Outsourcing is the practice of obtaining from independent suppliers products or services that a company previously provided for itself. Some...

GMAT Critical Reasoning : (CR) Questions

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Critical Reasoning

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Outsourcing is the practice of obtaining from independent suppliers products or services that a company previously provided for itself. Some analysts maintain that a company should outsource a product or service if an independent supplier can provide it at a lower cost, since the goal of any company is to maximize its profit. That goal, however, could require a company to make the opposite decision. Companies that outsource generally dismantle some of their capabilities. In so doing, they might make themselves totally dependent on just a few outside suppliers. Since the outsourcing companies do not control the priorities of those suppliers, the continuity of supply and thus of their own operations could be threatened. Thus, a company's long-term profitability might be better protected by not outsourcing.

In the argument given, the two boldfaced portions play which of the following roles?

The first describes a phenomenon the explanation of which is at issue in the argument; the second is the explanation that the argument concludes is correct.

The first describes a phenomenon the explanation of which is at issue in the argument; the second provides evidence in support of a proposed explanation of that phenomenon.

The first defines a key term used throughout the argument; the second is an intermediate conclusion drawn to support the main conclusion of the argument.

The first defines a key term used throughout the argument; the second is a generalization that has been used to support a conclusion that the argument rejects.

The first defines a key term used throughout the argument; the second provides evidence in support of an intermediate conclusion that is drawn to support the main conclusion of the argument.

Solution

Understanding the Passage

Text from Passage	Analysis
(Boldface 1) "Outsourcing is the practice of obtaining from independent suppliers products or services that a company previously provided for itself."	What it says: This defines what outsourcing means - when a company stops doing something internally and instead pays outside companies to do it for them. Visualization: Company ABC used to make their own computer chips in-house for $50 per chip. Now they buy chips from Supplier XYZ for $40 per chip instead of making them internally. What it does: This provides the basic definition needed to understand the entire discussion that follows. Source: Author's neutral definition
"Some analysts maintain that a company should outsource a product or service if an independent supplier can provide it at a lower cost, since the goal of any company is to maximize its profit."	What it says: Some business experts believe companies should outsource whenever they can save money, because companies exist to make as much profit as possible. Visualization: If Company ABC pays $50 per chip making internally but can buy for $40 from outside supplier, analysts say: outsource and save $10 per chip to maximize profits. What it does: This presents one side of the argument - the pro-outsourcing view based purely on cost savings. Source: Other people's view (analysts)
"That goal, however, could require a company to make the opposite decision."	What it says: The author suggests that maximizing profit might actually mean NOT outsourcing in some cases. Visualization: Company ABC might be better off paying $50 per chip internally instead of $40 externally if there are hidden long-term costs or risks. What it does: This signals the author disagrees with the analysts and will present a counter-argument. Source: Author's view
(Boldface 2) "Companies that outsource generally dismantle some of their capabilities."	What it says: When companies outsource, they typically get rid of their internal ability to do those tasks. Visualization: Company ABC closes its chip-making factory and lays off 200 chip engineers. Now they have zero internal chip-making capability. What it does: This introduces a key negative consequence of outsourcing that will support the author's counter-argument. Source: Author's view
"In so doing, they might make themselves totally dependent on just a few outside suppliers."	What it says: By losing internal capabilities, companies become completely reliant on external suppliers. Visualization: Company ABC now depends 100% on Supplier XYZ for chips. If XYZ has problems, ABC has no backup plan since they eliminated their internal chip-making. What it does: This explains why dismantling capabilities creates vulnerability. Source: Author's view
"Since the outsourcing companies do not control the priorities of those suppliers, the continuity of supply and thus of their own operations could be threatened."	What it says: Companies can't control what their outside suppliers prioritize, which could disrupt the supply of materials and hurt their business. Visualization: If Supplier XYZ gets a bigger order from Company DEF, they might delay ABC's chip order. ABC can't force XYZ to prioritize them, so ABC's production line stops for 2 weeks. What it does: This explains the specific risk of dependency - losing control over supply reliability. Source: Author's view
"Thus, a company's long-term profitability might be better protected by not outsourcing."	What it says: Therefore, companies might make more profit in the long run by keeping things internal instead of outsourcing. Visualization: Company ABC saves $10 per chip by outsourcing ($40 vs $50), but supply disruptions cost them $500,000 in lost production annually. Better to pay the extra $10 per chip for reliable supply. What it does: This is the author's main conclusion that opposes the analysts' view. Source: Author's view

