional view and then systematically dismantling it:
- First, the author presents the conventional economic belief that domestic competition weakens international competitiveness because it creates waste and prevents companies from getting big enough to be efficient.
- Next, the author explains the policy solution that follows from this belief - governments should pick and support one or two "national champions" to compete globally.
- Then, the author directly challenges this wisdom by pointing out that these protected champion companies usually fail in international markets because they miss out on the benefits of domestic competition.
- Finally, the author explains in detail how domestic competition actually strengthens companies by forcing them to innovate, compete directly for resources, and develop real advantages beyond just being located in a particular country.
Main Point:
Domestic competition between companies actually makes them stronger and more successful in international markets, not weaker as economists traditionally believed.
1. Question Analysis:
The question asks us to characterize what the last sentence of the passage is doing functionally. We need to identify the rhetorical purpose or role that this final sentence serves in the author's argument.
Connecting to Our Passage Analysis:
From our passage analysis, we know that the last sentence serves as the author's final synthesis and conclusion. The analysis shows this sentence "acknowledges and resolves a potential counterargument while reinforcing the main thesis." The sentence structure uses "True...however" which indicates the author is addressing a seeming contradiction and then resolving it in favor of their main argument.
The passage analysis reveals that throughout the passage, the author has been arguing that domestic competition actually helps international success, contrary to conventional wisdom. The final sentence acknowledges that domestic competition does pressure companies to look globally (which might seem like a problem), but then turns this into a strength.
Prethinking:
The last sentence acknowledges what might appear to be a downside of domestic competition (pushing companies to seek global markets) but then reveals this apparent disadvantage as actually being beneficial. This is a classic rhetorical move of showing that what seems negative is actually positive - finding benefit in an apparently disadvantageous situation.
• The passage doesn't focus on dangers of rejecting conventional wisdom - it focuses on benefits of embracing domestic competition
• The last sentence specifically addresses domestic competition's effects, not the consequences of ignoring economic advice
• The author has already established that conventional wisdom is wrong - the final sentence is making a different point
Common Student Mistakes:
- Does the author warn about dangers throughout the passage?
→ The author challenges conventional wisdom but doesn't warn about dangers of rejecting it - Is the final sentence about conventional wisdom?
→ No, it's about the specific mechanics of how domestic competition works
• The sentence doesn't discuss costs - it discusses benefits
• "Costs that accompany" suggests negative consequences, but the sentence shows positive outcomes
• The author is concluding that domestic competition leads to international success, not identifying downsides
Common Student Mistakes:
- Does "pressures domestic companies to look toward global markets" represent a cost?
→ This might seem like a cost, but the author presents it as leading to a benefit - Is being pushed to global markets necessarily bad?
→ The author shows this leads to success, making it ultimately beneficial
• The passage doesn't discuss reforms that need to be undertaken
• The author isn't warning about future problems - they're explaining current beneficial mechanisms
• The final sentence explains how domestic competition works positively, not what problems will arise without reforms
Common Student Mistakes:
- Is the author advocating for policy changes?
→ The author argues against conventional policy but doesn't propose specific reforms - Does the final sentence warn about future problems?
→ No, it explains how domestic competition currently helps companies succeed internationally
• The sentence acknowledges that domestic competition pressures companies to look globally (seemingly disadvantageous)
• Then it reveals this pressure actually "helps make international success possible" (the hidden benefit)
• This perfectly matches the pattern of finding benefit in what appears disadvantageous
• The entire sentence structure ("True...however") shows acknowledgment of apparent disadvantage followed by revelation of actual benefit
Key Evidence: "True, vigorous domestic competition ultimately pressures domestic companies to look toward global markets; however, domestic rivalry is precisely the condition that helps make international success possible."
• The sentence doesn't discuss using one strategy for two different goals
• The sentence focuses on one main outcome: international success through domestic competition
• While domestic competition might have multiple effects, the sentence emphasizes one primary benefit rather than two distinct goals
Common Student Mistakes:
- Are there two different goals mentioned in the final sentence?
→ The sentence focuses on one main goal: international success - Does domestic competition serve multiple purposes?
→ While it might, the final sentence emphasizes how it leads specifically to international competitiveness