IIA IIA Certifications IIA-CIA-PART3 Questions & Answers

• Question 581:

  Maslow's theory of motivation is based on a hierarchy of human needs. The need satisfied by greater income is:

  A. Self-actualization.

  B. Safety.

  C. Participation.

  D. Authority.

  Correct Answer: B

  Maslow saw human needs as a hierarchy and held that lower-level needs physiological and safety needs) must be satisfied before higher-level needs acceptance by peers, esteem,self actualization) can influence the individual. Safety needs involve protection not only from physical harm but also from economic insecurity. Job and income security help to satisfy the need for safety.

• Question 582:

  According to thebehavioral theory of management:

  A. Employees are motivated to fulfill needs.

  B. Morale problems are not goal related.

  C. Compensation is a universal motivator.

  D. Productivity is not correlated with job satisfaction.

  Correct Answer: A

  The behavioral theory of management holds that all people including employees) have complex needs, desires, and attitudes. The fulfillment of needs is the goal toward which employees are motivated. Effective leadership matches need-fulfillment rewards with desired behavior tasks) that accomplishes organizational goals.

• Question 583:

  A firm wishes to enter a new business by creating a new entity (an internal entrant). The internal entrant is most likely to achieve above-average profits by targeting which industry?

  A. An industry with high entry costs.

  B. An industry with a stabilized structure.

  C. A new industry.

  D. An industry in equilibrium if entry positively affects the firm's existing businesses.

  Correct Answer: C

  A firm may be able to achieve above-average profits by choosing appropriate targets. For example, an industry may be in disequilibrium because it is new, entry barriers are rising, or firms have poor information. In a new industry, (1) the structure is not established,

  (2) entry barriers are low, (3) retaliation is unlikely, (4) resource supplies have not been locked up, and (5)

  brands are not well developed.

  However, initial firms may have greater costs than later entrants. Rising entry barriers favor an early

  entrant whose subsequent competitors will face higher costs. The early entrant also may have an edge in

  product differentiation. Poor information may perpetuate disequilibrium because firms that might enter the

  industry may not be aware of its potential.

• Question 584:

  A firm may decide to enter a new business by creating a new entity. After undertaking a structural analysis, the internal entrant chooses an appropriate target industry. The most likely target is an industry in which the entrant:

  A. Will have to develop its own distribution network.

  B. Can raise mobility barriers after entry.

  C. Will not have to compete with a dominant firm that seeks to protect the industry.

  D. Calculates that the costs of retaliation to existing firms are less than the benefits.

  Correct Answer: B

  A distinctive ability to influence industry structure is another basis for earning above- average profits. Thus, an ability to raise mobility barriers after the firm has entered the industry is a reason to target that industry. Moreover, a firm may be able to recognize that entering a fragmented industry will start a process of consolidation and increased entry barriers.

• Question 585:

  Entry by a firm into a new business may be through the creation of a full-fledged new business entity. The new entrant is most likely to cause industry disruption and retaliation when:

  A. The industry is fast-growing.

  B. The industry is highly concentrated.

  C. Fixed costs are low.

  D. The market is segmented.

  Correct Answer: B

  In a highly concentrated industry, the internal entrant is more likely to have a significant and noticeable effect on particular firms with the ability to retaliate. In a fragmented industry, any firms might be affected but not significantly. These firms also might have no ability to retaliate.

• Question 586:

  The general attack strategy adopted by a market challenger that is used by a firm with an advantage in resources is:

  A. Frontal attack.

  B. Bypass attack.

  C. Flank attack.

  D. Encirclement attack.

  Correct Answer: D

  An encirclement attack is used by a challenger with an advantage in resources. It is an assault on multiple marketing fronts.

• Question 587:

  A firm enters a new business by creating a full-fledged new entity (an internal entrant). The internal entrant is least likely to cause disruption and retaliation in a:

  A. Slow-growth industry.

  B. Fragmented industry.

  C. Commodity-producing industry.

  D. Highly-concentrated industry.

  Correct Answer: B

  In a fragmented industry, many firms might be affected but not significantly. These firms also might have no ability to retaliate. Firms in a fragmented industry have insignificant market shares and little influence on industry outcomes.

• Question 588:

  Market-follower strategies are adopted by firms that do not wish to challenge the leader. The market-follower strategy adopted in such industries as fertilizers and chemicals is:

  A. Conscious parallelism.

  B. Product innovation.

  C. Multiple niching.

  D. Counterfeiting.

  Correct Answer: A

  Some industries are characterized by conscious parallelism. These industries (e.g., fertilizers and chemicals) tend to have high fixed costs and little product and image differentiation. Market followers tend to imitate the leader because competing for a greater market share provokes painful retaliation.

• Question 589:

  The dominant firm in a market pursues a market-leader strategy. It may defend its market share by offensive and defensive actions. According to Kotler and Singh, which defensive strategy involves market broadening?

  A. Mobile defense.

  B. Flank defense.

  C. Contraction defense.

  D. Counteroffensive defense.

  Correct Answer: A

  A mobile defense may involve market broadening, a reorientation from a specific product to the underlying need. An example is the repositioning of oil companies as energy companies. An alternative is market diversification, an effect of conglomerate mergers of firms in wholly different industries.

• Question 590:

  The dominant firm in a market pursues a market-leader strategy. This strategy may involve:

  A. Holding the market stable to avoid attracting new competitors.

  B. A flank defense to strengthen the firm's brand.

  C. Sending market signals as a mobile defense.

  D. Innovations as an offensive strategy.

  Correct Answer: D

  Constant innovation to improve products and services, control costs, and increase distribution effectiveness is the basis for a good offensive strategy. The leader must continuously improve the value offered to customers.