The fact that superior service can generate a competitive advantage for a company does not mean that every attempt at...
GMAT Reading Comprehension : (RC) Questions
The fact that superior service can generate a competitive advantage for a company does not mean that every attempt at improving service will create such an advantage. Investments in service, like those in production and distribution, must be balanced against other types of investments on the basis of direct, tangible benefits such as cost reduction and increased revenues. If a company is already effectively on a par with its competitors because it provides service that avoids a damaging reputation and keeps customers from leaving at an unacceptable rate, then investment in higher service levels may be wasted, since service is a deciding factor for customers only in extreme situations.
This truth was not apparent to managers of one regional bank , which failed to improve its competitive position despite its investment in reducing the time a customer had to wait for a teller. The bank managers did not recognize the level of customer inertia in the consumer banking industry that arises from the inconvenience of switching banks. Nor did they analyze their service improvement to determine whether it would attract new customers by producing a new standard of service that would excite customers or by proving difficult for competitors to copy. The only merit of the improvement was that it could easily be described to customers.
The primary purpose of the passage is to
1. Passage Analysis:
Progressive Passage Analysis
| Text from Passage | Analysis |
|---|---|
| The fact that superior service can generate a competitive advantage for a company does not mean that every attempt at improving service will create such an advantage. | What it says: Just because good service can help a company beat competitors doesn't mean every service improvement will work. What it does: Introduces the main concept and sets up a distinction between service improvements that work vs. those that don't. Source/Type: Author's opinion/analysis Connection to Previous Sentences: This is the opening statement - establishes the foundation for the entire argument. Visualization: Company A improves service → beats competitors ✓ BUT Company B improves service → no advantage ✗ Reading Strategy Insight: This opening creates a simple framework: some service improvements work, others don't. The rest of the passage will explain this distinction. What We Know So Far: Service improvements aren't automatically beneficial What We Don't Know Yet: When service improvements work vs. when they don't |
| Investments in service, like those in production and distribution, must be balanced against other types of investments on the basis of direct, tangible benefits such as cost reduction and increased revenues. | What it says: Companies should only invest in service improvements if they provide clear, measurable benefits like saving money or making more money. What it does: Restates and clarifies the opening idea by explaining what makes service improvements worthwhile. Source/Type: Author's opinion/business principle Connection to Previous Sentences: This builds on Sentence 1 by answering "So when DO service improvements create advantage?" Answer: When they provide measurable financial benefits. Visualization: Service Investment Decision: Option 1: Costs $100,000 → Saves $150,000 annually ✓ Option 2: Costs $100,000 → "Customers feel better" ✗ Reading Strategy Insight: Feel relieved here - this is clarification, not new complexity! The author is helping us understand the practical rule for service investments. |
| If a company is already effectively on a par with its competitors because it provides service that avoids a damaging reputation and keeps customers from leaving at an unacceptable rate, then investment in higher service levels may be wasted, since service is a deciding factor for customers only in extreme situations. | What it says: If your service is already good enough (customers aren't leaving, reputation is fine), spending more on service might be pointless because customers only care about service when it's really bad or really amazing. What it does: Provides a specific example of when service investments are wasted - when you're already "good enough." Source/Type: Author's analysis/principle Connection to Previous Sentences: This elaborates on the "must be balanced" concept from Sentence 2 by giving a specific scenario where the balance tips toward "don't invest more in service." Visualization: Service Level Scale: Terrible (customers leave) → Adequate (customers stay) → Amazing (attracts new customers) Most companies are in the "Adequate" zone where more investment = wasted money Reading Strategy Insight: This continues building the same argument - not introducing new complexity. We're learning WHEN the Sentence 1 principle applies. What We Know So Far: Service investments need measurable benefits; often wasted if you're already "adequate" What We Don't Know Yet: A concrete example of this principle in action |
