Decision Making 1

Based on XAT

Number of Questions : 30 CEX–0515/18

Level – 1 The study’s authors say the losses in school

performance from keeping teachers’ wages too low
Answer question no. 1 - 3 on the basis of in expensive areas outweigh the gains from
information given in the following case. overpaying teachers in cheaper areas.

Pupils’ education is suffering because their teachers’ She said: “It is this government’s policy of cutting
pay is negotiated centrally, according to new research the real and relative value of teachers’ pay that will
that finds a pupil’s exam performance drops by an make teaching as a career much less attractive and
average of one GCSE grade when there is a 10% cause real issues with recruitment and retention.
rise in local private sector salaries. As independent research has shown, removing
centralised pay regulations for teachers would simply
The study, by academics from the University of Bristol, reduce teacher mobility and lead to teacher
analyzed data from around 3,000 state secondary shortages in areas of lower pay.”
schools in England, which educate 3 million children
a year. 1. Based on your understanding of the passage,
identify the problem(s) highlighted in the
Current national pay scales for teachers allow for passage.
little regional variation; the average differential in A. The problem of teachers’ pay being regulated
teachers’ wages between inner London and north- centrally as opposed to other sectors.
east England is 9% compared with 30% for private B. Dipping grades of students.
sector jobs, the study says. This can cause C. Deterioration in the quality of education due
difficulties in recruitment and retention, especially to neglect from the teachers.
of the best teachers, the paper’s authors say. D. The problem of rising attrition rates in the
education sector, especially in the teaching
Carol Propper and Jack Britton, of the Centre for profession.
Market and Public Organisation, write: “High ability E. The problem of retaining and recruiting
teachers might decide to leave the profession, move teachers.
within the profession to a region where the relative
wage is higher, or be deterred from entering teaching (a) A, B and E (b) B, C and E
in the first place.” The study accounted for a school’s (c) A, B, D and E (d) B and E
intake to allow for different levels of difficulty in (e) All of the above
educating pupils of varying backgrounds. The
research finds that a 10% increase in the average
wage over five years is associated with a drop of one
GCSE grade in one subject, per pupil.

Non-CAT Exams / Decision Making – 1 Page 1

2. Given the merits and demerits of centralized pay Answer question no. 4 - 6 on the basis of
system, which of the following qualifies for a good information given in the following case.
solution to the problem(s) highlighted in the
passage? On September 5, 2007, Apple, Inc.’s Steve Jobs
A. State should set local private sector announced a 33% price decrease in his company’s
companies as benchmarks to decide on the newest gadget, the iPhone. The announcement came
salary increments in different regions. only ten weeks after the phone’s initial introduction
B. State should abolish the centralized pay in late June. Billed as a revolutionary product that
system completely and give schools the would change the mobile communications industry
liberty to decide on the pay scales for their entirely, the iPhone retailed at $599 in Apple and
teachers. AT&T Wireless stores throughout the country.
C. State should stick to centralized pay system Unfortunately, the initiative set off a wave of backlash
as removing such regulations would only as early iPhone adopters flooded internet chat rooms
lead to reduced teacher mobility and teacher and sent scathing emails to company executives
shortages in areas of lower pay. exclaiming their distaste for the company’s actions.
D. The pay system should be linked to Analysts and investors shared similar concerns as
performance and also depend on the region Apple’s stock price dropped 6.1% on the date of the
where the school is located. announcement amidst fears that the price reduction
E. The pay system adopted must be revised was fueled by weakening demand for the company’s
regularly, like that in private sector newest “blockbuster” product.
companies, so that retention and recruitment
do not become impediments in raising the 4. The early buyers see the price reduction in the
status of the profession. iPhone as a breach of trust by the company. It
is highly likely that they will resort to spreading
(a) Only B (b) Only C negative publicity about the company. Which of
(c) A and D (d) B and D the following, from the options given below, would
(e) D and E be the best way to deal with the customers?
(a) The gains that the company would accrue
3. If the government continues with its centralized through the slash in the prices would far
pay system as it is in the existing form, which outweigh the loss through the negative
of the following is a possible consequence in publicity spread by the early buyers;
the future? therefore, the company can very well choose
A. London would see hoards of young people to ignore them.
ready to pursue teaching irrespective of the (b) The company can collaborate with the
pay scales. service providers so as to offer lower tariffs
B. The grades of students would continue to and other schemes to the early buyers to
get affected by the rising salaries in private pacify them and win back their trust.
sector. (c) Communicate to the early customers that
C. Teaching, as a profession, would start losing the newer models are inferior in quality to
its charm. the ones bought by them.
D. Teachers from lowly paid regions would flock (d) Advertise that the price reduction is
to highly paid regions. temporary; this would soothe the early
E. Some of the best teachers would quit customers as well as increase the sales.
teaching for better prospects in other areas. (e) Cite obsolescence of the technology used
in the iPhone as the reason for the price
(a) A and D (b) B and C reduction.
(c) B, D and E (d) B, C, D and E
(e) All of the above

