IIA IIA Certifications IIA-CIA-PART3 Questions & Answers

• Question 801:

  A manager can use power and authority to accomplish objectives. The relationship between these two important concepts is best explained as follows:

  A. Power is the right to do things, while authority is the ability to do things.

  B. Authority is the right to do things, while power is the ability to do things.

  C. Power and authority are both required to accomplish a task.

  D. Power and authority are simply two words that describe the same concept -- how to get things done in organizations.

  Correct Answer: B

  Authority is the officially sanctioned privilege to direct others. A clear hierarchy of authority enhances coordination and accountability. Power is the ability to marshal organizational resources to obtain results. A manager may have both authority and power, or one without the other.

• Question 802:

  Globalization assists in achieving economies of scale, which is:

  A. Cost benefit

  B. Timing benefit.

  C. Learning benefit.

  D. Arbitrage benefit.

  Correct Answer: A

  Cost benefits are obtained from economies of scale as a firm expands its operations. Average costs of output decline because of standardization of products or processes, and increased bargaining power versus suppliers of raw materials, components, and services. Moreover, economies of scale may arise from centralized production or from marketing, logistical, or purchasing factors.

• Question 803:

  Globalization and localization are shaping the competitive structure of industries. The scenario contributing to the most competitive environment is when:

  A. Global forces dominate.

  B. Local forces dominate.

  C. Mix of global and local forces dominate.

  D. Neither global nor local forces dominate.

  Correct Answer: C

  Competitiveness of firms is greatest, and the competitive environment is most intense, when the benefits of global integration and coordination and the benefits of localization (flexibility, proximity, and quick response time) are achieved.

• Question 804:

  All of the following are impediments to global competition except:

  A. Economies of scale.

  B. Rapid changes in technology.

  C. Differing marketing tasks.

  D. Sensitivity to lead times.

  Correct Answer: A

  Economies of scale are sources of global competitive advantage. Economies of scale in centralized production, logistics, purchasing, or marketing facilitate entry into the global market.

• Question 805:

  For an industry to be genuinely global, it must be involved in which of the following significant activities?

  I. Licensing

  II. Export

  III.

  Direct Investment

  A.

  I. and II.

  B.

  II. or Ill.

  C.

  I. and lll.

  D.

  Ill. only.

  Correct Answer: B

  A genuinely global industry requires a firm to compete globally. Participation in foreign markets is usually by licensing; export; or, after the firm has obtained experience, direct investment. A genuinely global industry will have significant export activity or direct investment. Nevertheless, direct investment does not necessarily signal the existence of global competition. Direct investment also may occur when purely national factors determine a subsidiary's competitive position.

• Question 806:

  Which strategy in a global industry is most likely to rely on domestic content rules or high tariffs?

  A. A protected niche strategy.

  B. A national focus strategy.

  C. A national segment strategy.

  D. A global focus strategy.

  Correct Answer: A

  A protected niche strategy is applied in nations where global competitors are discouraged by governmental impediments, such as domestic content rules or tariffs. The strategy is designed to be effective in markets with governmental constraints and requires close attention to the national government.

• Question 807:

  According to Michael E. Porter's analysis of the evolution of global industries, the factor that is always necessary for an industry to become global is:

  A. The existence of environmental triggers to begin globalization.

  B. A strategic innovation.

  C. Marketing economies of scale.

  D. Changes in the costs of the factors of production.

  Correct Answer: B

  The triggers of the evolution of global industries establish or exploit the sources of global competitive advantage. They also may negate the impediments to global competition. However, negating impediments will not result in globalization unless the firm has sufficient strategic advantages. Moreover, a strategic innovation is always necessary for an industry to become global. Environmental triggers include an increase in any of the types of economies of scale,lower transportation or storage costs, changes in distribution channels that facilitate access by foreign firms, changes in the costs of the factors of production, increased similarity of economic and social conditions in other nations, and reduction in governmental constraints. However, strategic innovations may begin globalization even if environmental triggers are not present. These innovations include, for example, product redefinition, reducing the costs of adapting a product for sale in different nations, design changes, and elimination of constraints.

• Question 808:

  Impediments to global competition may increase direct costs, make management more difficult, be imposed by governments or other institutions, or consist of resource limitations. Which of the following is most likely to be an impediment to global competition?

  A. A certain nation has a competitive advantage regarding the cost of producing a product.

  B. Proprietary technology provides a competitive advantage regarding the quality of a product.

  C. The product is highly differentiated.

  D. Product needs vary from country to country.

  Correct Answer: D

  Product needs may differ from country to country because of culture, climate, degree of economic development, income, legal requirements, technical standards, and other factors. This barrier inhibits global procurement and achievement of economies of scale and experience. The height of the barrier depends on the costs of product modifications. Complex segmentation within geographic markets has similar effects.

• Question 809:

  The reason(s) governments most likely restrict trade include

  I. To help foster new industries.

  II. To protect declining industries.

  III. To increase tax revenues.

  IV.

  To foster national security.

  A.

  I only.

  B.

  I and II only.

  C.

  II and Ill only.

  D.

  I, II, and IV only.

  Correct Answer: D

  Governmental impediments to global competition are generally imposed for the announced purpose of protecting local firms and jobs, developing new industries, and fostering national security. They also may have the effect of raising revenue in the short run. In the long run, tax and revenues will decline because of reduced trade. Examples of governmental impediments are tariffs; duties; quotas; domestic content rules; preferences for local firms regarding procurement,taxes, RandD, labor regulations, and other operating rules; and laws (e.g., antibribery or tax) enacted by a national government that impede national firms from competing globally. These impediments are most likely when industries are viewed as crucial.

• Question 810:

  Which of the following is a source of global competitive advantage?

  A. Low fixed costs.

  B. Production economies of scale.

  C. Weak copyright protection.

  D. Intensive local service requirements.

  Correct Answer: B

  Production economies of scale exist when a firm can produce and sell the output at which the average total cost of production is minimized. (The archetypal example is oil refining.) In other words, economies of scale in centralized production may yield a cost advantage achievable only when output exceeds the demand in one country, and exports are feasible.