Comprehension
Business is a fine balance between opportunity and risk. In an ideal world the entrepreneur identifies a new opportunity, a
product, a process or a service that would increase user satisfaction. Successful businesses identify opportunities early, and ride
a wave, at minimum risk, to deliver sustained growth and profitability. Bad or incomplete identification of an opportunity or an
inadequate understanding of risk can destroy businesses. The last 18 months have seen a significant number of businesses
destroyed all over the world. Opportunities available to Indian firms eight months ago are now history; risk has increased
manifold.
The high growth environment and the go-go nature of growth in the last decade trivialized the need for a systematic identification of opportunity and a comprehensive assessment of risk. The pie was so big and growing so quickly, that almost anything made sense and money. Indian firms expanded capacity, market footprint, acquired firms in high-cost regimes, increased exports as a component of the sales and profit, salaries and wages rocketed and there was an opportunity for every stakeholder at seemingly no risk. All and sundry began to think of themselves as world-beaters.
Now that they have been beaten by the world it is time to reset the approach to avoid a Ctrl-Alt-Del situation. Identifying and seizing opportunities require a profound understanding of markets and customer expectations. Product, process and service have to be tailored to the ‘emerging’ customer need rather than the current need. The new paradigm is: what can we make that you want to buy as against – we have a product you have to buy! Indian corporates need to develop products and services that are centered around unmet needs of customers and go out and market, rather than sell, them. This requires understanding market reality, shifts and drivers on an ongoing continuous basis. Indian firms need to invest in understanding factors critical to their success – the physical, political, economic, social, technology and trade frameworks that will drive the competencies they need to acquire to leverage an opportunity. This requires a realistic estimate of the value chains that deliver results at least risk and their own strengths and weaknesses to manage and mitigate the risks while making the most of the opportunity. The iPhone is an excellent example of this approach.
In a commoditizing market Apple identified the needs that users, young, old and mid-age, wanted and produced a user- friendly product. The factor critical to its success is its ease of connectivity, high-speed download off the Internet and elegant looks, not to mention superb feature list. The least concern for the user is the phone attributes, which, in any case, are good! In contrast, all the leading players of two years ago are now playing catch-up with iPhone, which, incidentally, offers a limited range of models, in contrast to the dizzying array and colours from other phone-makers! A good risk reduction exercise. Risk needs to be understood in its totality. Risk, defined as the possibility that events may not turn out as planned or expected, has many dimensions to it, much of it ignored in a high growth era, and all of which become relevant and rear up when least desired, in difficult times. The primary risk Indian corporate need to contend with is strategic risk – the ability to identify and seize an opportunity and allot resources to ensure delivery. It is sad to see the ‘retail revolution’ leaders of mid-2008, languishing in sour deals. The closure of 20 per cent of these ‘modern format stores’ is a telling commentary on the poor assessment of strategic risk. Minimizing strategic risk increases the competitiveness of the firm.
The second major risk facing Indian corporate is operational risk; Indian productivity remains way behind global standards. And corporates have not even begun addressing them. The garment industry is a case in point. On average, an Indian garment- maker produces 7 – 10 garments per machine per day. The world standard is 23 – 25! No wage differential can mask the harmful consequences of this depth of under-performance. Remove the subsidies and the garment industry will sink like a stone. Reducing operational risk increases asset and resource productivity. Capacity utilization is a good mitigator of operational and strategic risk; and both of them could do with significant streamlining. With increasing profitability Indian firms have been diversifying – a nice, but risky way, to seek opportunities. Real estate is littered with firms which saw ‘opportunity’, created land banks and are now sitting ducks.
The high growth environment and the go-go nature of growth in the last decade trivialized the need for a systematic identification of opportunity and a comprehensive assessment of risk. The pie was so big and growing so quickly, that almost anything made sense and money. Indian firms expanded capacity, market footprint, acquired firms in high-cost regimes, increased exports as a component of the sales and profit, salaries and wages rocketed and there was an opportunity for every stakeholder at seemingly no risk. All and sundry began to think of themselves as world-beaters.
