1. What is the passage type?
Subject: Economics / Current Events
2. What is each paragraph about?
P1: Retailers are buying each other out.
P2: Wal-Mart bought Asda and sent British supermarket stock down.
P3: However, Norman, of Knutsford thinks the retail market is undervalued.
P4: M & S may be bought out.
P5: M & S’s founder was eccentric in character and management.
P6: M & S couldn’t stay up-to-date in its business practices and is losing profits as a result.
P7: Tesco is beating out Sainsbury. Sainsbury and Safeway will be taken over soon. Somerfield will not be able to sell its stores.
P8: France is nationalistic and will not sell out.
P9: Wal-Mart entered Europe through Germany, a price-conscious nation. If Wal-Mart is successful there, it will be in Britain as well, but not in food products.
3. What is the organization?
The passage combines fact and opinion. Most of the passage is a history of British business competition. This is a good background because it explains why there may be room for Wal-Mart or other buy-outs there.
Fact: France is nationalistic.
Opinion: France will not sell stores.
Fact: Germany is price-conscious.
Opinion: Wal-Mart will succeed there.
The passage also sets up some contrasts:
Germany vs. France
Britain vs. France
Eccentric business practices vs. Modern, innovative ones
Mom and Pop store vs. Large conglomerate
4. What is the Big Idea?
The retail situation in Europe is making room for takeovers and buy-outs by big companies. However, France may not succumb to this trend.
5. What is the author’s purpose?
To explain the retail situation in Europe and show that the effect on each country is not equal. However, overall changes are obvious.
1. Which of the following can be concluded from the passage?
(A) European retailers have ample reason to dread the American retail company Wal-Mart.
(B) More than 6% of Britons buy their food from J. Sainsbury & Sons.
(C) Wal-Mart is determined to become a major retailer in Europe.
(D) John Sainsbury and Simon Marks shared a similar disposition.
(E) None of the above
Type: Main Idea
(C) The passage alludes to the fear European retailers have of a threat from Wal-Mart, but this threat is not substantiated; hence there is not enough information to definitively infer (A). (B) is also wrong, because the passage says that more than 6% of Brits go grocery shopping at M&S, not J. Sainsbury & Sons. (D) is too vague to be supported by the passage. Finally, (C) is correct. We know that Wal-Mart is making a large effort to become a European retailer from lines like “Wal-Mart seems confident that the stores it has bought can beat the locals in service…”.
2. As compared to France, Germany is:
(A) more open to takeovers by international companies.
(B) less self-conscious about nationalism, protection from the state government is rare.
(C) more interested in cheaper goods.
(D) less concerned with customer satisfaction and quality service.
(E) none of the above.
Type: Detail of the passage
(C) In the sixth paragraph the author says, “Foreign takeovers seem less likely to succeed in France, where supermarkets are amalgamating into national champions, protected by local authorities”, but he or she does not say that Germany is more open to takeovers by international companies or that it is less self-conscious about nationalism and that protection from the state government is rare. So options (A) and (B) are wrong. Secondly, the author says, “Wal-Mart seems confident that the stores it has bought can beat the locals in service (which in Germany is atrocious).” Germany must be concerned with service if Wal-Mart is confident it can bring good service and, as a result, beat local stores. Hence, option (D) is incorrect. Now, consider the lines, “I would hesitate to invest early in any foreign intruder who seeks to flood France with the cheapest Asian textiles…That is why Wal-Mart has made its first European invasions during the past two years into price-conscious Germany.” Price-conscious means liking cheap goods. Hence, (C) is the correct option.
3. The company in which Archie Norman and friends invested $8 million is:
(A) aiming at opening retail outlets in Britain.
(B) likely to be involved in the manufacture or sale of clothes.
(C) a small retail operation that is aiming to expand by buyouts.
(D) not offering any product or service.
(E) none of the above.
(D) In the second paragraph the author says, “In early November he and three friends invested $8 million in a shell company called Knutsford.” A shell company means that it would not offer any product or service. Hence, (D) is correct. Although it is mentioned that Norman said Knutsford aimed to buy “undervalued retail operations”, we cannot infer that it is planning to expand by buy-outs. So option (C) is wrong. Finally, there is no mention of an intention to open retail outlets in Britain or the likelihood of its involvement in the manufacture or sale of clothes. Thus, options (A) and (B) are also incorrect.
4. Knutsford was worth $200 million the very next day because:
(A) Archie Norman’s association with Asda was enough to lure private investors.
(B) investors believed that some retail operations were undervalued.
