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

IIA IIA-CIA-PART4 Online Questions & Answers

• Question 81:

  A firm's capacity expansion decision should be based on the understanding that:

  A. Overcapacity in a profitable industry is a short-term problem.
  B. Under capacity in a profitable industry is a long-term problem.
  C. A key forecasting problem is behavior of competitors.
  D. Prices and cash flows must be estimated to predict market shares and industry capacity.
  C. A key forecasting problem is behavior of competitors.

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  Whether to expand capacity is a major strategic decision because of the capital required, the difficulty of forming accurate expectations, and the long time frame of the lead times and the commitment. The key forecasting problems are longterm demand and behavior of competitors. The key strategic issue is avoidance of industry overcapacity. Analysis of competitors determines when each will expand. The difficulty is that forecasting their behavior depends on knowing their expectations. Another difficulty is that each competitor's actions potentially affect all other competitors' actions, with the industry leader being most influential.

• Question 82:

  Select an additional deficiency in the communication chain.

  A. The receiver of the communication was inappropriate; the personnel department should have received the memorandum and then informed the buyer.
  B. The message is improperly encoded because the buyer does not know why the termination is to be completed.
  C. Because the supervisor and buyer have conflicting vacation schedules, no possibility exists for feedback.
  D. The supervisor should not be the sender of the memorandum; the personnel department is the appropriate source.
  C. Because the supervisor and buyer have conflicting vacation schedules, no possibility exists for feedback.

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  The communications process has five elements:1) the sender of the message, 2) symbols used to encode the message, ) the medium chosen to send the message, 4) the receiver of the message, and 5) feedback acknowledging interpretation of the message by the receiver. Because the supervisor and buyer have conflicting vacation schedules, no possibility exists for feedback, and the buyer is not referred to anyone else in the organization for any additional information.

• Question 83:

  Which of the following is most likely to be a disadvantage of decentralization?

  A. Lower-level employees will develop less rapidly than in a centralized organization.
  B. Top management will have less time available to devote to unique problems.
  C. Lower-level managers may make conflicting decisions.
  D. Lower-level managers may lose motivation.
  C. Lower-level managers may make conflicting decisions.

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  The disadvantages of decentralization include a tendency to focus on short-run results to the detriment of the long-term health of the entity, an increased risk of loss of control by top management, the increased difficulty of coordinating interdependent units, and less cooperation and communication among competing decentralized unit managers.

• Question 84:

  Which of the following is not a characteristic of decentralized organizations?

  A. Decentralized organizations are usually more flexible.
  B. Decentralized organizations have reduced costs through resource sharing.
  C. Decentralized organizations have fewer decisions made lower in the hierarchy that are monitored by senior management.
  D. Decentralization has a positive influence on morale.
  B. Decentralized organizations have reduced costs through resource sharing.

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  The main benefits of centralization are more effective control and reduced costs through resource sharing. In a centralized organization, senior management is able to direct control over subordinates and direct the flow of resources. Senior management is able to allocate reduce costs most effectively because they are aware of where expenses can be reduced across departments within an organization.

• Question 85:

  A firm considering entry into a fragmented industry may be able to eliminate the factors preventing concentration in which ways?

  I. Recognizing that the industry is "stuck" for noneconomic reasons.

  II. Adding value to products that cannot be significantly differentiated.

  III. Specialization by customer type.

  IV. Acquisitions of local firms.

  A. I and II only.
  B. I and IV only.
  C. II, III, and IV only.
  D. I, II, Ill, and IV.
  I. Recognizing that the industry is "stuck" for noneconomic reasons. II. Adding value to products that cannot be significantly differentiated. III. Specialization by customer type. IV. Acquisitions of local firms.
  B. I and IV only.