Now that they have been beaten by the world it is time to reset the approach to avoid a Ctrl-Alt-Del situation. Identifying and seizing opportunities require a profound understanding of markets and customer expectations. Product, process and service have to be tailored to the ‘emerging’ customer need rather than the current need. The new paradigm is: what can we make that you want to buy as against – we have a product you have to buy! Indian corporates need to develop products and services that are centered around unmet needs of customers and go out and market, rather than sell, them. This requires understanding market reality, shifts and drivers on an ongoing continuous basis. Indian firms need to invest in understanding factors critical to their success – the physical, political, economic, social, technology and trade frameworks that will drive the competencies they need to acquire to leverage an opportunity. This requires a realistic estimate of the value chains that deliver results at least risk and their own strengths and weaknesses to manage and mitigate the risks while making the most of the opportunity. The iPhone is an excellent example of this approach.
In a commoditizing market Apple identified the needs that users, young, old and mid-age, wanted and produced a user- friendly product. The factor critical to its success is its ease of connectivity, high-speed download off the Internet and elegant looks, not to mention superb feature list. The least concern for the user is the phone attributes, which, in any case, are good! In contrast, all the leading players of two years ago are now playing catch-up with iPhone, which, incidentally, offers a limited range of models, in contrast to the dizzying array and colours from other phone-makers! A good risk reduction exercise. Risk needs to be understood in its totality. Risk, defined as the possibility that events may not turn out as planned or expected, has many dimensions to it, much of it ignored in a high growth era, and all of which become relevant and rear up when least desired, in difficult times. The primary risk Indian corporate need to contend with is strategic risk – the ability to identify and seize an opportunity and allot resources to ensure delivery. It is sad to see the ‘retail revolution’ leaders of mid-2008, languishing in sour deals. The closure of 20 per cent of these ‘modern format stores’ is a telling commentary on the poor assessment of strategic risk. Minimizing strategic risk increases the competitiveness of the firm.
The second major risk facing Indian corporate is operational risk; Indian productivity remains way behind global standards. And corporates have not even begun addressing them. The garment industry is a case in point. On average, an Indian garment- maker produces 7 – 10 garments per machine per day. The world standard is 23 – 25! No wage differential can mask the harmful consequences of this depth of under-performance. Remove the subsidies and the garment industry will sink like a stone. Reducing operational risk increases asset and resource productivity. Capacity utilization is a good mitigator of operational and strategic risk; and both of them could do with significant streamlining. With increasing profitability Indian firms have been diversifying – a nice, but risky way, to seek opportunities. Real estate is littered with firms which saw ‘opportunity’, created land banks and are now sitting ducks.
Question: 1
“In contrast, all the leading players of two years ago are now playing catch-up with iPhone.” What does this sentence imply?
“In contrast, all the leading players of two years ago are now playing catch-up with iPhone.” What does this sentence imply?
Show Hint
When interpreting figurative language, such as "playing catch-up," consider how it reflects the competitive struggle between entities trying to match or exceed a leading product or idea.
Updated On: Mar 7, 2025
- Several retired sports people are now using iPhones to listen to catchy music.
- The leading companies of two years ago are trying to catch up with the latest by launching their own versions of the iPhone.
- Many leading music companies of yesteryear are offering catchy tunes for iPhones.
- None of these.
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The Correct Option is B
Solution and Explanation
Step 1: The phrase “playing catch-up with iPhone” suggests that other companies, who were once leaders, are now attempting to match the innovative advancements of the iPhone.
Step 2: The focus is on how these companies are trying to introduce their own versions to keep up with iPhone’s success.
Step 3: Therefore, option (B) correctly captures the implication of the sentence.
Step 2: The focus is on how these companies are trying to introduce their own versions to keep up with iPhone’s success.
