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Free CMA Exam Braindumps (page: 6)

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Which of the following is not an example of synergy?

  1. A shopping mail with several businesses providing different products and performing different services
  2. A store provides warranties on automobile parts in order to maximize customer value
  3. A manufacturing company hires a new manager with technological experience lacking in the company
  4. Military Huumvees are converted into sports utility vehicles for sale to civilians

Answer(s): B

Explanation:

Synergy occurs when the combination of formerly separate elements has a greater effect 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)



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Which of the following best describes a market synergy?

  1. Technology transfer from one product to another
  2. Bundling of products distributed through the same channels
  3. Production of multiple products at one facility
  4. