IMANET IMANET Certifications IMANET-CMA Questions & Answers

• Question 1201:

  Capacity expansion is also referred to as

  A. Market penetration

  B. Market development

  C. Product development

  D. Diversification

  Correct Answer: A

  Market penetration is growth of existing products or development of existing markets. It occurs in mature firms within an industry.

• Question 1202:

  What type of synergy exists when products or services have positive complementary effects?

  A. Market synergy.

  B. Cost synergy

  C. Technological synergy

  D. Management synergy

  Correct Answer: A

  Market synergy arises when products or services have positive complementary effects. Shopping malls reflect this type of synergy.

• Question 1203:

  Which of the following is not an example of synergy?

  A. A shopping mall with several businesses providing different products and performing different services.

  B. A store provides warranties on automobile parts in order to maximize customer value.

  C. A manufacturing company hires a new manager with technological experience lacking in the company.

  D. Military Humvees are converted into sports utility vehicles for sale to civilians.

  Correct Answer: B

  Synergy occurs when the combination of formerly separate elements has a greater affect than the sum of their individual effects. It is unclear here whether the store is a car dealership or a parts shop. Therefore, this is seen more as an operational service strategy that seeks to gain a competitive advantage and maximize customer value by providing services such as warranties, rather than market synergy. Market synergy arises when products or services have positive complementary effects( i.e., a parts shop and a service warranty on parts).

• Question 1204:

  Which of the following best describes a market synergy?

  A. Technology transfer from one product to another.

  B. Bundling of product distributed through the same channels.

  C. Production of multiple products at one facility.

  D. Use of complementary management skills to achieve entry into a new market.

  Correct Answer: B

  Market synergy arise when products or services have positive complementary effects. Shopping malls reflect this type of synergy. Also, bundling of product, distribution through the same distribution channels, and usage of the same sales force are other examples of market synergies.

• Question 1205:

  Which of the following factors is not typical of an industry that faces intense competitive rivalry?

  A. Price-cutting

  B. Large advertising budgets.

  C. Frequent introduction of new products.

  D. Inelastic demand.

  Correct Answer: D

  Rivalry among existing firms will be intense when an industry has many strong competitors. Inelastic demand exists when quantity purchased is not greatly affected by price changes. Thus, price cutting does not increase sales for the industry and is therefore a typical of an intensely competitive industry.

• Question 1206:

  The prospect for the long-term profitability of an existing firm is greater when

  A. The firm operates in an industry with a steep learning curve in its production process.

  B. The costs of switching suppliers is low.

  C. New entrants are encouraged by government policy.

  D. Distribution channels are willing to accept new products.

  Correct Answer: A

  The prospects of long-term profitability are contingent upon the industry's exit and entry barriers. The entry of new firms in a market decreases the prospect for long-term profitability. When a firm operates in an industry that has a steep learning curve, it is more difficult for new firms to enter the market. Thus, the prospects of long-term profitability are greater for an existing firm.

• Question 1207:

  Structural considerations affecting the threat of substitutes include all of the following expect

  A. Relative prices

  B. Brand identity

  C. Cost of switching to substitutes.

  D. Customers' inclination to use a substitute.

  Correct Answer: B

  Substitutes are types of goods and service that serve the same purpose. All products that can replace a good or service should be considered substitutes. For example, bicycles and cars are substitutes for public transportation. Structural considerations determine the effect substitutes have on one another. However, because substitutes are types (not brands) of goods and services that have the same purposes, brand identity is not a structural consideration affecting the threat of substitutes.

• Question 1208:

  Logistics Corp. is performing research to determine the feasibility of entering the truck rental industry. The decision to enter the market is most likely to be deterred if

  A. Buyer switching costs are high.

  B. Buyers view the product as differentiated.

  C. The market is dominated by a small consortium of buyers.

  D. Buyers enjoy large profit margins.

  Correct Answer: C

  When purchasing power is concentrated in a few buyers or when buyers are well organized, their bargaining power is greater. This effect is reinforced when sellers are in a capital-intensive industry such as trucking.

• Question 1209:

  Which industry factor does not contribute to competitive rivalry?

  A. Price-cutting, large advertising budgets, and frequent introduction of new products.

  B. A firm's growth must come from winning other firms' customers.

  C. High costs of switching suppliers.

  D. High fixed costs.

  Correct Answer: C

  If it is expensive to switch suppliers, customers will be less motivated to respond to competitor advances.

• Question 1210:

  Which basic force(s) drive(s) industry competition and the ultimate profit potential of the industry?

  I. Threat of new entrants.

  II. Bargaining power of suppliers.

  III. Favorable access to raw materials and labor.

  IV.

  Product differentiation.

  A.

  I only

  B.

  I and II only

  C.

  III and IV only

  D.

  I, II, III and IV

  Correct Answer: B

  Threat of new entrants and bargaining power of suppliers are among the five basic forces that drive industry competition and the ultimate profit potential in the industry. This potential is measured in terms of long-term return on invested capital. The other three forces are rivalry among existing firms, threat of substitutes , and threat of buyers' bargaining power.