IIA IIA Certifications IIA-CIA-PART4 Questions & Answers

• Question 191:

  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 192:

  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 193:

  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 194:

  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.

• Question 195:

  What strategy seeks to gain a larger share of a current market for a current product?

  A. Market penetration.

  B. Market development.

  C. Product development.

  D. Diversification.

  Correct Answer: A

  Market penetration is the percentage of potential users of a product in a current market who buy the product. A firm's market penetration strategy may be to (1) convince its current customers toincrease their usage frequency, (2) convince other firms' customers to switch, or (3) convert nonusers in the target market.

• Question 196:

  A runner-up firm in a market may choose a market-challenger strategy. Which general attack strategy adopted by a market challenger is directed at a gap in customer need fulfillment?

  A. Guerilla warfare.

  B. Bypass attack.

  C. Frontal attack.

  D. Flank attack.

  Correct Answer: D

  A flank attack may be directed at a geographic or segmental weakness of the target (an underserved market) or an unmet need (such as the desire for more healthful fast food). A flank attack succeeds when market segments shift. The result is a gap in need fulfillment that the attacker can convert into a strong position in a profitable segment.

• Question 197:

  Michael E. Porter's generic strategies are responses to the five competitive forces. How do focus strategies respond to the threat of buyers' bargaining power?

  A. A cost leader may be able to pass along suppliers' price increases.

  B. Substitute products may not be able to compete on quality.

  C. Core competencies in a broad market may not be matched by new entrants.

  D. Brand loyalty may not be matched by new entrants.

  Correct Answer: B

  Differentiation may reduce the leverage enjoyed by strong buyers because of the uniqueness of the product and the resulting lack of close substitutes. Focus strategies also may reduce buyers' ability to negotiate in a narrow market. Substitutes may not be able to compete on price, quality, etc.

• Question 198:

  According to Michael E. Porter's generic strategies model, a firm that successfully adopts a cost focus strategy is most likely to:

  A. Have weak customer loyalty.

  B. Have a strong RandD function.

  C. Know its market well.

  D. Enjoy economies of scale.

  Correct Answer: C

  Cost focus is the generic strategy favored by firms that seek competitive advantage through lower costs and that have a narrow competitive scope (e.g., a regional market or a specialized product line). The rationale for a cost focus strategy is that the narrower market can be better served because the firm knows it well.

• Question 199:

  According to Michael E Porter's generic strategies model, a firm that successfully adopts a differentiation strategy is most likely to:

  A. Tend to disregard cost control.

  B. Risk overlooking product changes.

  C. Closely supervise its labor force.

  D. Be able to pass supplier cost increases on to its customers.

  Correct Answer: D

  Differentiation is the generic strategy favored by firms that seek competitive advantage through providing a unique product or service and that have a broad competitive scope. A successful differentiation strategy creates a consumer perception that few, if any, substitutes are available. Thus, a firm that adopts this strategy may have the additional advantage of being able to pass supplier cost increases to consumers.

• Question 200:

  In accordance with Michael E Porter's generic strategies model, a firm with a broad competitive scope that has high sales volume, low margins, and efficient supply and distribution channels will most likely choose a

  A. Cost leadership strategy.

  B. Cost focus strategy.

  C. Differentiation strategy.

  D. Focused differentiation strategy.

  Correct Answer: A

  Cost leadership is the generic strategy favored by firms that seek competitive advantage through lower costs and that have a broad competitive scope. Such a firm can earn higher profits than its competitors at the industry average price or charge a lower price to increase market share. The typical firm that follows a cost leadership strategy has low profit margins, a high volume of sales, and a substantial market share. Such a firm has efficient supply and distribution channels; is capable of large capital investment; if it is a manufacturer, has strengths in product design and process engineering; and closely supervises its labor force.