IIA IIA Certifications IIA-CIA-PART4 Questions & Answers

• Question 221:

  Strategic control measurements that relate to external effectiveness concern customer satisfaction at the:

  A. Departmental level.

  B. Business-operating-system level.

  C. Business-unit level.

  D. Work-center level.

  Correct Answer: B

  Strategic controls should be established to monitor progress, isolate problems, identify invalid assumptions, and take prompt corrective action. As plans are executed at each organizational level, control measurements are made to determine whether objectives have been achieved. Thus, objectives flow down the organizational hierarchy, and control measures flow up. One category of strategic control measures relates to external effectiveness. At the business- operating-system level, these measures concern satisfaction and flexibility.

• Question 222:

  A firm should state its primary competitive scopes when it:

  A. Defines its strategic business units (SBUs).

  B. Establishes strategic control points.

  C. Formulates its mission.

  D. Makes investment and divestment decisions.

  Correct Answer: C

  At the highest level, a firm's strategic planning function involves formulating its mission (ultimate firm purposes and directions), determining its strategic business units (SBUs), allocating resources to SBUs, planning to start new businesses, and downsizing or divesting oldbusinesses. A mission statement should address reasonably limited objectives, define the firm's major policies and values, and state the firm's primary competitive scopes (e.g., industries, products and services, applications, core competencies, market segments, degree of vertical integration, and geographic markets).

• Question 223:

  In a SWOT analysis, a firm considers macroeconomic factors when it identifies:

  A. The capability profile.

  B. Opportunities and threats.

  C. Core competencies.

  D. Strengths and weaknesses.

  Correct Answer: B

  Opportunities and threats (the external environment) are identified by consideringmacro environmentalfactors (economic, demographic, political, legal, social, cultural, and technical) andmicro environmentalfactors (suppliers, customers, distributors, competitors, and other competitive factors in the industry).

• Question 224:

  What operations strategy is most likely to be adopted when the product sold by an organization is a commodity and the market is very large?

  A. Flexibility strategy.

  B. Quality strategy.

  C. Service strategy.

  D. Cost strategy.

  Correct Answer: D

  An operations strategy formulates a long-term plan for using enterprise resources to reach strategic objectives. A cost strategy is successful when the enterprise is the low-cost producer. However, the product (e.g., a commodity) tends to be undifferentiated in these cases, the market is often very large, and the competition tends to be intense because of the possibility of high-volume sales.

• Question 225:

  Which of the following best describes a cost synergy?

  A. Recycling of by-products.

  B. Selling one product strengthens sales of another product.

  C. Transferring knowledge to new uses.

  D. Acquiring new management skills.

  Correct Answer: A

  Cost synergy results in cost reduction. It manifests itself in many ways, for example, in recycling of by- products or in the design, production, marketing, and sales of a line of products by the same enterprise.

• Question 226:

  Business strategies may be characterized by their effects on operations. The distinction between a compact car and a luxury car reflects which operational strategy?

  A. Cost.

  B. Flexibility.

  C. Service.

  D. Quality.

  Correct Answer: D

  A quality strategy involves competition based on product quality or process quality. Product quality relates to design, for example, the difference between a luxury car and a subcompact car. Process quality concerns the degree of freedom from defects.

• Question 227:

  Strategic management includes developing the organization's grand strategy. This strategy is based on:

  A. Existing strategic business units (SBUs).

  B. A SWOT analysis.

  C. Portfolio management of the organization's businesses.

  D. Strategic planning.

  Correct Answer: B

  Strategic management is a process that includes development of a grand strategy that describes how the organization's mission is to be achieved. This strategy is based on a situational analysis that considers organizational strengths and weaknesses (a capability profile) and their interactions with environmental opportunities and threats. Such an evaluation is also called a SWOT analysis. Strengths and weaknesses (the internal environment) are usually identified by considering the firm's capabilities and resources. What the firm does particularly well or has in greater abundance are known as core competencies. Opportunities and threats (the external environment) are identified by considering macroenvironment factors (economic, demographic, political, legal, social, cultural, and technical) and microenvironment factors (suppliers, customers, distributors, competitors, and other competitive factors in the industry).

• Question 228:

  Which one of the following is a social trend affecting the organization?

  A. Changes in labor markets.

  B. Tougher legislation to protect the environment.

  C. Rising inflation.

  D. Replacements for steel in cars and appliances.

  Correct Answer: A

  Social trends, such as changes in labor markets, reflect social, cultural, and demographic factors in the organization'smicroenvironmentthat may constitute opportunities or threats (identified in a SWOT analysis). The attributes of people (age, education, income, ethnicity, family status, etc.) and their beliefs, attitudes, and values shape and are shaped by social trends that in turn affect the organization. Thus, changes in the characteristics, sources, locations, and costs of labor resources supplied (a basic factor of production) have great effects on an organization's strategic position.

• Question 229:

  Which of the following is a market-oriented definition of a business versus a product- oriented definition of a business?

  A. Making air conditioners and furnaces.

  B. Supplying energy.

  C. Producing movies.

  D. Selling men's shirts and pants.

  Correct Answer: B

  Businesses should be defined in market terms, that is, in terms of needs and customer groups. Moreover, a distinction should be made between a target market definition and a strategic market definition. For example, a target market for a railroad might be freight hauling, but a strategic market might be transportation of any goods and people. Accordingly, stating that a business supplies energy is a market-oriented definition as opposed to the product-oriented definition. Moreover, it is also a strategic market definition.

• Question 230:

  Which of the following best describes a market synergy?

  A. Technology transfer from one product to another.

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