Page 2 Non-CAT Exams / Decision Making – 1

5. The stakeholders (analysts and investors) have Answer question no. 7 - 8 on the basis of
shown similar concerns as the reduction in price information given in the following case.
has led to speculations about the plummeting
demand of the company’s products and German engineering giant Siemens, which is
adversely affected the stock prices. Which of increasingly feeling the effects of the economic
the following, from the options given below, would downturn, is to slash “thousands” of jobs, the
be the best way to deal with the stakeholders? financial daily Boersen Zeitung reported on Tuesday.
(a) Convince the stakeholders that the reduction Last month, Siemens chief executive Peter Loescher
in price is not a reactive but a proactive said the company was drawing up a programme to
approach to capture greater market share. cut costs, boost productivity and efficiency. While
(b) Promise them that the original prices will the programme would not primarily be implemented
be back soon; stakeholders’ concerns are by reducing the headcount, job cuts could not be
of top priority. ruled out completely, Loescher said at the time. At
(c) Increase the dividends paid out to the the end of July, Siemens warned that it would be
shareholders temporarily to distract them harder to achieve its annual profit targets, as the
from the issue. gloomy global economic mood weighs on orders,
(d) Do not react to their concerns/ especially in the field of renewable energy. It was
apprehensions; it is normal for the the second time Siemens had been forced to revise
stakeholders to oppose change. down its targets this year.
(e) Promise to include them in the decision
making process in the future. 7. Given above is a piece of news published in a
leading German daily. Alexander, an excellent
6. Assume that Apple’s move of reducing the price employee at Siemens, came across this news
was a response to aggressive price war tactics and is unsure about his stay in the company in
from its competitors. Choose, from the following the given scenario. From your understanding of
options, the best way that Apple could have the passage, advise Alexander regarding the
adopted instead of lowering its prices to tackle same from the options given below.
the competition. (a) Alexander should not resign/panic as he is
(a) Buy out the competition; it will consolidate a valuable resource of the company; it is
Apple’s own position as well as remove the unlikely that he would be asked to leave.
threat of reduction in market share. (b) Alexander should resign and start looking
(b) Price war is fuelled by reactions and counter- for jobs with immediate effect; given the
reactions; the best way should be to not situation layoffs are on the way.
become party to such tactics. (c) Alexander should not resign but express his
(c) Do not reduce the price but mitigate the fears/concerns to his immediate superiors/
advantage gained by the competitors by managers.
establishing that Apple’s products are of (d) Alexander should not resign but start
better quality vis-à-vis the competing looking for jobs to fall back on in case he is
products. asked to leave.
(d) Offer freebies with the iPhone to attract the (e) Alexander should not resign but discuss the
buyers and combat the competition. situation with colleagues and try to get more
(e) Launch a new range of low priced products information on the issue.
with fewer features to tackle the competition.

Non-CAT Exams / Decision Making – 1 Page 3

8. Alexander has decided to confront his boss, Mr. 50% of the time. He still has clients.” “It’s more like
Johnson, regarding the speculation of “thousands 95%. I haven’t seen him since Thursday, and you
of job cuts”. As Mr. Johnson, decide what should know I’m always around.” Matthew sensed that Ellen
be the best response to Alexander’s queries from was exaggerating, but he couldn’t be sure. “He
the given options. doesn’t get that he’s a manager now,” Ellen said.
(a) Do not entertain such queries as it can “Not only does he fail to comply with your new
spark off unnecessary rumours in the systems, but he doesn’t seem to care if his clinicians
company. do. I mean, he barely blinks when they call in sick.
(b) Tell Alexander not to pay attention to such Right after Memorial Day we had 14 people out, and
speculation in the media. he didn’t do a thing. We spent the entire day
(c) Advise Alexander to start looking for a job scrambling to find subs.” “Well, that’s certainly not
and leave the company before being asked optimal,” Matthew said, worried his inexperience was
to do so. showing. “Ellen, I really need to find out more before
(d) Commit to Alexander that his job is safe. passing judgment on Ronnie. I know he’s more laid-
(e) Tell Alexander what he is expected to know back than you, but…” Matthew regretted his words
exactly and advise him to keep himself open immediately. Ellen was sensitive about the fact that
to all possibilities. people thought she was uptight. “Have you talked to
him about any of this?” he asked quickly. “I mention
Answer question no. 9 - 11 on the basis of the time sheets every time he calls in, and he
information given in the following case. promises to get to them. But then nothing happens.”
“I’ll be down next week for the clinical team meeting.
The caller ID on Matthew Spark’s phone read “Kid I’ll check in with Ronnie then. Like I said, I really
Spectrum, Inc.” It was someone from the Orlando need more information.”
office, probably administrative director Ellen Larson.
She had been in daily contact with Matthew since The team meeting had run long, so most people
he purchased the company, a provider of in-home rushed off to their next appointments. Matthew, who
services for autistic children, eight months ago. used the conference room as his office when he was
“Matthew, it’s Ellen. I don’t want to bother you again, visiting, opened his laptop to check e-mail but then
but we have a situation down here.” Matthew sat noticed that a senior clinician, Maxine, was lingering
back in his chair and readied himself. The “situation” in the doorway. “Maxine, can I help you with
could be anything from the copier running out of ink something?” he asked. “You’re getting an earful from
to the building catching on fire. “I’m calling about Ellen about Ronnie, aren’t you?” Maxine closed the
Ronnie,” she said. Ronnie Emerson was director of door behind her. Matthew was alarmed by her candor.
clinical operations in Orlando, a position Matthew The few times he had met with Maxine, she had
had created soon after taking the reins at Kid seemed quiet. “Well, I can guarantee he’s not as
Spectrum. Ronnie, whose son had Asperger’s, had bad as she says,” Maxine said. “He’s a really good
been working with special needs children his entire guy. Y’all did the right thing by promoting him.” “I’m
career and had been with the company for a decade. glad to hear that.” “You know, he’s told us about the
The other 40 clinicians on staff regularly turned to new systems, like the one for turning in our hours,
him for advice. So it had seemed like a no-brainer to and we understand why they’re important. But Ronnie
promote him to a formal management role. “He’s doesn’t drill down on us like Ellen does. She’s way
not up to the job,” Ellen said now. “That’s a strong too intense for how we do things here. She always
statement, Ellen,” Matthew said. “I know, but it’s has been. She’s supposed to be supporting us
true. He’s still resisting the new protocols for time clinicians in our jobs, but she acts like we’re here to
sheets. It’s been eight months, and he has yet to serve her. In my opinion, Ronnie focuses on what
complete them on time. You know the impact that matters: the patients.” “The patients are important,”
has on insurer reimbursement. And he’s hardly ever Matthew said, trying for diplomacy. “He understands
here in the office.” “He’s supposed to be in the field what they need more than any of us, really—with

