Re: A hospital plans to cut costs by employing an independent service
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18 Apr 2024, 12:12
A hospital plans to cut costs by employing an independent service company, rather than the manufacturer, to maintain some of its technologically advanced diagnostic equipment. The independent company provides parts at cost, charges significantly less for labor, and maintains the equipment just as well as the manufacturer's service facilities.
The purpose of the hospital's plan is the following:
to cut costs
The reasoning of the hospital is that the plan to employ an independent service company, rather than the manufacturer, to maintain some of its equipment will achieve its purpose for the following reasons:
The independent company provides parts at cost, charges significantly less for labor, and maintains the equipment just as well as the manufacturer's service facilities.
So, basically, the idea is that the hospital can get the equipment maintained just as well at lower cost by employing an independent service company.
The effectiveness of the hospital’s plan is most vulnerable to which of the following moves by a manufacturer?
The correct answer will describe a move that the manufacturer can make that will cause the hospital's plan not to work.
A. Significantly increasing the prices it charges independent service companies for the replacement parts of which it is the only manufacturer
This move by the manufacturer could cause the plan not to work.
After all, if the manufacturer increases the prices it charges independent service companies for parts but doesn't increase the prices at which the manufacturer sells parts directly, then it can increase the cost of employing an independent company relative to the cost of using the manufacturer to maintain equipment. In that case, the hospital won't cut costs by employing the independent company.
I personally think this choice would have been more clearly correct if it said something about the manufacturer charging higher prices to independent companies than it charges customers who have it maintain equipment. All the same, since none of the other choices work and since we can tell that the question-writer probably meant that the manufacturer would increase prices of parts sold to independent companies but not those of parts sold directly to customers, we can confidently choose this choice as correct.
Keep.
B. Claiming that independent service companies give their service staff less training than the manufacturer gives its service staff
The manufacturer claiming that independent companies give their staff less training won't make any difference. After all, the passage states as fact that "The independent company ... maintains the equipment just a well as the manufacturer's service facilities."
So, even if the independent service company gives its staff less training, the result is just as good.
Eliminate.
C. Refusing to service any equipment that was previously serviced by an unauthorized person
This move won't wreck the plan since the hospital isn't planning to have the manfacturer service the equipment anyway.
Eliminate.
D. Mounting an advertising campaign that promotes the use of the manufacturer's service facilities
This move might convince the hospital to change its plan, but it won't undermine the success of the plan itself. After all, regardless of what's said in advertisements, the plan will work or not work since the plan does not depend on anything said about the manufacturer's service facilities.
Eliminate
E. Offering a bonus to its sales staff for selling equipment maintenance contracts to hospitals that use its equipment
This move might help the manufacturer get more equipment maintenance business, but it won't wreck the plan of a hospital that uses another service provider.
After all, sales of equipment contracts by the manufacturer won't affect the cost of employing or results achieved by the independent company.
Eliminate.
Correct answer: A