Overall Structure

The author presents a counter-argument to the common business view on outsourcing. The flow is: definition → analysts' pro-outsourcing view → author's disagreement → reasons why outsourcing can hurt long-term profits.

Main Conclusion: A company's long-term profitability might be better protected by not outsourcing.

Boldface Segments

Boldface 1: Outsourcing is the practice of obtaining from independent suppliers products or services that a company previously provided for itself.
Boldface 2: Companies that outsource generally dismantle some of their capabilities.

Boldface Understanding

Boldface 1:

Function: Provides the foundational definition of outsourcing that the entire argument depends on
Direction: Neutral - neither supports nor opposes the author's conclusion, just sets up the discussion

Boldface 2:

Function: Presents a key negative consequence of outsourcing that supports the author's argument against it
Direction: Supports the author's conclusion by identifying a major downside of outsourcing

Structural Classification

Boldface 1:

Structural Role: Background definition/context that enables the entire discussion
Predicted Answer Patterns: "provides a definition," "establishes the context," "introduces the concept being discussed"

Boldface 2:

Structural Role: Evidence supporting the author's position against the analysts' recommendation
Predicted Answer Patterns: "supports the author's conclusion," "provides evidence against outsourcing," "identifies a disadvantage of outsourcing"

Answer Choices Explained

The first describes a phenomenon the explanation of which is at issue in the argument; the second is the explanation that the argument concludes is correct.

'The first describes a phenomenon the explanation of which is at issue in the argument' - ✗ WRONG - The first boldface simply defines outsourcing; it doesn't describe a phenomenon that needs explanation. 'the second is the explanation that the argument concludes is correct' - ✗ WRONG - The second boldface presents evidence about dismantling capabilities, not a complete explanation

The first describes a phenomenon the explanation of which is at issue in the argument; the second provides evidence in support of a proposed explanation of that phenomenon.

'The first describes a phenomenon the explanation of which is at issue in the argument' - ✗ WRONG - Same issue as Choice A - the first boldface is a definition, not a phenomenon requiring explanation. 'the second provides evidence in support of a proposed explanation of that phenomenon' - ✗ WRONG - Since the first part is wrong, this interpretation falls apart

The first defines a key term used throughout the argument; the second is an intermediate conclusion drawn to support the main conclusion of the argument.

'The first defines a key term used throughout the argument' - ✓ CORRECT - The first boldface clearly defines outsourcing, which is the central concept discussed throughout. 'the second is an intermediate conclusion drawn to support the main conclusion of the argument' - ✗ WRONG - The second boldface is evidence (companies dismantle capabilities), not a conclusion itself

The first defines a key term used throughout the argument; the second is a generalization that has been used to support a conclusion that the argument rejects.

'The first defines a key term used throughout the argument' - ✓ CORRECT - Accurately describes the definitional role of the first boldface. 'the second is a generalization that has been used to support a conclusion that the argument rejects' - ✗ WRONG - The second boldface supports the author's conclusion, not a conclusion the author rejects

The first defines a key term used throughout the argument; the second provides evidence in support of an intermediate conclusion that is drawn to support the main conclusion of the argument.

'The first defines a key term used throughout the argument' - ✓ CORRECT - The first boldface provides the foundational definition of outsourcing. 'the second provides evidence in support of an intermediate conclusion that is drawn to support the main conclusion of the argument' - ✓ CORRECT - The second boldface provides evidence (dismantling capabilities) that supports the intermediate conclusion about dependency, which supports the main conclusion about protecting long-term profitability

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