Urban planners studied the relationship between large retail chains and small independent businesses in downtown commercial districts. They found that...
GMAT Information and Ideas : (Ideas) Questions
Urban planners studied the relationship between large retail chains and small independent businesses in downtown commercial districts. They found that commercial districts are sharply divided, with small businesses clustered in certain areas and chain stores dominating others, with little overlap between the two zones. Large retail chains typically operate with extensive supply networks and bulk purchasing power that allow them to offer significantly lower prices. When researchers tracked small businesses that relocated to areas near large chain stores, they found that these businesses experienced revenue declines of 60% compared to similar businesses that remained in areas without nearby chain stores.
Based on the text, what role do large retail chains most likely play in maintaining the separation between small business districts and chain-dominated commercial areas?
Large retail chains' extensive supply networks and bulk purchasing allow them to capture so much consumer spending that small businesses cannot compete effectively in those areas.
Large retail chains' supply networks extend so broadly that they create logistical barriers that small businesses' distribution systems cannot overcome.
The retail chains' purchasing power damages small businesses' supplier relationships, leaving those businesses unable to secure adequate inventory.
The supply networks of large retail chains enhance the commercial environment immediately surrounding them, allowing them to thrive in otherwise challenging markets.
Step 1: Decode and Map the Passage
Create Passage Analysis Table
| Text from Passage | Analysis |
|---|---|
| "Urban planners studied the relationship between large retail chains and small independent businesses in downtown commercial districts." |
|
| "They found that commercial districts are sharply divided, with small businesses clustered in certain areas and chain stores dominating others, with little overlap between the two zones." |
|
| "Large retail chains typically operate with extensive supply networks and bulk purchasing power that allow them to offer significantly lower prices." |
|
| "When researchers tracked small businesses that relocated to areas near large chain stores, they found that these businesses experienced revenue declines of 60% compared to similar businesses that remained in areas without nearby chain stores." |
|
Provide Passage Architecture & Core Elements
Main Point: Urban planners discovered that commercial districts are sharply divided between small business areas and chain-dominated zones because large retail chains competitive advantages make it impossible for small businesses to survive in the same areas.
Argument Flow: The passage starts with research context, presents the main finding of sharp division in commercial districts, explains that chains have competitive advantages through supply networks and bulk purchasing that enable lower prices, then provides evidence showing that small businesses experience dramatic revenue losses when they try to locate near chain stores.
Step 2: Interpret the Question Precisely
This is a fill-in-the-blank question asking us to choose the best logical connector. The answer must create the right relationship between what comes before and after the blank.
Step 3: Prethink the Answer
- The correct answer should connect the chains competitive advantages (extensive supply networks and bulk purchasing power) to the reason small businesses cannot survive in the same areas
- We know from the passage that chains can offer significantly lower prices because of these advantages
- We have concrete evidence that small businesses lose \(60\%\) of their revenue when they locate near chains
- This suggests chains capture so much of the available consumer spending through their lower prices that small businesses simply cannot compete effectively in those areas
Large retail chains' extensive supply networks and bulk purchasing allow them to capture so much consumer spending that small businesses cannot compete effectively in those areas.
✓ Correct
- Directly connects chains competitive advantages (supply networks, bulk purchasing) to their ability to capture consumer spending
- Explains the mechanism of separation - small businesses "cannot compete effectively" in chain areas
- Matches our evidence perfectly - when small businesses tried to locate near chains, they lost 60% of revenue, showing they indeed cannot compete effectively
Large retail chains' supply networks extend so broadly that they create logistical barriers that small businesses' distribution systems cannot overcome.
✗ Incorrect
- Focuses on "logistical barriers" and "distribution systems" but the passage never mentions distribution problems or logistical barriers for small businesses
- Students might confuse "supply networks" with distribution barriers, but the passage shows supply networks help chains offer lower prices, not create logistics problems for competitors
The retail chains' purchasing power damages small businesses' supplier relationships, leaving those businesses unable to secure adequate inventory.
✗ Incorrect
- Claims chains damage small businesses "supplier relationships" but the passage mentions nothing about supplier relationships being affected
- The 60% revenue decline was about customer spending, not supply problems
The supply networks of large retail chains enhance the commercial environment immediately surrounding them, allowing them to thrive in otherwise challenging markets.
✗ Incorrect
- Suggests chains "enhance the commercial environment" around them
- This would actually encourage small businesses to locate nearby, not maintain separation
- Contradicts the evidence that small businesses perform poorly near chains