PREFACE

About this book

Whom this Book is for

What is Unique about this Book

When to use this Book

How to use this Book

We at IMS Learning have often felt that a standalone book on XAT-type Decision Making questions was long overdue as many students have expressed their nervousness and apprehension in solving this particular question type. The uniqueness of this section (it only appears in the XAT) and the different reasoning skills required to be able to solve this question type are the major reasons for this lack of confidence. Decision Making questions started appearing in the XAT examination from 2007 and since then have become a regular feature in the XAT. Decision Making questions are usually in the form of cases/caselets with multiple questions but can also be single Critical Reasoning questions. This section also includes some maths-based questions. Unlike the Quant, English or Reasoning sections there are no formulae or theorems or rules that can be used to tackle these questions. Furthermore, there may be some grey areas in some questions making it extremely difficult to come up with a single satisfactory answer. Students have often confided to us that they were never completely confident of mastering this section – since some of the questions seemed to have multiple correct answers.

We at IMS know that the secret to success is “Correct Practice”. With this in mind, we have come out with this book containing 26 cases/caselets, with each caselet containing between 1 to 4 questions. The caselets have been created in the XAT mould, keeping in mind the type of problems that the XAT uses for this section. Some caselets are exclusively maths-based while others are exclusively reasoning–based, with a couple that are both reasoning- as well as maths-based.

This book is for all XAT aspirants who wish to improve on their scores and confidence levels in solving Decision Making questions. Although the questions have been created keeping in mind XAT aspirants, it would also be useful for those who wish to improve on their reasoning skills for other MBA entrance examinations such as the NMAT, SNAP, TISS, CET, IIFT, etc.

XAT aspirants face a paucity of Decision Making questions to practise on, as there aren’t many Decision Making practice books on the market currently. Furthermore, we at IMS Learning have done a lot of background research on every possible type of wrong answer choice that can appear in every Decision Making question – and incorporated the same type of wrong answer choices in our questions. This is what we mean by “Correct Practice”. XAT aspirants who solve the Decision Making caselets in this book will, we believe, be much more confident in the face of every tricky wrong answer choice that comes up in the XAT Decision Making section.

This book is ideal for XAT aspirants who wish to hone their skills just before the actual XAT. It is also suitable as a long term investment and can be used at all other times for students who have little to no clue about solving these types of questions. Since Decision Making questions are fundamentally different from other question types it does take most students a considerable amount of time to comprehend and master the reasoning skills required to be able to excel in this section.

A step-wise approach is advisable for most aspirants. Begin with passage 1 and move forward at a steady – rather than at a hurried – pace. Make time to analyse your performance after every case. Study the explanations to questions that you attempted wrongly especially closely. If you do this sincerely, you will begin to see a pattern in the kind of reasoning required to master this question type and be able to ace this section in the XAT examination.

INDEXDecision Making

1. Verbal Section 8Passage 1 8Passage 2 9Passage 3 10Passage 4 12Passage 5 13Passage 6 15Passage 7 16Passage 8 17Passage 9 19Passage 10 20Passage 11 22Passage 12 23Passage 13 24Passage 14 24Passage 15 26Passage 16 28Passage 17 29Passage 18 30Passage 19 31Passage 20 33

2. Quant Section 34Passage 21 34Passage 22 35Passage 23 36Passage 24 37Passage 25 38Passage 26 39

3. Explanatory Answers (Verbal Section) 41Explanatory Answers (Quant Section) 49

Decision Making in XAT

Ethical perspectives

1. Utilitarianism:

2. Kant’s categorical imperative:

Decision making questions have been a part of XAT since 2007, but it was in 2012 that the XAT authorities decided to devote an entire section to this area. There are 25 questions in this section. Some questions (8 questions in 2013) require calculations or analytical reasoning and are mostly an application of concepts learnt in Quantitative Abililty, Data Interpretation and Logical Reasoning. The remaining are pure decision making problems. The shortest cases are a few lines long, while the longest is a page and a half long. Most cases span half a page.