Page 4 Non-CAT Exams / Decision Making – 1

his son and all.” “OK, Maxine. Thanks for that input.” 9. Which of the following could have been a better
She turned to open the door, and then paused. “If response of Ellen towards Ronnie’s reluctance
you ask me,” she said, “Ellen’s the one who’s to turn in the time sheets?
trouble.” (a) Request Matthew to step in right in the
beginning so that the implementation of the
Later that day Matthew was in his makeshift office protocols is not delayed further.
waiting for Ronnie, who was nearly 20 minutes late (b) Talk through the matter with Ronnie trying
for their 3:00 appointment. “I’m so sorry I’m late.” to convince him rationally of the importance
Ronnie walked in and shut the door behind him. “I of time sheets.
was with a client, Harry. Eight years old, such a (c) Confront Ronnie directly and demand an
good kid, but he’s struggling with school and his explanation regarding the delay in
aide seems like she wants to give up. But we were implementing the protocols.
making such strides today.” Matthew appreciated (d) Escalate the matter and let the management
how dedicated Ronnie was. “I wanted to see how take a call; they are better equipped to deal
things are going with you and your team, particularly with the issue.
with the new systems, the time sheets.” “Well, we’re (e) Do not bring up the issue with Ronnie or the
easing into them, you know. These clinicians aren’t management at all, her job was to tell Ronnie
worker bees. They’re used to being with kids, helping to submit the time sheets, if he does not, it
kids, so they need time.” “We could do another is his fault.
training session if you thought it made sense.” “No,
no, I don’t think that’s necessary,” Ronnie said. “We 10. Which of the following is not one of the problems
just need more time. All this emphasis on efficiency that ‘Kid Spectrum’ is facing?
is new for us. We’re dealing with some rough cases, (a) Lack of co-ordination/understanding
families under a lot of stress. You can’t just zip in between the employees of Kid Spectrum.
and zip out because that’s what a time sheet calls (b) Lack of clarity of role and goals of the
for.” Matthew nodded. “Of course, the client comes organization.
first. That’s what’s kept us in business for so long. (c) Employees’ lack of confidence in the
But we won’t stay in business without becoming more management.
profitable. No insurer will pay us without the proper (d) Differing priorities of the employees directed
paperwork. If we want to grow the business—and towards the success of the organization.
help more kids—we need to follow these new (e) Lack of constructive communication
protocols. And we can’t have a quarter of our staff between the employees.
out every holiday.” “I know who’s complaining about
that. Ellen. She acts like we’re in the military. Time 11. According to the passage, which of the following
sheets on time. No one gets sick. It’s just not would serve as the best response(s) on
realistic. She was obsessive before, but now it’s Matthew’s part to resolve the Ellen-Ronnie
getting ridiculous.” Ronnie paused and swallowed. issue?
“It’s like you’ve given her a license to be more uptight.” (a) He should sit with Ellen and Ronnie
“As the administrative director, she needs separately and put the other person’s
accountability from you and your team, Ronnie.” “And genuine concerns forward making them
she has it. But I need a certain amount of flexibility understand the problems and limitations of
so that I can meet the needs of the kids. And, frankly, each other.
she needs to back off.” Ronnie’s face had turned (b) Segregate their departments in such a way
red. This was the most worked up Matthew had ever that they don’t cross each other’s paths
seen him. professionally.
(c) Matthew must align the objectives of both
the managers with each other ensuring they
are working towards a common goal.

Non-CAT Exams / Decision Making – 1 Page 5

 (d) Visit the Orlando office on a weekly basis 13. Unhappy customers will not only leave the
along with keeping himself updated of the company, but also spread negative publicity
daily happenings through technology. about the company. The best way, among
(e) He should mediate between the two of them the options below, to deal with customers is:
suggesting a middle path that is not very (a) suggest to customers to wait.
liberal with the protocols but still flexible (b) suggest to customers to consider
enough to accommodate the working styles purchasing any of the other PAC's models
of the clinicians. available in showrooms, with a substantial
discount along with gifts.
(c) suggest to PAC to treat Indian and
Level – 2
Chinese markets equally.
(d) promise the top management of PAC
Answer question no. 12 -14 on the basis of the
higher sales/profit from Indian market
information given in the following case.
compared to Chinese market.
(e) suggest to the top management of PAC
Due to increased competition, Ginger Automobiles,
to manufacture essential components in
the Indian subsidiary of Pepper Automobile Company
either India or China.
(PAC) reported lower sales and profits. PAC expects
XAT - 2012
its new model Limo, developed especially for value
conscious customers of India and China, would revive
14. Mr. Murugan from Chennai experienced the
its fortunes. In order to prevent customers from buying
comfort of Limo during his visit to China. He
competing products, PAC announced the launch of
was willing to deposit an approximate price
Limo six months before schedule. Due to unrest in
of Limo to buy the first available unit from Mr.
its Indian supplier's plant, deliveries of essential
Ahmed, a dealer in Chennai, known for fair
components for its main plant was hampered, and
dealing. Ginger Automobile is yet to announce
hence it decided to launch Limo in China only as
the actual price, and the process for allocation
per the original plan. Within a short span of time,
of the vehicles. In order to maximise his cash
Limo captured 30% market share in China, which
flow, Mr. Ahmed should
was 200% higher than expected. Indian customers
(a) collect the amount from Mr. Murugan.
who had looked forward to purchasing Limo were
Later when the delivery is delayed, blame
becoming increasingly unhappy to the non-availability
it on PAC's problems.
of Limo in the India. Ginger's dealers were worried
(b) collect 50% as advance and the remaining
about loss of business from the customers who might
50% after the confirmation of launch date
switch to other cars.
by Ginger Automobiles.
12. Statement I: In the Chinese market, Baft, and (c) collect the amount Mr. Murugan is willing
Hebe, are competing models in Limo' s target to deposit after clarifying that delivery is
market. Due to increase in sales of Limo by subject to the company policy.
200%, Baft and Hebe saw their market share (d) not collect the amount, but suggest to
decline by 10%. Mr. Murugan to write to Ginger
Statement II: Baft and Hebe were not desired Automobiles.
by the customers due to their new features. (e) collect the amount and transfer it to the
Which of the following conclusions can be account of Ginger Automobiles, instead
most justifiably made? of keeping it in his personal account.
(a) I alone (b) II alone XAT - 2012
(c) Either I or II (d) Neither I nor II
(e) I and II together
XAT - 2012

Page 6 Non-CAT Exams / Decision Making – 1

Answer question no. 15-17 on the basis of the information given in the following case.

