In the Early 1970s, a New System of Organizing the Grow- ing GMAT Reading Comprehension

Reading Passage Question

In the early 1970s, a new system of organizing the growing acquisitions of corporations was introduced. Called the growth/share matrix, this tool seemed to operate on the most logical of assumptions: Corporations should sell off (5) their losing divisions as determined by the divisions’ positions on the matrix, and retain and increase those divisions that the matrix considered successful. According to the Harvard Business Review, the Boston Consulting Group (BCG) introduced the matrix in response (10) to corporations that had entered the heyday of acquisition and diversification of the 1960s and early 1970s, and subse- quently filtered with the energy crisis of 1973. The matrix worked by ordering each division according to its position within its industry overall. Thus, managers had a tool for un-(15) derstanding the relative success of those businesses with whose fields they were unfamiliar. Enthusiasm over the the matrix and its simplicity and apparent logic obscured one of the problems inherent in the initial situation: the wide range of acquisitions these corporations had purchased. (20) The matrix evaluated the performance of the divisions in terms of their competitiveness within their fields and their cash value, but failed to analyze the relationships among di- visions that made up a corporation's holdings. For instance, a corporation that owned a newspaper chain and a paper (25) mill would be advised to consider more than just the relation of the paper mill's performance to that of other mills. Beyond this, the matrix underestimated the amount of debt a corporation could safely assume. And finally, the matrix was unable to provide information regarding the corporation's (30) ability to manage even those successes identified by the matrix. Simply having a number of separately competitively successful companies does not ensure that companies will be able to support their owners without proper management (35) and understanding. Despite the clarity and effectiveness of the growth/share matrix as a tool for determining divisions’ performance, it could not long compensate for the difficulties present in the initial situation it sought to alleviate: that of corporations believing that their particular management (40) styles would function effectively for any type of smaller business they might acquire.

“In the early 1970s, a new system of organizing the grow- ing GMAT reading comprehension.”- is a GMAT reading comprehension passage with answers. Candidates need a strong knowledge of English GMAT reading comprehension. This GMAT Reading Comprehension consists of 4 comprehension questions. The GMAT Reading Comprehension questions are designed for the purpose of testing candidates’ abilities in understanding, analyzing, and applying information or concepts. Candidates can actively prepare with the help of GMAT Reading Comprehension Practice Questions.

Solution and Explanation

1. Which of the following best describes the main idea of the passage?

1. The growth/share matrix was a failure as an acquisition research tool, and hurt many corporations.
2. The growth/share matrix, though eagerly embraced at first, could not completely solve the problems it sought to address.
3. Corporations that acquire holdings that are both overly diversified and unrelated will not succeed in the business world.
4. Management style should be of primary concern when a corporation is deciding which divisions to retain and which to divest.
5. No one corporate tool can ever compensate for a lack of management skills and well-thought-out acquisition planning.

2. According to the passage, all of the following were problems associated with corporations’ reliance on the growth/share matrix EXCEPT

1. the overestimation by the matrix of the negative effect that debt might have on a corporation.
2. not considering divisions’ relation to one another within each corporation’s holdings.
3. The failure of the matrix to compensate for the lack of knowledge the corporations had about their own holdings.
4. the matrix’s inability to correctly order divisions within their overall industries.
5. the matrix’s lack of focus on a corporation’s ability to manage its acquisitions.

3. It can be inferred from the passage that the author suggests which of the following concerning some corporations during the energy crisis of 1973?

1. The troubles of these corporations were related to problems of conforming their management styles to their new holdings.
2. Lack of fuel led many companies to have trouble powering their acquisitions.
3. Corporations’ reliance on the growth/share matrix led them to mismanage their holdings.
4. Overenthusiastic buying of smaller companies left many corporations unwieldy and difficult to manage.
5. Too little diversification forced companies to find a tool to estimate the relative success of companies with whose fields they were unfamiliar.

4. It can be inferred from the passage that the original intention of the growth/share matrix was to

1. indicate which smaller companies were successes and thus good buys for corporations
2. counter the chaos of the heyday of acquisition and diversification of the 1960s and 1970s
3. inform parent companies which of their holdings were doing well in relation to their own fields
4. present companies with a way to counter the faltering of their successes during the energy crisis of 1973
5. alleviate the problems associated with corporations’ underestimation of the amount of debt they could acquire

Suggested GMAT Reading Comprehension Samples

• The United States Government has a Long-Standing Policy of Using Federal Funds to Keep Small Business Viable. GMAT Reading Comprehension
• Comparable Worth, as a Standard Applied to Eliminate Inequities in Pay GMAT Reading Comprehension
• Some Historians Contend that Conditions in the United States During the Second World War GMAT Reading Comprehension
• More Selective than Most Chemical Pesticides in that they Ordinarily Destroy only Unwanted Species GMAT Reading Comprehension
• Historians have Identified Two Dominant Currents in the Russian Women's Movement of the Late Tsarist Period.GMAT Reading Comprehension
• According to P. F. Drucker, The Management Philosophy Known as Total Quality Management GMAT Reading Comprehension
• The Professionalization of the Study of History in the Second Half of the Nineteenth Century GMAT Reading Comprehension
• Conventional Wisdom has it that Large Deficits in the United States Budget Cause Interest Rates to Rise. GMAT Reading Comprehension
• In a New Book About the Antiparty Feeling of the Early Political Leaders of the United States GMAT Reading Comprehension
• The System of Patent-Granting, Which Confers Temporary Monopolies for the Exploitation of New Technologies GMAT Reading Comprehension
• Traditional Social Science Models of Class Groups in the United States are Based on Economic Status GMAT Reading Comprehension
• Solar Ponds are Bodies of Water in Which Circulation is Incomplete and There is a Very High Salt Concentration that Increases with Depth GMAT Reading Comprehension
• More Selective than Most Chemical Pesticides in that they Ordinarily Destroy only Unwanted Species GMAT Reading Comprehension
• Historians have Identified Two Dominant Currents in the Russian Women's Movement of the Late Tsarist Period.GMAT Reading Comprehension
• Citing the Fact that the Real Gross Domestic Product (GDP) per capita was Higher in 1997 GMAT Reading Comprehension
• Ethnohistoric Documents from Sixteenth-Century Mexico GMAT Reading Comprehension
• A Recent Study has Provided Clues to Predator-Prey Dynamics in the Late Pleistocene Era. GMAT Reading Comprehension
• The Black Death, a Severe Epidemic that Ravaged Fourteenth Century Europe GMAT Reading Comprehension
• The General Density Dependence Model can be Applied to Explain the Founding of Specialist Firms GMAT Reading Comprehension
• In the 1980's, Astronomer Bohdan Paczynski Proposed a Way of Determining Whether the Enormous Dark Halo Constituting the Outermost Part of the Milky Way Galaxy GMAT Reading Comprehension