Step 3: Therefore, option (B) correctly captures the implication of the sentence.
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Question: 2
Which of the following is not true in the context of this passage?
Which of the following is not true in the context of this passage?
Show Hint
Be cautious of statements that oversimplify risk. Always refer to how the passage presents risk management strategies.
Updated On: Mar 7, 2025
- About a fifth of the “modern format stores” have shut down because of their poor assessment of strategic risk.
- Diversification is a nice way to seek opportunities, without risk.
- In a high growth area, businesses tend to ignore risk.
- ‘Marketing’ and not ‘Selling’ is the new way to do business.
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The Correct Option is B
Solution and Explanation
Step 1: The passage emphasizes that risk is a crucial factor and that companies should carefully assess the risks involved in any opportunity.
Step 2: Diversification is mentioned as a potentially risky strategy, not a guaranteed risk-free method.
Step 3: Therefore, option (B) is incorrect as the passage does not suggest that diversification eliminates risk.
Step 2: Diversification is mentioned as a potentially risky strategy, not a guaranteed risk-free method.
Step 3: Therefore, option (B) is incorrect as the passage does not suggest that diversification eliminates risk.
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Question: 3
The most appropriate title for this passage is
The most appropriate title for this passage is
Show Hint
When identifying a title, focus on the central theme or the most prominent message conveyed in the passage.
Updated On: Mar 7, 2025
- Balancing Risk and Opportunity in Business
- Effect of Recession on Businesses
- Business Strategies for the Future
- Identifying Businesses for the "Emerging" Customers
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The Correct Option is A
Solution and Explanation
Step 1: The passage talks about the balance between opportunity and risk in business, emphasizing how businesses must assess risks carefully to achieve sustained growth.
Step 2: The discussion centers around how businesses must identify and handle risks to take advantage of new opportunities.
Step 3: Hence, option (A) is the most appropriate title, as it directly reflects the central theme of the passage.
Step 2: The discussion centers around how businesses must identify and handle risks to take advantage of new opportunities.
Step 3: Hence, option (A) is the most appropriate title, as it directly reflects the central theme of the passage.
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Question: 4
“Risk needs to be understood in its totality.” Which of the
following relevant risk factor(s) is/are discussed by the author
in this passage?
I. Strategic Risk
II. Operational Risk
III. Recession
“Risk needs to be understood in its totality.” Which of the
following relevant risk factor(s) is/are discussed by the author
in this passage?
I. Strategic Risk
II. Operational Risk
III. Recession
I. Strategic Risk
II. Operational Risk
III. Recession
Show Hint
When discussing risk factors, be sure to pay attention to the different types mentioned in the passage and how they relate to business outcomes.
Updated On: Mar 7, 2025
- Strategic Risk
- Operational Risk
- Environmental Risk
- I and II
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The Correct Option is C
Solution and Explanation
Step 1: The passage discusses two main risks: strategic risk and operational risk.
Step 2: Recession is not mentioned as a risk factor in the passage.
Step 3: Option (C) correctly identifies the two relevant risk factors discussed in the passage.
Step 2: Recession is not mentioned as a risk factor in the passage.
Step 3: Option (C) correctly identifies the two relevant risk factors discussed in the passage.
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Question: 5
The best example of leveraging a business opportunity, as implied in the passage, is
The best example of leveraging a business opportunity, as implied in the passage, is
Show Hint
Look for examples in the passage where a company or product successfully capitalizes on a market need or opportunity.
Updated On: Mar 7, 2025
- Real estate.
- Retail revolution.
- Garment industry.
- iPhone.
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The Correct Option is D
Solution and Explanation
Step 1: The passage mentions how the iPhone capitalized on the opportunity in the market by identifying user needs and providing a product that met those needs.
Step 2: It exemplifies how leveraging an opportunity in a competitive market can lead to significant success.
