CAT RC Practice Set-62

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.


Question: The primary purpose of the passage is to

  1. contrast possible outcomes of a type of business investment
  2. suggest more careful evaluation of a type of business investment
  3. illustrate various ways in which a type of business investment could fail to enhance revenues
  4. trace the general problems of a company to a certain type of business investment
  5. criticize the way in which managers tend to analyze the costs and benefits of business investments
Option: 2

Question: According to the passage, investments in service are comparable to investments in production and distribution in terms of the

  1. tangibility of the benefits that they tend to confer
  2. increased revenues that they ultimately produce
  3. basis on which they need to be weighed
  4. insufficient analysis that managers devote to them
  5. degree of competitive advantage that they are likely to provide
Option: 3

Question: The passage suggests which of the following about service provided by the regional bank prior to its investment in enhancing that service?

  1. It enabled the bank to retain customers at an acceptable rate.
  2. It threatened to weaken the bank’s competitive position with respect to other regional banks.
  3. It had already been improved after having caused damage to the bank’s reputation in the past.
  4. It was slightly superior to that of the bank’s regional competitors.
  5. It needed to be improved to attain parity with the service provided by competing banks.
Option: 1

Question: The passage suggests that bank managers failed to consider whether or not the service improvement mentioned in line 19

  1. was too complicated to be easily described to prospective customers
  2. made a measurable change in the experiences of customers in the bank’s offices
  3. could be sustained if the number of customers increased significantly
  4. was an innovation that competing banks could have imitated
  5. was adequate to bring the bank’s general level of service to a level that was comparable with that of its competitors
Option: 4

Question: The discussion of the regional bank serves which of the following functions within the passage as a whole?

  1. It describes an exceptional case in which investment in service actually failed to produce a competitive advantage.
  2. It illustrates the pitfalls of choosing to invest in service at a time when investment is needed more urgently in another area.
  3. It demonstrates the kind of analysis that managers apply when they choose one kind of service investment over another.
  4. It supports the argument that investments in certain aspects of service are more advantageous than investments in other aspects of service.
  5. It provides an example of the point about investment in service made in the first paragraph.
Option: 5

Question: The author uses the word “only” in line 23 most likely in order to

  1. highlight the oddity of the service improvement
  2. emphasize the relatively low value of the investment in service improvement
  3. distinguish the primary attribute of the service improvement from secondary attributes
  4. single out a certain merit of the service improvement from other merits
  5. point out the limited duration of the actual service improvement
Option: 2

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