Dev Anand, CEO of a construction company, recently escaped a potentially fatal accident. Dev had failed
to notice a red light while driving his car and attending to his phone calls. His well- wishers advised him to
get a suitable replacement for the previous driver Ram Singh, who had resigned three months back.

Ram Singh was not just a driver, but also a trusted lieutenant for Dev Anand for the last five years. Ram
used to interact with other drivers and gathered critical information that helped Dev in successfully bidding
for different contracts. His inputs also helped Dev to identify some dishonest employees, and to retain
crucial employees who were considering attractive offers from his competitors. Some of the senior employees
did not like the informal influence of Ram and made it difficult for him to continue in the firm. Dev provided
him an alternative job with one of his relatives.

During the last three months Dev has considered different candidates for the post. The backgrounds of the
candidates are given in the table below.

Educational Expected
Name Age Experience Remarks
Qualification Salary (<)

Ex-employers are highly satisfied. Their

Seven years 18,000 only concern is about his tendency to
switch jobs after every six months. Enjoys
Sunder 32 Post graduate of driving per
the newness in every job but tends to lose
experience month interest after six months. Not willing to
commit for any more than six months
Claims to have more than one year of
8,000 experience, but can't provide any certificate
Studied up to
Mani 23 One year per to substantiate it. He has received a hike of
Standard IX < 2,000 last month on account of his good
month
performance as a driver.

20,000 Working as a driver for the last one year

after losing his previous job of a
Chintan 44 Graduate 20 years per
stenographer. He has been forced to take
month up the job of a driver.
Cousin of Ram Singh. Substituted Ram as
15,000 Dev's driver whenever Ram was on leave.
More than Currently working as a driver with Dev's in-
Bal Singh 40 Literate per
20 years laws. Strongly recommended by Ram. His
month knowledge and contacts in the firm is as
good as Ram's.
Working as a temporary driver with Dev's
major competitor for the last three years.
The competitor has offered Chethan's
12,000 service to Dev on a temporary basis.
Chethan 38 Standard XII 10 years per Chethan has also expressed his
month willingness to work on a long term basis,
provided he is given an annual increment
of < 500, which is reasonable as per the
market condition.

Non-CAT Exams / Decision Making – 1 Page 7

Dev is primarily looking for a stable and trustworthy Answer question no. 18 - 19 on the basis of the
driver, who can be a suitable replacement for Ram. information given in the following case.
His family members do not want Dev to appoint a
young driver, as most of them are inexperienced. Saral Co. is operating in seven north-eastern states
Dev's driver is an employee of the firm and hence of the country. The organization has a history of
the appointment has to be routed through the HR participative decision making, wherein people
manager of the firm. The HR manager prefers to deliberate openly about pros and cons of every
maintain parity among all employees of the firm, He important decision, and a broad consensus is taken
also needs to ensure that the selection of a new before taking the final decision. In Saral Co. every
driver does not lead to discontent among the senior employee gets a salary proportional to the sales
employees of the firm. achieved. A new General Manager (GM) joined during
the beginning of this month and challenged the
15. Who among the following five candidates is organization's sole focus on sales to determine
most likely to be rejected by the GM (HR)? salaries. He urged the top management to include
(a) Chethan (b) Chintan two more additional parameters in determining the
(c) Bal Singh (d) Mani salaries of the employees, viz. collection of
(e) Sunder information about competitors and the quality of
XAT - 2012 relationship with the retailers.
16. From his perspective, and taking into account
18. Manohar, the highest earning employee for
the family's concerns, Mr. Dev would like to
the last three years, vehemently opposes the
have
GM's proposal. Which of the following could
(a) Chethan (b) Chintan
be most likely reason for him to oppose the
(c) Bal Singh (d) Mani
proposal?
(e) Sunder
(a) He considers the proposal as a serious
XAT - 2012
threat to his favourable position in Saral
17. In order to resolve the conflicting preferences, Co.
one of Dev's friends suggested Dev, his family (b) He is not interested in collecting the
members and the HR manager to identify their information regarding competitors.
most and the least preferred candidates (c) No clarity regarding the relative importance
without considering the concerns of other of the three parameters.
stakeholders. (d) He is not interested in maintaining quality
I. Dev's most and least preferred candidates: relationship with retailers.
Bal Singh and Chetan respectively (e) He may need to work harder to earn the
II. Family members' most and least preferred highest salary.
candidates: Bal Singh and Chintan XAT - 2012
respectively
III. HR manager's most and least preferred 19. The top management of Saral Co. refused to
candidates: Chethan and Bal Singh implement the proposal of new GM from the
respectively beginning of next month. Which of the
following could be the most justified reason
Which of the above three statements is/are for the management's refusal?
in conformity with the information provided in (a) To ensure that no manager will get credit
the passage? for a major change soon after joining.
(a) Option I (b) Option II (b) To avoid attracting criticism for their failure
(c) Options I and II (d) Options II and III to implement a similar scheme.
(e) Options I, II and III (c) His past experience is limited to seven
XAT - 2012 north-eastern states only.