Step 3: Thus, option (D) is the correct example of leveraging a business opportunity.
Step 2: It exemplifies how leveraging an opportunity in a competitive market can lead to significant success.
Step 3: Thus, option (D) is the correct example of leveraging a business opportunity.
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Top Questions on Reading Comprehension
“Why do they pull down and do away with crooked streets, I wonder, which are my delight, and hurt no man living? Every day the wealthier nations are pulling down one or another in their capitals and their great towns: they do not know why they do it; neither do I. It ought to be enough, surely, to drive the great broad ways which commerce needs and which are the life-channels of a modern city, without destroying all history and all the humanity in between: the islands of the past.” (From Hilaire Belloc’s “The Crooked Streets”)
Based only on the information provided in the above passage, which one of the following statements is true?
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THE FAIR ISLE METHOD: Fair Isle knitting is a traditional technique that involves using two or more colours of yarn in a single row to create intricate patterns and designs. This method requires careful tension management to ensure even stitches and prevent puckering. To begin, select your colours and cast on the desired number of stitches. As you knit, alternate between colours every few stitches, carrying the unused yarn along the back of the work. Mastering the Fair Isle technique allows you to create stunning visual effects in garments, accessories, and home textiles.
THE CONTINENTAL STYLE: The Continental knitting style, often referred to as “picking,” involves holding the yarn in the left hand while the right hand manipulates the needles. This method allows for greater speed and efficiency, particularly when working with complex patterns or multiple colours. To practice this style, start by casting on your stitches and using your left hand to tension the yarn. With each stitch, simply “pick” the yarn with your right needle, forming a quick and fluid motion. As you become comfortable with this technique, you may find that your overall knitting speed and comfort improve significantly.
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The Story of Coffee
Coffee, a beloved beverage enjoyed by millions around the globe, has a rich and captivating history that spans centuries. The story of coffee begins in the ancient highlands of Ethiopia, where, according to legend, a goat herder named Kaldi discovered the stimulating effects of coffee beans. One day, Kaldi noticed his goats frolicking with unusual energy after eating red berries from a certain tree. Curious, he tried the berries himself and experienced a newfound alertness. This discovery soon spread to monasteries, where monks used it to stay awake during long hours of prayer. From Ethiopia, coffee cultivation and consumption spread to the Arabian Peninsula, particularly in Yemen, where the practice of roasting coffee beans and brewing the drink began to take shape. By the 15th century, coffee had become a popular beverage in the Islamic world, with coffee houses known as ‘qahveh khaneh’ emerging as social hubs for conversation, music, and intellectual exchange. These coffee houses became centers of culture and commerce, influencing the spread of coffee to Turkey and beyond, eventually reaching Europe. In Europe, coffee initially faced resistance from religious authorities who considered it a ‘Muslim drink’ and tried to ban it. However, its popularity persisted, and by the 17th century, coffee houses had sprung up in major European cities, becoming important gathering places for artists, writers, and thinkers. The stimulating effects of coffee were embraced during the Age of Enlightenment, where it was seen as a catalyst for intellectual discussion and innovation. The journey of coffee continued with the establishment of colonial plantations in tropical regions such as the Caribbean, Central and South America, and Southeast Asia. These plantations fuelled the global demand for coffee, transforming it from a regional specialty to a major commodity. The industrial revolution further accelerated coffee production and consumption, leading to innovations in coffee brewing methods and the development of instant coffee. In the modern era, coffee has evolved into a deeply ingrained part of daily life for people worldwide. Its cultural significance spans from the bustling cafes of Paris to the quiet coffee farms of Colombia. Today, coffee remains not only a popular beverage but also a symbol of social interaction, productivity, and enjoyment. Whether sipped slowly over a conversation with friends or grabbed hastily on the way to work, the story of coffee continues to unfold, intertwining with the histories and cultures of countless societies across the globe.- AILET BALLB (Hons.) - 2025
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