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Recent years have brought minority-owned businesses in the United States unprecedented opportunities-as well as new and significant risks.
Civil rights activists have long argued that one of
(5) the principal reasons why Blacks, Hispanics, and other minority groups have difficulty establishingthemselves in business is that they lack access to
the sizable orders and subcontracts that are gener-ated by large companies. Now Con
government. Indeed, some federal and local agen-cies have gone so far as to set specific percentage goals for apportioning parts of public works con-
tracts to minority enterprises.
Corporate response appears to have been sub-stantial. According to figures collected in 1977, the total of corporate contracts with minority busi-
nesses rose from $77 million in 1972 to $1. lbillionin 1977. The projected total of corporate contracts with minority businesses for the early 1980’s is
estimated to be over 53 billion per year with no letup anticipated in the next decade.
Promising as it is for minority businesses, this increased patronage poses dangers for them, too.First, minority firms risk expanding too fast and
overextending themselves financially, since most are small concerns and, unlike large businesses, they often need to make substantial investments in
new plants, staff, equipment, and the like in order to perform work subcontracted to them. If, there-after, their subcontracts are for some reason(35) reduced, such firms can face potentially crippling fixed expenses. The world of corporate purchasing can be frustrating for small entrepreneurs who get requests for elaborate formal estimates and bids. Both consume valuable time and resources, and a (40) small company’s efforts must soon result in
orders, or both the morale and the financial health of the business will suffer.
A second risk is that White-owned companies may seek to cash in on the increasing apportion-(45)ments through formation of joint ventures with
minority-owned concerns. Of course, in many instances there are legitimate reasons for joint ventures; clearly, White and minority enterprises
can team up to acquire business that neither could (50) acquire alone. But civil rights groups and minority business owners have complained to ConGREss about minorities being set up as “fronts” with White back-ing, rather than being accepted as full partners in legitimate joint ventures.Third, a minority enterprise that secures the business of one large corporate customer often run
the danger of becoming--and remaining—dependent.Even in the best ofcircumstances, fierce compe-tition from larger, more established companies
(60) makes it difficult for small concerns to broaden their customer bases: when such firms have nearly guaranteed orders from a single corporate bene-
factor, they may truly have to struggle against complacency arising from their current success.
1. The primary purpose of the passage is to
(A) present a commonplace idea and its
inaccuracies
(B) describe a situation and its potential drawbacks
(C) propose a temporary solution to a problem
(D) analyze a frequent source of disaGREement
(E) explore the implications of a finding
2. The passage supplies information that would answer
which of the following questions?
(A) What federal agencies have set percentage goals for
the use of minority-owned businesses in public
works contracts?
(B) To which government agencies must
businesses awarded federal contracts report their
efforts to find minority subcontractors?
(C) How widespread is the use of minority-owned
concerns as “fronts” by White backers seeking to
obtain subcontracts?
(D) How many more minority-owned businesses were
there in 1977 than in 1972?
(E) What is one set of conditions under which a
small business might find itself financially over-
extended?
3. According to the passage, civil rights activists
maintain that one disadvantage under which
minority- owned businesses have traditionally had
to labor is that they have
(A) been especially vulnerable to governmental
mismanagement of the economy
(B) been denied bank loans at rates comparable to
those afforded larger competitors
(C) not had sufficient opportunity to secure business
created by large corporations
(D) not been able to advertise in those media that
reach large numbers of potential customers
(E) not had adequate representation in the centers of
government power
4. The passage suggests that the failure of a large
business to have its bids for subcontracts result
quickly in orders might cause it to
(A) experience frustration but not serious financial
harm
(B) face potentially crippling fixed expenses
(C) have to record its efforts on forms filed with the
government
(D) increase its spending with minority
subcontractors
(E) revise its procedure for making bids for federal
contracts and subcontracts
5. The author implies that a minority-owned concern
that does the GREater part of its business with one
large corporate customer should
(A) avoid competition with larger, more established
concerns by not expanding
(B) concentrate on securing even more business
from that corporation
(C) try to expand its customer base to avoid
becoming dependent on the corporation
(D) pass on some of the work to be done for the
corporation to other minority-owned concerns
(E) use its influence with the corporation to promote
subcontracting with other minority concerns
6. It can be inferred from the passage that, compared
with the requirements of law, the percentage goals
set by “some federal and local agencies ”(lines 14-
15) are
(A) more popular with large corporations
(B) more specific
(C) less controversial
(D) less expensive to enforce
(E) easier to comply with