Page 8 Non-CAT Exams / Decision Making – 1

 (d) The GM is new to the organization and iv. We are not to blame. The government is
he would require some time to implement not doing enough to ensure availability of
the new plan. sufficient fuel to power the existing plants,
(e) The top management would need time to let alone the new plants.
deliberate and get consensus. v. The government had ignored the
XAT - 2012 infrastructure availability like roads etc.,
and environmental clearances required for
Answer question no. 20 on the basis of the such projects and therefore set an
information given in the following case. unrealistic target to begin with, and the
revised target is also unrealistic as well.
20. Indian government may hold top executives (a) i and ii (b) i and iii
responsible if state-run power companies fail (c) i, iii and iv (d) ii,iv and v
to meet performance targets and punish them (e) i, ii, iii, iv and v
with fines and transfers. The strict XAT - 2011
performance parameters are aimed at
ensuring that at least the reduced target for Answer question no. 21 - 22 on the basis of the
62,000 MW of generation capacity addition information given in the following case:
is achieved before the end of the II th Plan,
said a power ministry official. Performance of The CEO of ABC Telecom Ltd. (ABC) is in a quandary
chairmen and managing directors of the power since he received the telephone call in the morning
Public Sector Units (PSUs) in project from his counterpart at LMN Telecom Ltd. (LMN).
implementation will be assessed as per the Both companies were engaged in a bitter experience
terms and conditions stipulated in the a couple of years ago when they had attempted to
company’s memorandum of understanding merge with the intention of creating a behemoth
(MoU) with the power ministry, he said, telecom company, possibly the largest in the world.
requesting anonymity. Performance The merger had fallen through due to opportunistic
parameters of executives had come under behaviour on the part of Mr. Das, then CEO of LMN.
strict scrutiny due to a lack of progress in During the time the merger talks were taking place,
capacity addition program. While the target Mr. Das had also approached a few other suitors for
for the II th five year plan has already been LMN in an attempt to force ABC to pay a higher
scaled down by the government from 78,500 price. Further, there were reports of attempts by
MW, in the first three years of the plan yielded management of LM to scuttle the deal. Back then,
only 22,302 MW of fresh capacity. ABC had also faced stiff opposition to the deal from
one of its large shareholders.
If you were the chairman of one of these power
PSU’s, which of the following statements (all Since then, a lot has changed for both companies.
of which are assumed to be true) could best The bleak economic conditions due to recession had
be used in order to strengthen your case led to a drastic fall in the market value of both
against the government holding top companies, with ABC comparatively losing much
executives responsible? more in terms of market value. Raising money has
i. The labour unions, owing allegiance to become more difficult for both companies, especially
ruling party at the Centre, are not allowing for LMN. On the brighter side for ABC, the opposing
work to progress with their demands for shareholder had recently sold off his stake to another
wage hikes that are untenable investor who earlier had supported the original merger
ii. The actions of the mid-level management deal with LMN a couple of years ago.
are not In line with the objectives laid down
by the top management
iii. The delays have been due to difficulties
in obtaining funds at reasonable interest
rates on account of the recessionary
conditions

Non-CAT Exams / Decision Making – 1 Page 9

21. Which of the following would be the most (b) The market would be as competitive as
appropriate line(s) of thought for the CEO of ever for the resultant entity, thus providing
ABC to adopt in response to the offer by no guarantee for success.
LMN? (c) The combined management did present
i. Once bitten twice shy. There is simply no have any grand strategies to the investors.
way I can think of resuming talks with LMN (d) ABC’s management was giving in to Mr.
after their unethical behaviour the previous Das who was a known opportunist.
time around. I would rather spend my time (e) LMN was using high cost debt to purchase
on merger discussions with other another company in the same industry
companies. facing similar problems, with no visible
ii. The deal may make less business sense advantage for the combined entity over
this time around. However, if it goes competitors.
through, I will become the CEO of the XAT - 2011
world’s largest telecom company. So let
us try our luck once more. Answer question no. 23 -26 on the basis of the
iii. I will resume talks only if they provide information given in the following case.
guarantees as to the reimbursement of
our expenses incurred, in the event of the Chetan Textile Mills (CTM) had initiated various
deal not materializing. employee welfare schemes for its employees since
iv. Let me not be biased against dealing with the day the mill began its operations. Due to its
LMN. If we can secure the deal at a various welfare initiatives and socially responsible
reasonably low price, benefiting our business practices, the organization had developed
shareholders, let us go ahead with it. an impeccable reputation. Majority of the regular
v. I am not sure if we can raise the money workers in Chetan Mills had membership of Chetan
now. In any event, they are the ones facing Mills Mazdoor Sangh (CMMS), a non political trade
greater financial problems. So let’s not union. CMMS had the welfare of its members as its
hurry now. We might have an opportunity guiding principle. Both CTM and CMMS addressed
to buy them out at a cheaper price later. various worker related issues on a proactive basis.
(a) i and iii (b) ii and iv As a result no industrial dispute had been reported
(c) ii and iii (d) i and iv from the organization in the recent past.
(e) iv and v
XAT - 2011 These days majority of the employers deploy large
number of contract labourers in their production
22. The merger of ABC and LMN has been processes. In an open economy survival of an
confirmed after detailed negotiation with LMN organization depends on its competitiveness. In order
holding the majority share of the resultant to become competitive, an organization must be able
entity. LMN has financed the merger by taking to reduce cost and have flexibility in employment of
debt at higher-than-market interest rates from resources. Engaging workers through contractors
its bankers, in the hope that it would be able (contract labourer) reduces the overall labour cost
to streamline operations and reduce costs in by almost 50%. Indian labour legislations make
the resultant entity which will allow it to repay reduction of regular workers almost impossible, but
the loan. If you were an investor looking to organizations can overcome this limitation by
invest in telecom companies, which of the employing contract labourers. Contract labourers
following could be the strongest reasons for neither get the same benefits as regular employees
staying away from investing in resultant nor do they have any job security. According to
entity? various recent surveys, government owned public
(a) The new entrants in the telecom market sector units and other departments are the biggest
were coming with better offers for the employers of contract labourers in the country.
customers. Contractors, as middle-men, often exploit the