The questions mostly ask for the best course of action that should be followed to achieve a certain goal, given the circumstances of the case. Other question types include the most justified conclusions or the most likely reasons behind certain behavior. At times, there are cases that list some selection criteria and ask the student to make appropriate selections as per the criteria.

As far as the pure decision making questions are concerned, the decisions required to be made are always non-programmed (obviously) and mostly tactical. Students are required to perform steps 2-6 of the decision making process. The options are created from the view points of various management styles. Most of the cases present non-business issues. In 2013, only 7 questions were based on business related cases.

Some guidelines for solving this section (in the XAT): 1. The shortest cases should be tackled first. There are normally 6-7 questions at least, which can be

answered after reading less than 10 lines. A student must go through these first as it is a low-risk approach. Even if the question/case turns out to be very confusing or difficult, the realization comes within 2-3 minutes. This is much safer than spending 7-8 minutes reading a long case and then realizing that it needs to be left alone.

2. The analytical or numerical cases need to be tackled next, as a student can quickly ascertain their level and there are well-defined techniques for arriving at the answers to such questions. The gray area here is minimal.

Preparing for the decision making section in XAT doesn't require studying a lot of concepts or memorizing details. Thus students should prepare for this section only about 6 to 8 weeks before XAT, after they have completed all the other basic reference material.

Some globally accepted ethical perspectives that can guide your decision making are discussed below. This is the view that the moral worth of an action can be determined only by its

utility i.e. benefits. English philosopher JeremyBentham (1748–1832) is regarded as the founder of the theory. Another important contributor is considered to be the British philosopher John Stuart Mill (1806–1873). They believed that the best decisions are those that result in the maximum possible benefits (as compared to the losses) and that too for the maximum number of people. This view can thus be summed up as:

Other philosophers proposed a variant of utilitarianism, called negative utilitarianism, which involved replacing the principle of ‘maximizing pleasure’ with ‘minimizing pain’.

The German philosopher Immanuel Kant introduced this concept in 1785. He believed that the moral philosophy of his day was based on too many subjective considerations and that in order to be compelling, a moral concept could not be subject to various situational or personal conditions. Thus, he believed in

The first categorical imperative (rules to be obeyed without exception) he formulated was the following:

The greatest good for the greatest number

doing what is right, irrespective of the consequences.

‘Act only according to that maxim whereby you can at the same time will that it should become a universal law without contradiction.’

There were two more formulations of the imperative, but it would suffice to remember their essence: So, a decision maker must ask himself ‘would I want everyone to make the decision I am making?’ If the answer is ‘yes’, then the decision is right, else wrong.

In 1971, American philosopher John Rawls introduced this concept, to be applied especially when allocating limited resources. He believed that following utilitarianism could seriously disadvantage minorities. He advocated two principles: the liberty principle and the equality principle.

The former states that for e.g. right to vote, freedom of speech and thought,

freedom to own personal property, and freedom from arbitrary arrest. No person, organization or government must infringe upon these liberties.

The equality principle states that (i.e. offices and positions should be open to all individuals) and that

According to him, the best decision could be arrived at by following the ‘maximin’ rule i.e. the best course of action is that whose worst outcome is better than the worst outcomes of all other alternatives. Thus, the best decision is the one that guarantees everyone a certain minimum level of benefits.

The following aspects need to be considered before taking decisions:1. Integrity – The decision maker has to be guided by some ethical perspective.2. Impact – The decision maker has to consider the impact the various alternatives will have

on various stakeholders. He should then try to choose the alternative that maximizes the positive impact or minimizes the negative impact.

3. Legality – The decision maker must be conversant with the laws pertaining to the decision he is planning to take. He has to ensure that the course of action he is about to take is completely legal.

4. Fidelity – If the decision maker has made a promise to someone, he must ensure that the decision doesn’t renege on it. That would be perceived as being unethical.

5. Impartiality – The decision maker must ensure that his decision is not being influenced by any prejudice or bias.

6. Inputs by others – Taking others’ wants, concerns and opinions into consideration usually leads to making better decisions.

what is right for one is right for all.

certain rights or liberties are more important than others and every person has an equal right to them

each society member must get equal opportunityonly those social or

economic inequalities can be allowed to exist that work to benefit the least advantaged members of the society.

3. Justice as fairness:

Considerations for decision making

VERBAL SECTION

PASSAGE 1

Answer questions 1-3 based on the information provided in this passage.

Build Big Corp and City Constructions are premium real-estate companies involved in the construction, sale and lease of residential and commercial premises. Buyers normally prefer to invest their monies in reputed real-estate companies like Build Big Corp and City Constructions. Like all real-estate enterprises, they keep a close watch on interest rate cuts and hikes by the Central Bank. If the Central Bank announces a 25 basis points cut in the bank repo rate, sales increase by about 10 per cent. However, with a hike of 25 basis points in the bank repo rate, sales decline by 15 per cent. This is because rising rates affect both developers and buyers. With each increase in the repo rate, interest rates on loans taken by real-estate companies for projects increase. Most real-estate purchases by retail consumers are backed by bank loans that are spread over ten to twenty years. Hence, when rates on home loans increase, they also affect demand for houses and retail spaces. Moreover, over the long term, continuous rate hikes also cause an increase in loan installments which may trigger loan defaults on existing debt commitments.

1. The Central Bank announces a interest rate hike of 25 basis points. Which of the following decisions made by Build Big Corp might counter a possible decline in sales?A. Provide a one-time discount on booking new flats and bank on its reputation.B. Provide free gifts to lure buyers.C. Tie up with a bank to offer fixed rate loans to borrowers.D. Form a real-estate industry group and lobby for a reduction in rates.E. Introduce a novel payment method in which buyers can pay 50 per cent of the amount on booking and

the rest while taking possession.

2. The Central Bank has announced a rate cut of 50 basis points in its annual review. This has led to renewed interests in real-estate purchases by retail consumers. Which of the following information about City Constructions may drastically reduce sales despite a rate cut?A. A large number of houses built by City Constructions remained unsold in the past year.B. On a housing portal, two buyers of homes constructed by City Constructions have put up negative

reviews about its practices while some buyers have praised the company for offering homes of great construction quality.

C. The Chief Executive Officer of City Constructions, said to be an iconic figure in the real estate industry, has resigned and left the company.

D. City Constructions is sitting on a huge pile of land and may build more buildings in the near future which might become available at lower than existing rates.

E. City Constructions is facing a torrent of litigation due to its construction of buildings on land it had not legitimately acquired.

3. The real-estate regulator is investigating claims that Build Big Corp has indulged in unfair trade practices including altering housing plans, withholding stocks of houses to benefit from scarcity and charging higher prices than its competitors. The managing committee at Build Big Corp has come out with the following arguments in their favour:i. Build Big Corp changed its housing plans in favour of larger apartment sizes due to the demands of

buyers and this is a standard industry practice.ii. Build Big Corp does not hold back housing stocks as that can be detrimental to its revenues and

intends to start a festive sale soon that would offer homes at 10 per cent discount than that of existing rates.

iii. Build Big Corp had to acquire lands at higher prices due to which its rates are slightly higher than that of its competitors.

iv. Build Big Corp always comes up with innovative financial packages in association with lender banks and wishes to launch a special loan package that would enable buyers to pay loans over longer tenures.

v. Build Big Corp is a respected company and employs various good practices to ensure high quality apartments.

Which of the above combinations would restore buyer confidence and lead to a rise in sales?A. i & ii B. ii & iii C. iii & v D. ii & iv E. iv & v