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Passage 27
Since the late 1970‘s， in the face of a severe loss ofmarket share in dozens of industries， manufacturers inthe United States have been trying to improve produc-tivity-and therefore enhance their international（5） competitiveness-through cost-cutting programs. （Cost-cutting here is defined as raising labor output whileholding the amount of labor constant.） However， from1978 through 1982， productivity-the value of goodsmanufactured divided by the amount of labor input-（10） did not improve； and while the results were better in thebusiness upturn of the three years following， they ran 25percent lower than productivity improvements duringearlier， post-1945 upturns. At the same time， it became clear that the harder manufactures worked to imple-（15） ment cost-cutting， the more they lost their competitiveedge.
With this paradox in mind， I recently visited 25companies； it became clear to me that the cost-cuttingapproach to increasing productivity is fundamentally（20） flawed. Manufacturing regularly observes a “40， 40， 20”rule. Roughly 40 percent of any manufacturing-basedcompetitive advantage derives from long-term changesin manufacturing structure （decisions about the number， size， location， and capacity of facilities） and in approaches（25） to materials. Another 40 percent comes from majorchanges in equipment and process technology. The final20 percent rests on implementing conventional cost-cutting. This rule does not imply that cost-cutting shouldnot be tried. The well-known tools of this approach-（30） including simplifying jobs and retraining employees towork smarter， not harder-do produce results. But thetools quickly reach the limits of what they cancontribute.
Another problem is that the cost-cutting approach（35） hinders innovation and discourages creative people. AsAbernathy‘s study of automobile manufacturers hasshown， an industry can easily become prisoner of itsown investments in cost-cutting techniques， reducing itsability to develop new products. And managers under（40） pressure to maximize cost-cutting will resist innovationbecause they know that more fundamental changes inprocesses or systems will wreak havoc with the results onwhich they are measured. Production managers havealways seen their job as one of minimizing costs and（45） maximizing output. This dimension of performance hasuntil recently sufficed as a basis of evaluation， but it hascreated a penny-pinching， mechanistic culture in mostfactories that has kept away creative managers.Every company I know that has freed itself from the（50） paradox has done so， in part， by developing and imple-menting a manufacturing strategy. Such a strategyfocuses on the manufacturing structure and on equip-ment and process technology. In one company a manu-facturing strategy that allowed different areas of the（55） factory to specialize in different markets replaced theconventional cost-cutting approach； within three yearsthe company regained its competitive advantage.Together with such strategies， successful companies arealso encouraging managers to focus on a wider set ofobjectives besides cutting costs. There is hope for manufacturing， but it clearly rests on a different way ofmanaging. 1.The author of the passage is primarily concerned with
（A） summarizing a thesis
（B） recommending a different approach
（C） comparing points of view
（D） making a series of predictions
（E） describing a number of paradoxes 2. It can be inferred from the passage that the manufacturrs mentioned in line 2 expected that the measures they implemented would
（A） encourage innovation
（B） keep labor output constant
（C） increase their competitive advantage
（D） permit business upturns to be more easily predicted
（E） cause managers to focus on a wider set of objectives 3. The primary function of the first paragraph of the passage is to
（A） outline in brief the author‘s argument
（B） anticipate challenges to the prescriptions that follow
（C） clarify some disputed definitions of economic terms
（D） summarize a number of long-accepted explanations
（E） present a historical context for the author‘s observations 4. The author refers to Abernathy‘s study （line 36） most probably in order to
（A） qualify an observation about one rule governing manufacturing
（B） address possible objections to a recommendation about improving manufacturing competitiveness
（C） support an earlier assertion about one method of increasing productivity
（D） suggest the centrality in the United States economy of a particular manufacturing industry
（E） given an example of research that has questioned the wisdom of revising a manufacturing strategy 5. The author‘s attitude toward the culture in most factories is best described as
（A） cautious
（B） critical
（C） disinterested
（D） respectful
（E） adulatory 6. In the passage，the author includes all of the following EXCEPT
（A） personal observation
（B） a business principle
（C） a definition of productivity
（D） an example of a successful company
（E） an illustration of a process technology 7. The author suggests that implementing conventional cost-cutting as a way of increasing manufacturing competitiveness is a strategy that is
（A） flawed and ruinous
（B） shortsighted and difficult to sustain
（C） popular and easily accomplished
（D） useful but inadequate
（E） misunderstood but promising
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