Important Note
This question is a part of the Focus Edition practice exams (mocks). Please go through the following solution only if you already encountered this question and are looking for a solution. If you are yet to come across this question in your GMAT prep, it may be better to skip this article, as you may get this question in one of your practice exams in the future
Question
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.
Given this is an official question, because of copyright, the complete question cannot be shown here. The question can be accessed at GMATClub by searching using the question text online.
Solution
Understanding the argument and it’s logical structure
– The author starts by defining “outsourcing” for us: opting for a 3rd party for a product/service instead of continuing to do it in-house.
BF1 -> is simply the author providing a definition of something.
– Now, we see the analysts’ argument presented:
>> Their conclusion: a company should outsource if an independent supplier can provide the product/service at a lower cost.
>> The justification provided: because the goal of any company is to maximize its profit (logic -> less cost helps create more profit).
– Next, we see a claim made by the author. We realize that this claim is technically a conclusion as we read on, because the author provides a reasoning for it in subsequent sentences.
>> A conclusion by the author: That goal (maximizing profits), however, could require a company to make the opposite decision (i.e., in-house instead of outsourcing).
– Next, we see the reasoning for the above conclusion:
>> Companies that outsource generally dismantle some of their capabilities (BF2). Factual truth.
>> In doing so, they may become dependent on some suppliers.
>> The companies have no control on these suppliers. So, their ops, their supply is not safe (these could impact profits). It could be threatened because they are dependent on suppliers they have zero control over.
The above reasoning supports the author’s conclusion that the goal of maximising profits could require i.e., make it mandatory for a company to go in-house rather than outsource.
Logic -> With outsourcing, there could be a legitimate threat to profits because of dependency on suppliers the company has no control over. Hence, it could be that it is absolutely necessary to go in-house rather than outsource, given the goal of profit maximisation.
BF2 -> is clearly a fact that is used to support a conclusion made by the author.
But wait – is the above conclusion the author’s main conclusion from the overall argument?
No. The author adds a little something extra here.
– “Thus, a company’s long-term profitability might be better protected by not outsourcing.”
This statement is actually the main conclusion of the argument. It is supported by the earlier conclusion made by the author (which we can call an “intermediate conclusion”).
>> Main Conclusion: A company’s long-term profitability might be better protected by not outsourcing.
>> Reasoning:
Because it could be that the goal of maximising profits can only be achieved by going in-house rather than outsourcing (this is the earlier conclusion), the author claims that a company’s long term profitability might actually be better protected by not going for outsourcing.
So, in essence ->
BF1 – is simply the author providing a definition.
BF2 – is a fact that is used to support an intermediate conclusion made by the author, which is used to support the main conclusion of the argument.
Here, you can already see that choice E makes most sense. It is the correct answer!
Confused about which of the two conclusions of the author is the actual, “main conclusion” of the argument?
The key to figuring this out is to reason out which conclusion is actually supporting which conclusion?
i.e., which sequence makes logical sense?
A) Conclusion 1 is supporting conclusion 2 (or)
B) Conclusion 2 is supporting conclusion 1
Let’s think logically. For a company to have good profitability in the long run, it makes sense that it has to prioritize profit maximization in most if not all of what it does.
Continuous efforts to maximize profits -> over a period of time, excellent profits. (expected)
The earlier conclusion is talking about what a company needs to do to maximize profits. The final conclusion is about what can happen as a result of doing things that help with profit maximization – long term profitability. It makes sense that the first conclusion is the intermediate conclusion, and the second one is the main conclusion.
Answer choice analysis
· Choice A:
o BF1
§ Outsourcing can be called a phenomenon.
§ But the explanation of what outsourcing is is not an issue in the argument.
§ BF1 is incorrect.
o BF2
§ The second is a fact related to outsourcing (what happens when outsourcing is done). It is not an explanation of what outsourcing is. More importantly, it is considered as a factual truth. The argument does not “conclude” that it is correct. It is considered correct as is.
§ BF2 is also shady.
· Choice B:
o BF1
§ Same as choice A. Incorrect.
o BF2
§ BF2 is evidence used to support the intermediate conclusion that the goal of maximising profits could require a company to go for in-house instead of outsourcing. It is not evidence in support of some proposed explanation of the phenomenon of outsourcing. Beyond the stated definition, there is no explanation of outsourcing. “Proposed explanation of that phenomenon” does not make much sense.
§ BF2 is also incorrect.
· Choice C:
o BF1
§ Correct. The whole argument is concerned with outsourcing. BF1 provides the definition of this key term.
o BF2
§ BF2 is a factual truth (premise) used to support the intermediate conclusion. It is not the intermediate conclusion.
§ BF2 is incorrect.
· Choice D:
o BF1
§ Correct. Same as choice C.
o BF2
§ BF2 is a generalization, yes. It tells us something companies that outsource generally do.
§ It is used to support a conclusion. Also yes, as we have seen before.
§ But the conclusion BF2 supports is not something the argument rejects. Nope. That conclusion is in fact used to support the main conclusion of the argument.
§ So, BF2 is incorrect.
· Choice E:
o BF1
§ Correct. Same as choice C.
o BF2
§ BF2 can be considered as evidence.
§ It is indeed used to support an intermediate conclusion.
§ That intermediate conclusion is indeed used to support the main conclusion of the argument.
§ So, BF2 is also correct.
o Choice E is the correct answer.
Hope this helps!
Harsha