Page 10 Non-CAT Exams / Decision Making – 1

contract labourers, and these government due to competition. Also expose those
organizations have failed to stop the exploitation. contractors who are creating problems.
IV. Promise strong action against the security
Over time CTM started engaging a large number of guards who are guilty.
contract labourers. At present, more than 35% of V. Increase the wages of contract labourers.
CTM’s workers (total 5,000 in number) are contract
labourers. CMMS leadership was wary about the (a) I, V (b) I, II
slow erosion of its support base as regular workers (c) II, V (d) III, IV
slowly got replaced by contract workers and feared (e) IlI, V
the day when regular workers would become a XAT - 2011
minority in the mill. So far, CMMS has refused to
24. In the current context, which among the
take contract labourers as members.
following represent the most suitable reaction
Recently, based on rumours, CTM management from CMMS leadership?
started to investigate the alleged exploitation of (a) Distance CMMS from the episode and
contract labourers by certain contractors. Some explain that CMMS is not involved in the
contractors felt that such investigations may expose fiasco through a press conference.
them and reduce their profit margin. They instigated (b) Offer membership to contract labourers,
contract labourers to demand for better wages. Some which would put the contract workers at
of the contract labourers sought the support of par with the regular workers in CMMS.
various political parties in order to increase their (c) Do not offer membership to contract
negotiation power. Contract labourers engaged in labourers, but represent their interests
material handling and cleaning work started provoking during negotiation in order to prevent the
CTM management by adopting violent tactics. formation of another union in CTM.
(d) Start another union exclusively for contract
Today’s news-paper reports that police and CTM labourers of CTM.
security guards fired two or three rounds in air to (e) Adopt a neutral stand in public, and pass
quell the mob. The trouble started while a security on information related to problem creators
guard allegedly slapped one of the contract labourers to the CTM management.
following a heated argument. Angry labourers set XAT - 2011
fire to several vehicles parked inside the premises,
and to two police jeeps. 25. Out of the options given below, which one
would be the best policy decision by
23. In the wake of recent happenings, what
government at the national level?
decision is expected from CTM management? (a) Asking CTM management to pay same
From the combinations given below, choose wages to both regular and contract
the best sequence of action.
workers.
I. Stop the current investigations against the (b) Income tax raids in offices of contractors
contractors to ensure industrial peace; under investigation.
after all allegations were based on (c) Setting up a new labour welfare office
rumours. within CTM premises.
II. Continue investigations to expose (d) Setting up a new committee to make
exploitation and take strong actions recommendations for changes in labour
against trouble makers. legislations with an objective to reduce
III. Get in direct touch with all contract exploitation of contract labourers.
labourers through all possible means, (e) Use entire government machinery to
communicate the need for current support CTM, which has an impeccable
investigation to stop their exploitation, and track record.
convince them regarding CTM’s situation XAT - 2011

Non-CAT Exams / Decision Making – 1 Page 11

26. The criminals in the surrounding area often contacted a reputed university and employed a
took their cue from the situation in the mill, graduating psychologist, Mr. Shyam Khanna.
creating law and order problems outside the
mill which would make it difficult for workers Mr. Shyam Khanna was employed by Siksha
to come to the mill safely. Given the Foundation with the single directive that he was to
circumstances, identify the stakeholder that contribute to the selection of teachers. This task
should be the immediate priority of CTM had previously been the prerogative of principals of
management. each school. Mr. Khanna immediately notified each
(a) Contract labourers who were allegedly principal that in the future he was to be notified of
beaten by the security guards of the the personnel needs and in return he would recruit,
company. screen and select the teachers.
(b) District administration that is concerned At the end of his first year, with Siksha, Mr. Khanna
about the spread of violence. realized that his efforts had resulted in failure. During
(c) CMMS that prefers an immediate his first few months he encountered much opposition
settlement of the issue. from several principals who had been managing
(d) Customers who are concerned about schools for ten or more years. They did not believe
prices and regular supplies. in newer psychological techniques and preferred
(e) Contract labourers who are demanding job selecting people based on their own assessment.
security and same wages as regular Other principals frequently refused to accept the
employees. teachers selected by Mr. Khanna. Finally, Mr.
XAT - 2011 Khanna began to notice fewer and fewer principals
notifying him of vacancies in their schools. Realizing
Directions for questions 27 to 30: For each that he was not making any effective contribution,
question, an answer (A) and a reason (R) has been Mr. Khanna submitted the suggestion to the society
given. Base your analysis on the information members that support and co-operation of the school
presented in the passage. Mark principals should be a matter of executive order, or
(a) if both A and R are based on information given else his resignation should be considered.
in the passage and R is the correct
explanation of A. 27. What responsibilities were shouldered by Mr.
(b) if both A and R are based on information given Khanna in his first year of employment?
in the passage but R is not the correct A: Mr. Khanna had the responsibility of
explanation of A. contributing his expertise to recruitment
(c) if A is based on information given in the and selection of teachers.
passage but R is not based on the facts given. R: The board members wanted to
(d) if A is not based on information given in the systematize the recruitment and selection
passage but R is based on the information of the entire organization.
given in the passage.
(e) if both A and R are not based on information 28. “At the end of his first year with Siksha, Mr.
given in the passage. Gupta realized that his efforts had resulted in
failure.” Was Mr. Khanna’s self-assessment
Siksha Foundation had been engaged in running justified?
primary schools in different parts of the country since A: Yes, since the selection of teachers
1970. While attending a conference on employee continued to be done as it was being done
selection, Mr. Ram Kapoor, a senior member of the earlier.
foundation learned that a leading school had recently R: He was placed in a situation where the
employed a psychologist to perform employment concerned persons refused to consult him
functions, i.e., recruitment and selection of teachers. regarding his expertise. Hence his impact
Within two months of his return, Mr. Kapoor was dependent on co-operation by others.

Page 12 Non-CAT Exams / Decision Making – 1

29. How were the changes in the recruitment and 30. What was the flaw in the decision of selecting
selection process received by the principals? a psychologist for selecting teachers that led
A: The principals rejected the new process to the final situation?
in its entirely from the day it was A: Mr. Kapoor’s decision was predominantly
introduced. driven by the information about another
R: The principals were cynical of the abilities school that had enlisted the services of a
of the psychologists as far as recruitment psychologist for recruitment and
and selection of teachers were concerned. selection.
R: Both the administration of the school and
managing teachers have been primary
responsibilities of the principal of the
school.