| This truth was not apparent to managers of one regional bank, which failed to improve its competitive position despite its investment in reducing the time a customer had to wait for a teller. | What it says: Bank managers didn't understand this principle and wasted money making teller lines faster without gaining any competitive advantage. What it does: Introduces a concrete example that will illustrate the principles established in the first three sentences. Source/Type: Factual example/case study Connection to Previous Sentences: This is the promised example! "This truth" directly refers back to the principle in Sentence 3 about wasted service investments. Visualization: Regional Bank Investment: Spent: Unknown amount on faster teller service Result: No competitive advantage gained Wait time: Reduced (but this didn't matter to customers) Reading Strategy Insight: This should feel familiar, not overwhelming! The author is giving us a real-world illustration of concepts we already understand. This is reinforcement, not new information. |
| The bank managers did not recognize the level of customer inertia in the consumer banking industry that arises from the inconvenience of switching banks. | What it says: The bank managers didn't realize that customers rarely switch banks because it's too much hassle, so small service improvements won't attract new customers. What it does: Explains the first reason why the bank's strategy failed - provides industry-specific context. Source/Type: Author's analysis of the bank's mistake Connection to Previous Sentences: This elaborates on "failed to improve its competitive position" by explaining WHY the failure occurred. Connects back to the "extreme situations" concept - faster teller service wasn't extreme enough to overcome switching hassle. Visualization: Customer Decision Process: "Bank A: 3-minute teller wait" vs "My current bank: 5-minute wait" Customer thinks: "2 minutes saved vs. hassle of switching accounts, learning new ATM locations, updating direct deposits..." Result: Stays with current bank Reading Strategy Insight: This is still the same example, just getting more specific about why it failed. We're drilling down, not jumping to new concepts. |
| Nor did they analyze their service improvement to determine whether it would attract new customers by producing a new standard of service that would excite customers or by proving difficult for competitors to copy. | What it says: The managers also failed to check if their improvement would either: (1) create excitement that attracts customers, or (2) be hard for competitors to copy. What it does: Explains the second reason for the bank's failure and reveals what successful service improvements should accomplish. Source/Type: Author's analysis/business principle Connection to Previous Sentences: "Nor did they" continues the list of bank management mistakes. This also connects back to Sentence 2's "direct, tangible benefits" - these are the two ways service can provide those benefits. Visualization: Successful Service Improvements Must: Path 1: Create excitement → attract new customers → increased revenues Path 2: Be hard to copy → maintain competitive advantage → sustained revenues Bank's teller speed: Easy to copy, not exciting Reading Strategy Insight: The author is giving us the positive version of the principles - what the bank SHOULD have done. This completes our understanding without adding complexity. |
| The only merit of the improvement was that it could easily be described to customers. | What it says: The only good thing about the bank's teller speed improvement was that it was simple to explain to customers. What it does: Provides a final, somewhat ironic conclusion to the bank example - emphasizing how inadequate their strategy was. Source/Type: Author's critical assessment Connection to Previous Sentences: This contrasts sharply with the "excite customers" and "difficult for competitors to copy" criteria from the previous sentence. "The only merit" emphasizes how completely the bank missed the mark. Visualization: Bank's Service Improvement Report Card: Creates excitement: ✗ Hard to copy: ✗ Overcomes customer inertia: ✗ Provides measurable benefit: ✗ Easy to describe: ✓ Score: 1/5 - Failed Reading Strategy Insight: This is the satisfying conclusion that ties everything together. The author has systematically shown us why this example perfectly illustrates the opening principle. No new concepts - just a complete picture. Final Summary - What We Now Understand: • Service improvements aren't automatically beneficial • They must provide measurable financial benefits • They're often wasted when companies are already "adequate" • Success requires either customer excitement or competitive protection • The bank example perfectly demonstrates all these principles |
2. Passage Summary:
Author's Purpose:
To explain why many service improvement investments fail to create competitive advantages and demonstrate this principle through a real business example.
Summary of Passage Structure:
The author builds their argument in clear steps:
- First, the author establishes that not all service improvements create competitive advantages, even though superior service can be beneficial.
- Next, they explain that service investments must provide clear financial benefits and outline when such investments are typically wasted.
