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Financial CMA Exam
Certified Management Accountant (Page 10 )

Updated On: 1-Feb-2026
Page 10 of 270
PDF with 1336 Questions
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The concurrent action of basic competitive force as defined by Porter's model determines?

  1. The long-term profitability and the competitive intensity of the industry.
  2. The entrance barriers that potential players must face to get into the industry.
  3. The rivalry inside the industry.
  4. The strategy that a firm should follow to achieve its objectives.

Answer(s): A

Explanation:

Michael E. Porter, a leader in the field of strategic management, has developed a comprehensive model of the structure of industries and competition. One feature is his analysis of the five competitive forces that determine long-term profitability measured by long-term return on investment. This analysis determines the attractiveness of an industry.



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Which factor most likely encourages entry into an existing market?

  1. Governmental subsidies for new investors.
  2. High product differentiation, principally produced by trademarks.
  3. Knowledge of the industry, with high investments in development.
  4. Low fixed exit costs.

Answer(s): A

Explanation:

Subsidies for new firms’ lower entry barriers. Thus, new firms may enter the industry and intensify competition. Government policy also may affect competition via regulations that encourages or discourage substitutes or affect costs, that gave competitive behavior, or that limit growth. Government also may be a buyer or supplier.



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Which condition does not increase the threat of new competitor entry into the industry?

  1. Strong brand identity.
  2. Existing firms do not enjoy the cost advantages of vertical integration.
  3. Few proprietary product differences.
  4. Low capital requirements.

Answer(s): D

Explanation:

Strong brand identity decreases the new competitors will enter an industry. New competitors have difficulty because potential customers are loyal to established firms in the industry.



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Which industry factor does not contribute to competitive rivalry?

  1. Price-cutting, large advertising budgets, and frequent introduction of new products.
  2. A form's growth must come from winning, other firms' customers.
  3. High costs of switching suppliers.
  4. High fixed costs.

Answer(s): C

Explanation:

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



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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

  1. Buyer switching costs are high
  2. Buyers view the product as differentiated
  3. The market is dominated by a small consortium of buyers
  4. Buyers enjoy large profit margins

Answer(s): C

Explanation:

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 capital-intensive industry such as trucking.



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