Non-CAT Exams / Decision Making – 1 Page 13

 Answers and Explanations

1 d 2 e 3 c 4 b 5 a 6 c 7 d 8 e 9 b 10 c
11 e 12 d 13 b 14 c 15 c 16 c 17 a 18 e 19 e 20 c
21 e 22 e 23 d 24 c 25 d 26 e 27 c 28 b 29 e 30 b

Level – 1 4. b Option (a) is incorrect as it fails to take into account

the image of the company that would take a beating
1. d Only B and E are the problems highlighted in the if Apple chooses to ignore the backlash of its
passage. Statement A is not the problem but the customers. The approach outlined in option (c) is
practice (of regulating the teachers pay centrally) suicidal. The sales of the iPhone would be greatly hit
that has led to problems mentional in the passage. by such a move and it would harm the image of the
Due to the pay being regulated centrally, the grades company. Option (d) is incorrect as announcing the
of the students are dipping. C and D are generalized reductions as temporary would not achieve anything.
statements which have not been highlighted in the The early customers would, if not more, be as upset
passage. E is another problem highlighted in the as before. Option (e) is not the correct strategy
passage arising due to centralized pay system. because it cannot be inferred from the passage that
Hence, option (d) is the correct choice. the technology has become obsolete. Option (b) is
the correct choice since it treats the early customers
2. e Statement A is not a good solution as the requirements in a special way by offering them rewards for buying
of other private sector jobs would be very different early.
from that of teaching and it would be unsuitable to
emulate their salary increments. Statement B is also 5. a The best approach would be to explain to the
not a good solution as it would lead to teacher stakeholders the rationale behind the move. They
shortages in low paid areas. Statement C doesn’t do should be explained that the reduction is not the
anything to solve the problem, reduction in teacher result of weakening demand and would only benefit
mobility is just a small benefit compared to the the company. Option (b) is equivalent to backtracking
problems posed by the centralized pay system. from its stand which is not correct for any company
Statement D is a good solution since it links the pay because it portrays that the management can
to performance which automatically takes care of succumb under pressure. Option (c) is incorrect
the problem of dipping grades of the students. It also because the passage talks about the concerns of
talks about being region specific, catering to the stakeholders, not shareholders. Moreover, increasing
problem of teacher mobility. Statement E also is a dividends would only solve the issue temporarily.
good solution as then the grades of the students Option (d) and (e) are incorrect because they do not
won’t dip with rising salaries in other sectors. solve the issue at hand. Option (d) disregards the
stakeholder's concerns while option (e) is a futuristic
3. c The passage talks about the teaching profession approach that need not necessarily satisfy them.
becoming unattractive because of the centralized
pay system, this makes statement A improbable to 6. c Option (a), buying out competition, is a far-fetched
occur in the future. All other statements except (c) solution which is not always feasible. Option (b) is
are hinted at as a consequence of the centralized incorrect as it does not suggest what the company
pay system and hence can be possible in the future. should do instead of engaging in price war. Option
C however is a very generalistic statement that (c) is the correct choice. This would make the
cannot be concluded definitely from the passage as company immune to any further reductions in price
‘charm’ may have several connotations – one by its competitors. Offering freebies would lead to
referring to monetary benefits and the other to increased cost which is not the correct approach.
intrinsic benefits that it brings along to the individual. In addition, the customers would expect more
So, the ‘charm’ here cannot be equated with freebies when the competitors reduce their prices
‘attractiveness’ (due to monetary benefits) as further. Thus, option (d) is incorrect. Option (e) is
mentioned in the passage. incorrect as launching a new product that is less in
price than the iPhone will not help tackle the

Page 14 Non-CAT Exams / Decision Making – 1

 competition because the competing products already for the organization. Ronnie must be made to
have the iPhone features and are lower in price understand that implementing the protocols is
than the iPhone. People would still prefer an ‘all important for the business which would eventually
feature’ phone that is priced lower over a phone help the patients and their families better. Ellen must
that is equivalent in price but has less features. be explained that it is the nature of the clinicians'
jobs that keeps them from filling the timesheets on
7. d The best course of action for Alexander in the given time. Option (a), sitting with both of them separately,
scenario is to start looking for jobs but not resign till won't solve the problem. Option (b) is not a good
the time the management does not ask him to do so. solution as it fails to achieve what the company
Therefore, option (d) is the correct answer. Option could have achieved had both the star employees
(a) is incorrect as the company's chief executive worked together. Option (c) is not feasible as both
has given a statement regarding possible job cuts of them belong to separate departments, while
which by no means can be taken lightly. Option (b) is Ronnie's main concern is to help the patients; Ellen is
a kind of over-reaction on Alexander's part. He a strict administrator working to increase profits.
should not resign without being sure about the future. Option (d) falls short as it does not resolve the issue
The question is what he should do in the given at hand presently; it is more of a preventive approach
scenario, resign or stay. Option (c) is incorrect as it that may only check such cases in the future.
does not answer this question. Option (e) is a
complete no-no since that would lead to an air of Level – 2
insecurity and suspiciousness among all the
employees. 12. d The information given says that Limo captured 30%
market share which was 200% of the expected share.
8. e Option (a) is not the best approach as it can confuse It does not mean that the sales of Limo increased by
Alexander all the more. Not entertaining the query 200%. Moreover, we don’t know whose share Limo
would only aggravate the situation. Option (b) is not ate into to capture its share, it could well have come
the correct advice to give as it can pose a threat to off other competitors. Hence we can’t say that Baft
Alexander's job in case he is actually fired. Option and Hebe saw their market share decline by 10% due
(c) is ruled out since the organization may lose a to Limo. The information doesn’t in sense talk about
valuable employee even when they don't intend to the desirability of Baft and Hebe and about its features.
lay him off. Option (d) is a far-fetched thing for the So, both the conclusions can’t be made. Hence the
manager to do. He cannot commit that Alexander will correct option is d.
not be axed. The best approach for Mr. Johnson
should be to tell Alexander exactly what he is 13. b The best way to deal with unhappy customers is to
expected to know and leave the ultimate decision to suggest them to buy other models and offering to
him. This will ensure that the manager is true to both, them discounts and gifts. This would not only make
the company and the employee. Therefore, option the customers happy but would also mean more
(e) is correct. business for the company. Option (a) is incorrect since
suggesting the customers to wait will only aggravate
9. b The correct response from Ellen should have been the problem. Option (c), (d) and (e) don’t deal with
to talk calmly with Ronnie understanding what's issue of making the customers happy.
keeping him from submitting the sheets and
convincing him how the timesheets would assist 14. c Option (a) is unfair since Mr. Murugan is not informed
him to help the patients better. Option (a), (d) and (e) about the delivery date and expected delay. Option (b)
are incorrect as they mean not trying to resolve the is incorrect for the same reason that Mr. Murugan is
issue at all on one's own end before bringing in the not informed about Ginger Automobiles and its
management/superiors. Option (c) is a very high- announcements. Option (d) is correct as it maximizes
handed approach that can cause the relations to Mr. Ahmed’s cash flow as well informs Mr. Murugan of
become strained further. the delivery problem. The rest of the two options are
incorrect since they do not maximize Mr. Ahmed’s cash
10. c The passage doesn't talk about employees not having flow and inform Mr. Murugan about the delivery
confidence in the management. Ellen and Ronnie respectively.
both show good confidence in Matthew. Ronnie and
Ellen not communicating and coordinating effectively, 15. c Ram Singh was a cause of concern for the
having different priorities towards the company and HR manager because he provided insider information
lack of clarity in their respective roles and goals of to Mr. Dev which used to irk the senior members. Bal
the company are the problems that Kid Spectrum is Singh has a profile very similar to Ram Singh and thus,
facing. the HR manager would never like to take him on board.

