IMANET IMANET Certifications IMANET-CMA Questions & Answers

• Question 1021:

  When a market leader attempts to increase demand in the market through the attraction of new customers, there are three strategies from which to choose. The focus of a market- penetration strategy is to

  A. Target customers in new locations where the product or service has not previously been offered.

  B. Pursue customers who have never before used the product or service although it was available for purchase in their locality.

  C. Respond to a competitive move through effective retaliation.

  D. Pocus on customers who might use the product or service.

  Correct Answer: D

  The dominant firm in a market pursues a market-leader strategy. The leader should attempt to increase total demand in the market because the market leader will gain the most. Demand will increase if the firm attracts new users, encourages new uses of the product or service, or promotes increased use of the product or service. Three strategies may be used to attract new users. A market-penetration strategy focuses on customers who might use the product or service. A new-market segment strategy pursues customers who have never used the product or service. A geographical-expansion strategy targets users in previously unnerved localities.

• Question 1022:

  When assessing a competitor's strengths and weaknesses, a firm may use the three-factor model for assessing a competitor's current and future market shares, in accordance with the suggestion of the consulting firm, Arthur D. Little. The factors included in this assessment are market share, mind share and

  A. Innovation share.

  B. Heart share.

  C. Critical share.

  D. Reaction share.

  Correct Answer: B

  Arthur D. Little suggests a three-factor model for assessing a competitor's current and future market shares. Market share is the share of the target market. Mind share is the percentage of customers who name the firm as the first "that comes to mind" in the industry. Heart share is the percentage of customers who name the firm as the one from which they "would prefer to buy." A competitor that improves its mind share and heart share will ultimately increase its market share and profits.

• Question 1023:

  Which of the following is not characteristic of a mature industry environment?

  A. Consolidation.

  B. Competitive interdependence.

  C. Palling demand.

  D. Strategic focus on deterring entry of new competitors into the marketplace.

  Correct Answer: C

  Falling demand is characteristic of declining industries; These industries have sustained a Permanent decrease in unit sales over the long run.

• Question 1024:

  Industry structure and competition during the decline phase may result in intense and destructive competition. Which factor is most likely to contribute to this condition?

  A. Firms do not expect demand to rebound.

  B. The decline is rapid.

  C. Attractive substitutes are not available.

  D. Exit barriers are high.

  Correct Answer: D

  High exit barriers may restrain firms from leaving the industry even though their returns are poor. i For example, specialized assets and inventory in a declining industry may have a low liquidation value. Few purchasers who wish to operate in the same industry may be available. Durable assets may have a carrying amount far greater than the liquidation value. Hence, liquidation may result in a loss that the firm may not wish to recognize. Furthermore, a low liquidation value means that the future discounted cash flows from remaining in the industry may exceed the opportunity cost of the capital invested in the declining industry. Thus, the returns from the proceeds of liquidation may be less than the returns from keeping those assets in the business, the fixed costs of exit (such as contract cancelation) 11may be high, the firm is part of a group executing a larger strategy, a government discourages exit to preserve employment, or managers have an emotional tie to the business.

• Question 1025:

  Strategic choices in an emerging industry are inherently subject to great uncertaintj and risk with regard to competitors, industry structure, and competitive rules. Accordingly, a firm considering entry into an emerging industry

  A. Has little need to be concerned with industry cooperation.

  B. Is least likely to be able to shape the industry structure at this stage.

  C. May enjoy such benefits of pioneering as experience advantages and early commitment to suppliers.

  D. Must be prepared for responding vigorously to competitors' moves.

  Correct Answer: C

  Timing of entry is a critical choice. Pioneering firms face high risk but low barriers and may earn high returns. The following are factors favoring early entry: pioneering improves the firm's reputation, the learning curve (experience) advantage is important and will persist, customer loyally will be high, and cost advantages (through early commitment to suppliers or distributors) can be secured.

• Question 1026:

  A firm in a declining industry ordinarily adopts one of four strategies. A firm that follows a?

  A. Quick divestment strategy should have divested during the maturely phase.

  B. Leadership strategy may assume that success will enable it to subsequently pursue a harvest strategy.

  C. Harvest strategy seeks a pocket of stable demand.

  D. Niche strategy is engaged in a gradual liquidation.

  Correct Answer: B

  A leadership strategy is pursued by a firm that believes it can achieve market share gains to become the dominant firm. An assumption is that additional investment can be recovered A second assumption is that success will put the firm in a better position to hold its ground or subsequently to follow a harvest strategy, This strategy may entail aggressive pricing. marketing, or other investments that raise the stakes for competitors; reducing competitors' exit barriers by acquisitions of their capacity or products, assuming their contracts, and producing spare parts and generic versions of goods for them; demonstrations of strength and risk*vet to remain in the industry and publicizing accurate data about the reality of future decline so as to dispel competitors' uncertainly.

• Question 1027:

  An emerging industry is new formed and is small in size initially. It results from innovation, changes is 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 spin-offs.

  Correct Answer: D

  Embryonic companies (firms newly formed and not new units of established entities) area 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 inventive, and be well-placed, to create new firms. Their motive is to exploit ideas that may not received a favorable reception by their former employers.

• Question 1028:

  While auditing a marketing department, the internal auditor discovered that the product life cycle model was used to structure the marketing mix. The manager has asked the auditor for advice about increasing advertising of various products. During which stage of the life cycle would it be appropriate to advertise that the company's products is the lowest price and best quality of all competitors?

  A. Introduction stage.

  B. Growth stage.

  C. Maturity stage.

  D. Decline stage.

  Correct Answer: C

  The maturity stage is the ideal time for advertising lower price and superior quality because this is the period during a product's life when competition is greatest. Due to the availability of many alternatives or substitutes, a firm has reasons to set itself apart. Because price and quality are both concerns of customers during the maturity stage, it is ideal for the firm to differentiate its product by advertising low prices and higher quality.

• Question 1029:

  While auditing a marketing department, the internal auditor discovered that the product life cycle model was used to structure the marketing mix. Under such a philosophy, the opportunity for cost reductions would be greatest in which stage of the cycle?

  A. Introduction stage.

  B. Growth stage.

  C. Maturity stage.

  D. Decline stage.

  Correct Answer: B

  During the growth stage, the opportunity for reductions id at its maximum because production volume is increasing at a high rate. Thus, fixed costs are being spread over more unit of production, and the benefits of the learning curve are being realized.

• Question 1030:

  While auditing a marketing department, the internal auditor discovered that the product life cycle model was used to structure the marketing mix. Under such philosophy, the price charged on a consistent basis for a specific product would probably be lowest during which life cycle stage?

  A. introduction stage

  B. Growth stage

  C. Mutually stage

  D. Decline stage

  Correct Answer: C

  During the maturity stage, competition is at its greatest and costs are at their lowest. Moreover, firms are engaged in competitive price-cutting measures, resulting in some of the lowest prices seen during a product's life cycle.