- Then, they introduce a regional bank as an example of failed service investment, showing how the bank reduced teller wait times but gained no competitive advantage.
- Finally, they analyze why the bank's strategy failed by explaining the bank managers' multiple mistakes and highlighting the investment's only minor benefit.
Main Point:
Companies often waste money on service improvements because they fail to ensure these investments will either overcome customer inertia by creating genuine excitement or provide advantages that competitors cannot easily copy.
3. Question Analysis:
The question asks for the primary purpose of the passage - essentially, why did the author write this passage? What is the main goal or objective the author is trying to accomplish?
Connecting to Our Passage Analysis:
- The passage structure shows the author establishing a principle (not all service improvements work) and then demonstrating this principle through analysis
- The author provides specific criteria for evaluating service investments: they must provide "direct, tangible benefits such as cost reduction and increased revenues"
- The bank example serves as a cautionary tale that illustrates what happens when companies don't properly evaluate service investments
- The author systematically explains what the bank managers should have considered: customer inertia, whether the improvement would excite customers, and whether it would be difficult for competitors to copy
Prethinking:
Based on our passage analysis, the author's primary purpose appears to be advocating for more careful, systematic evaluation of service investments. The author isn't just contrasting outcomes or illustrating failures - they're providing a framework for how companies should approach service investment decisions. The passage reads like business advice: "Here's why service investments often fail, here's what you should consider, and here's what happens when you don't follow this advice."
Why It's Wrong:
• The passage doesn't simply contrast outcomes - it advocates for a specific approach to evaluation
• While the passage mentions both successful and failed service investments, contrasting outcomes is not the primary focus
• The emphasis is on the evaluation process, not on comparing different results
Common Student Mistakes:
1. Doesn't the passage show both good and bad outcomes of service investments?
→ Yes, but showing different outcomes is a tool the author uses to make the main point about proper evaluation
1. Isn't the bank example contrasted with successful approaches?
→ The bank example illustrates poor evaluation; the author's main goal is teaching better evaluation methods
Why It's Right:
• The passage systematically outlines what companies should consider before investing in service improvements
• The author provides specific criteria for evaluation: direct tangible benefits, customer excitement, difficulty for competitors to copy
• The bank example serves as a teaching tool to show the consequences of inadequate evaluation
• The entire passage structure builds toward better decision-making about service investments
Key Evidence: "Investments in service, like those in production and distribution, must be balanced against other types of investments on the basis of direct, tangible benefits such as cost reduction and increased revenues."
Why It's Wrong:
• The passage uses only one detailed example (the bank), not "various ways"
• The focus isn't on illustrating failure modes but on promoting better evaluation
• Revenue enhancement is mentioned, but it's not the central focus of the passage
Common Student Mistakes:
1. Doesn't the bank example show how service investments can fail?
→ Yes, but this serves the larger purpose of teaching proper evaluation, not just cataloging failures
1. Isn't the passage about avoiding revenue problems?
→ Revenue is one consideration, but the passage is broader - it's about comprehensive evaluation methodology
Why It's Wrong:
• The passage doesn't trace the bank's "general problems" - it focuses on one specific investment decision
• The bank example illustrates a broader principle rather than analyzing the company's overall issues
• The scope is much broader than one company's problems
Common Student Mistakes:
1. Isn't the bank example central to the passage?
→ The bank is an illustration of broader business principles, not the main subject
1. Doesn't the passage explain what went wrong at the bank?
→ Yes, but to teach general evaluation principles, not to analyze that specific company
Why It's Wrong:
• The passage doesn't criticize managers' general analytical tendencies
• The focus is on providing guidance for better evaluation, not criticizing current practices
• The tone is instructive rather than critical
Common Student Mistakes:
1. Doesn't the passage criticize the bank managers?
→ The bank example serves to illustrate principles, not to broadly criticize managerial analysis
1. Isn't the author pointing out flaws in business thinking?
→ The author points out specific evaluation gaps to promote better decision-making methods