11. e The best way Matthew can solve the problem is to 16. c Mr. Dev would like to have Bal Singh as his driver as
convince Ronnie and Ellen that they both wish well he is experienced, trustworthy and a stable choice.

Non-CAT Exams / Decision Making – 1 Page 15

 Bal Singh meets the criteria of Mr. Dev’s family too 21. e Since both the management and the economic situation
who do not want a young driver. Mani is young and of LMN has undergone a change, it will be pragmatic
so doesn’t meet the criteria. Sunder is experienced to look at this deal from a fresh perspective and let
but not stable. Chethan is willing to work long term bygones be bygones. Hence, statement (iv) is a wise
but his services have been offered on a temporary line of thought for the CEO of ABC. He can also consider
basis. Chintan is inexperienced and unstable. the present market value and economic situation of
LMN and decide to try and bid for this company at a
17. a Dev’s most preferred employee would be Bal Singh later time at a cheaper price. Hence, statement (v) is
as he is both stable and trustworthy. His least also correct. This eliminates all the options except (e).
preferred choice would be Chinthan who is being
offered on a temporary basis (which makes him 22. e Since both the companies are facing similar problems
unstable) by a competing firm. Also, it can be a ploy and are in the same sector, there is no visible
on the part of the competitor to know the inside advantage monetarily as well as from the perspective
information of Mr. Dev’s company. This makes him of portfolio diversification for the resultant entity. The
untrustworthy too and thus, Mr. Dev’s least preferred only advantage could be consolidation of assets.
choice. Family members do not want a young driver Hence E is the strongest option.
so their least preferred choice would be Mani and
not Chintan. Thus, statement II is not in conformance 23. d The management needs to placate workers, expose
with the given information. Statement III is also not in contractors and take unbiased decisions against
conformance with the information. We do not have troublemakers. This will ensure that these workers
sufficient information regarding his most preferred will continue to work without causing further trouble.
choice and so it can be anyone out of the other four Statements 3 and 4 are possible course of actions.
except Bal Singh who has a very similar profile to
Ram Singh which created discontent among senior 24. c Since CMMS is an association for permanent labourers,
employees. Hence the correct answer is statement they do not want to give membership to contract
I which is option A. labourers. But if they continue to alienate themselves
from contract labourers then their representative
18. e Manohar would oppose the proposal because now power will diminish. In these circumstances option (c)
he would be judged on three parameters instead of will be the best course of action.
one and he may not be that good on the new criteria.
25. d At the root of the problem lies the fact that there is no
He would have to definitely work harder to maintain
significant legislation that is effective in the current
his ‘highest earning employee’ status. Thus, option (e)
market situation where contract labourers are being
is correct. Options (b) and (d) are ambiguous and
employed in greater numbers. Also, it seems that
can’t be stated concretely. Option (a) is incorrect for
contract labourers do not have any legislation
the word ‘favorable position’. Being highest paid does
safeguarding their rights. Thus, taking steps to enact
not mean he has a favorable or unfavorable position.
relevant labour legislation is the best course for the
Option (c) is ambiguous too because we don’t know if
government to take. Therefore, option (d) is the best
the relative importance of the three parameters would
choice under the circumstances.
not be specified later.
26. e The immediate attention is required towards the
19. e The main reason for delaying the implementation of labourers who are already disgruntled. They are also
the proposal for a month is that the management would more vulnerable to influence by criminals of the area.
need time to think it out and get consensus from Out of A and E, E is a better choice as it takes into
concerned employees. This makes option (e) correct. account the entire labour class.
Options (a) and (b) give trivial reasons that the
management would choose to overlook. Option (c) is 27. c A is true according to the passage, however, R talks
irrelevant as it questions the competence of the GM about the desires of the board members which is not
which is certainly incorrect. Option (d) states that GM mentioned in the passage.
would require time to implement the plan, which is
incorrect. It is the management in its entirety that 28. b Both A and R are true according to the passage but R
implements the plan. Thus, the delay has nothing to do is not the correct explanation of A.
with the GM. This rules out option (d).
29. e The case nowhere says that all the principals
20. c The case in question presents the view of the rejected the new process from the very first day. This
government that holds responsible the top executives makes A incorrect. R also makes a generalization,
of the PSUs for the failure in the implementation of which is not given in the passage, this makes R also
plans. Statements (i), (iii) and (v) present arguments incorrect.
that tell us why it is the government that is responsible
and not these executives. 30. b Both A and R are true but R is not the explanation of A.

Page 16 Non-CAT Exams / Decision Making – 1