(C) Archie Norman had obtained $11 billion in cash from the sale of Asda.
(D) retail operations were perceived as a very good investment.
(E) Knutsford was likely to buy out the bigger retail outlets in Britain.
(B) In the second paragraph, the author states that Norman said that Knutsford aimed to buy “undervalued retail operations.” Investors jumped at the last shares of his company. Hence, we know that investors believed retail operations were undervalued. The value of Norman’s investment skyrocketed due to this fact, and thus, (B) is the correct option. No evidence in the passage suggests that Norman’s association with Asda was enough to lure private investors, that he obtained $11 billion in cash from the sale of Asda, that retail operations are perceived as a very good investment or that Knutsford was likely to buy out the bigger retail outlets in Britain. So options (A), (C), (D) and (E) are incorrect.
5. Given what the passage says about the success of Wal-Mart, which of the following reforms, if carried out, would be most likely to ensure the continued success of M & S?
(A) a complete overhaul of the supplier base to ensure that it makes volume purchases at globally competitive rates.
(B) a marketing campaign to popularize its brand.
(C) recruiting senior managers from outside and purchasing from global sellers without any purchase guarantee.
(D) training staff for changes in the business environment.
(E) looking towards international rather than British trends and purchase accordingly.
(A) The passage offers no clues that any of the following would help M & S maintain its success: a marketing campaign to popularize the brand, recruiting senior managers from outside and purchasing from global sellers without any purchase guarantee, training staff for a change in the business environment, or looking towards international rather than British trends and purchasing accordingly. Hence, (B), (C), (D), and (E) are not incorrect. However, in the second paragraph, Wal-Mart is said to be a threat because it can find the cheapest suppliers. If M & S replicates Wal-Mart’s strategy by purchasing at cheaper prices, it will ensure its continued success. Therefore, (A) is the correct option.
6. With which of the following would Walmart have difficulty competing?
(E) M & S
(B) The last paragraph says, “The food market in Britain is challenging to enter for several reasons: there are planning restrictions against large out-of-town warehouses, gas taxes are high, and Tesco is already thriving as an efficient grocer in an overcrowded market.” Therefore, (B) is correct. There is no evidence that Sainsbury, Safeway, Somerfield, and M & S pose any threats for Wal-Mart. The passage, in fact, suggests the opposite. Hence, (A), (C), (D), and (E) are incorrect.
7. A hostile takeover would be unnecessary in the case of:
(A) M & S
(E) The author says that, “The fifth largest, Somerfield, is trying to sell its 140 best stores, but will probably fail to sell its 350 worst ones.” Hence, a hostile takeover is not necessary to beat out Somerfield. The company is already trying to sell its viable stores. Thus, (E) is the correct option. In the case of M & S, Sainsbury, Safeway, and Tesco this does not hold true. Hence, (A), (B), (C), and (D) are incorrect.
8. Which of the following is not mentioned as an obstacle to success in entering the British retail food market?
(A) strict law on food preservation
(B) the need for large out-of-town warehouses
(C) the presence of a well-entrenched retail outlet
(D) an overcrowded grocery market.
(E) high taxes associated with transportation
Type: Detail of the passage
(A) The last paragraph mentions, “The food market in Britain is challenging to enter for several reasons: there are planning restrictions on large out-of-town warehouses, gas taxes are high, and Tesco is already thriving as an efficient grocer in an overcrowded market.” Thus, only (A) is not mentioned as an obstacle.
9. One may infer that France is less susceptible to foreign takeovers mainly because
(A) it does not believe in free trade.
(B) it is not very price conscious.
(C) it is a closed economy.
(D) it is biased against American products.
(E) it is very nationalistic.
(E) Essentially, the French seem to believe in protectionism. As the author states, “Foreign takeovers seem less likely to succeed in France, where supermarkets are amalgamating into national champions, protected by local authorities…I would hesitate to invest early in any foreign intruder who seeks to flood France with the cheapest Asian textiles and most efficiently produced American hormone-treated beef.” Even the “cheapest Asian textiles” do not lure the French, so price consciousness is not a possible reason. Therefore, option (B) is wrong. Although a mention of American beef is made, there is no evidence of a bias. So option (D) is incorrect. Why does France believe in protectionism? A philosophical objection to free trade, or nationalistic fervor? Free trade and a closed economy are not referred to at all, so we cannot infer either of these are the reasons. Thus, options (A) and (C) are also incorrect. On the other hand, the passage mentions that French supermarkets are becoming national champions and that this is the reason that they are being protected. Therefore, (E) is correct.