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  Overcoming fragmentation has significant strategic payoffs given that entry is not costly and competitors are weak. If the factor(s) preventing consolidation can be eliminated, industry structure will change. For example, industries may be "stuck" in a fragmented state for reasons other than underlying economic factors. Firms in the industry lack the resources, skills, awareness, or ambition to make the strategic moves needed for consolidation. Outside firms do not recognize the opportunity offered by an industry 皊tuck" in a fragmented state, for example, because it is new, small, or obscure. Also, acquisitions may enable a firm to expand when competing with local firms is difficult because of their contacts or image. However, adding value to products that cannot be significantly differentiated and specialization by customer type are methods of coping with, not overcoming, fragmentation.

• Question 86:

  The key ingredient to group effectiveness is:

  A. Challenge.
  B. Trust.
  C. Norms.
  D. Roles.
  B. Trust.

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  Groups in the acceptance stage of group development tend to be effective and efficient. This stage is characterized by personal and mutual understanding, tolerance of individual differences, constructive conflict about substantive matters, realistic expectations about group performance, and acceptance of the authority structure. The resulting trust engenders cohesiveness and a free exchange of information between group members.

• Question 87:

  The STEP model is consistent with which organizational philosophy?

  A. Self-managed teams.
  B. Open-book management.
  C. Impression management.
  D. Group development.
  B. Open-book management.

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  Open-book management involves sharing important financial information with trained and empowered employees. The first step is to share S) the financial information with the employees. Next, management must teach T) the employees how to understand the information and use it to the benefit of the organization. Then, management empowers E) the employees to act on the information given. Finally, the employees are paid P) for their accomplishments.

• Question 88:

  An emerging industry is new or newly formed and is small in size initially. An emerging industry results from innovation, changes in cost structures, new customer needs, or another factor that creates an attractive opportunity for selling a product or service. Which of the following is a structural characteristic of an emerging industry?

  A. A long time horizon for product development.
  B. Low initial costs and a shallow learning curve.
  C. Mobility barriers include economies of scale and brand identification.
  D. The presence of embryonic companies and spinoffs.
  D. The presence of embryonic companies and spinoffs.

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  Embryonic companies (firms newly formed and not new units of established entities) are numerous in the emerging phase of industry evolution. Entry is not discouraged by the presence of economies of scale or strategic certainty. Spin-offs from existing firms also are common. Given the strategic uncertainties and the lure of equity interests, employees of these firms may have the incentive, and be well-placed, to create new firms. Their motive is to exploit ideas that may not have received a favorable reception by their former employers.

• Question 89:

  Backward integration strategy is most appropriate when the firm's current suppliers are:

  A. Highly reliable.
  B. Not reliable.
  C. Geographically dispersed.
  D. Geographically concentrated.
  B. Not reliable.

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  Backward integration is appropriate when the firm's current suppliers are unreliable. Stable relationships between internal sellers and buyers create economies because they need not fear loss of the related buyers and sellers. They also need not fear undue economicpressure from each other. Furthermore, because the relationship is locked in, more efficient procedures for their relationship (e.g., dedicated controls and records) may be implemented. Another advantage is that internal sellers and buyers may more fully adapt to each other's needs than they would or could in dealings with outsiders.

• Question 90:

  The email received by the executive committee was faulty. In terms of the links in the communications process, the error occurred because of:

  A. Noise in the communication chain.
  B. The sender's perception.
  C. Message encoding.
  D. The choice of transmission medium.
  C. Message encoding.

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  Encoding is the sender's packaging of an idea for better understanding. It entails translating the message into symbols that can be transmitted through the chosen medium of communication and then decoded by the recipient. In this example, the sender's wording of the message was misleading. A multinational firm was attempting to buy a controlling interest in a medium size US $10 million annual sales) foreign metal-working firm. The multinational firm's negotiator in the foreign country sent the following email:The foreign firm won't deal unless 51% ownership." The executive committee of the multinational firm, not wanting a minority interest, then canceled the deal. Upon returning to the multinational firm, the negotiator pointed out that the foreign firm wanted to sell no more than 51% ownership i n order to retain at least 49%. Thus, the deal could have been made.