IIA IIA-CIA-PART4 Online Practice Questions and Exam Preparation

IIA IIA-CIA-PART4 Online Questions & Answers

• Question 211:

  According to Michael E Porter, evolutionary processes involving both internal and external factors operate to move an industry from its initial structure to its potential structure. A likely structural effect of the major evolutionary processes is that:

  A. Expansion of industry scale will discourage entry by large firms.
  B. Sellers' industries tend to become less concentrated as customers' industries become more concentrated.
  C. Learning by buyers who become more sophisticated increases product differentiation.
  D. Diffusion of proprietary knowledge will tend to reduce entry barriers.
  D. Diffusion of proprietary knowledge will tend to reduce entry barriers.

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  Diffusion of proprietary knowledge may result from reverse engineering (a form of imitation) or another form of competitive intelligence (e.g., that obtained from suppliers, distributors, or customers), expiration of patents, purchase, migration of personnel to new firms, and spinoffs of operating segments. Thus, because barriers created by proprietary knowledge and specialized personnel tend to disappear, new competitors may emerge, and vertical integration becomes more likely. However, if further technological advances are feasible, economies of scale in RandD may create a protective barrier against new competition. The problem of diffusion may be met by creation of a substantial capacity to develop new proprietary knowledge.

• Question 212:

  Which factor increases the threat of entry into an industry?

  A. Economies of scale are significant.
  B. Capital requirements are high.
  C. An industry leader may retaliate against a new entrant.
  D. Exit barriers are low.
  D. Exit barriers are low.

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  The most favorable condition for the attractiveness of an industry is the existence of high entry barriers and low exit barriers. When the threat of new entrants is minimal and exit is not difficult, returns are high, and risk is reduced in the event of poor performance. Low entry barriers keep long-term profitability low because new firms can enter the industry, increasing competition and lowering prices and the market shares of existing firms. Exit barriers are reasons for a firm to remain in an industry despite poor (or negative) profits.

• Question 213:

  A production worker in a plant often speaks for the entire work force when problems arise between labor and management. Although this individual has the same level of authority andexpertise as the individual's co-workers, the worker seems to possess a degree of power that others do not have. What type of power does this individual apparently have?

  A. Coercive.
  B. Referent.
  C. Legitimate.
  D. Reward.
  B. Referent.

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  Referent power is based on identification of subordinates with a superior. Thus, personal magnetism (charisma) may be a basis for influencing others to comply with a manager's directives.

• Question 214:

  Auditor 1 and Auditor 2 are working on similar projects. After looking at Auditor 2's work, Auditor 1 informs Auditor 2 that Auditor 2's project contains many errors and is not acceptable. Auditor 1 discusses with Auditor 2 ways to improve to prevent the errors from happening again. Auditor 2 acknowledges the mistakes and vows to work harder. Auditor 2 listens to Auditor's 1 suggestions, corrects the errors on the current project, and returns a highquality project. This is an example of:

  A. Cooperative conflict.
  B. Competitive conflict.
  C. Destructive conflict.
  D. None of the answers are correct.
  A. Cooperative conflict.

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  Auditor 1's conflict with Auditor 2 is productive because dialogue between the two workers is productive. The workers share the same goals for a high-quality project.

• Question 215:

  A starting point for developing competitive strategies is customer value analysis (CVA). According to theCVA approach.

  A. Customer value equals customer benefits.
  B. Bad competitors rather than good competitors should be targeted.
  C. Strong competitors should be avoided even when they have exploitable weaknesses.
  D. Distant competitors are the usual threats.
  B. Bad competitors rather than good competitors should be targeted.

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  Bad competitors should be targeted rather than good competitors. The former disturb the competitive equilibrium, e.g., by excessive expansion of capacity or overly risky behavior. The latter make sound business decisions that promote the long-term health of the industry, e.g., about prices, entry into newsegments, and pursuit of market share.

• Question 216:

  Which of the following strengthens and increases acceptable behavior by termination or withdrawal of undesirable consequences?

  A. Positive reinforcement.
  B. Negative reinforcement.
  C. Reward.
  D. Punishment.
  B. Negative reinforcement.

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  Negative reinforcement removes an existing unpleasant condition when the desired behavior occurs. In contrast, positive reinforcement rewards the desired behavior. For example, a crying child negatively reinforces a parent's behavior when (s)he stops crying after receiving what (s)he wants.

• Question 217:

  Strategic management includes developing the organization's grand strategy. This strategy is based on:

  A. Existing strategic business units (SBUs).
  B. A SWOT analysis.
  C. Portfolio management of the organization's businesses.
  D. Strategic planning.
  B. A SWOT analysis.

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  Strategic management is a process that includes development of a grand strategy that describes how the organization's mission is to be achieved. This strategy is based on a situational analysis that considers organizational strengths and weaknesses (a capability profile) and their interactions with environmental opportunities and threats. Such an evaluation is also called a SWOT analysis. Strengths and weaknesses (the internal environment) are usually identified by considering the firm's capabilities and resources. What the firm does particularly well or has in greater abundance are known as core competencies. Opportunities and threats (the external environment) are identified by considering macroenvironment factors (economic, demographic, political, legal, social, cultural, and technical) and microenvironment factors (suppliers, customers, distributors, competitors, and other competitive factors in the industry).

• Question 218:

  An audit manager allowed a work group to make a decision about whether to adopt a new work procedure. In allowing the group to make the decision, the manager should be aware that groups tend to make: A. Very conservative decisions and do not want to assume risk.

  B. Faster decisions than do individuals because groups have more expertise than does any one person.
  C. Decisions that are less accurate than those made by individuals.
  D. Riskier decisions than do individuals, and individual responsibility for the group's decision is lessened.
  D. Riskier decisions than do individuals, and individual responsibility for the group's decision is lessened.

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  Groupshift is the difference between the decisions that members of a group would make singly and the group's decision. Sometimes the group's decision is more conservative, butmore often it is riskier. What apparently occurs is that the group discussion accentuates the initial tendency of the group. The most likely reason for the more frequent shift toward the riskier course is diffusion of responsibility among members of the group. Thus, no one will be wholly to blame for failure.

• Question 219:

  A milk producer company acquires its own dairy farms to supply milk. The growth strategy adopted by the company is:

  A. Horizontal integration.
  B. Vertical integration.
  C. Concentric diversification.
  D. Conglomerate diversification.
  B. Vertical integration.

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  Vertical integration occurs when a company becomes its own supplier or distributor. It combines within a firm production, distribution, selling, or other separate economic processes needed to deliver a product or service to a customer.

• Question 220:

  Vertical integration is the acquisition of:

  A. A supplier or a distributor.
  B. A supplier but not a distributor.
  C. A distributor but not a supplier.
  D. A competitor.
  A. A supplier or a distributor.

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  Vertical integration combines within a firm production, distribution, selling, or other separate economic processes needed to deliver a product or service to a customer. All such processes could in principle be performed through market transactions with outside firms. However, vertical integration uses internal or administrative transactions for these purposes in the expectation they will increase efficiency or decrease costs and risks.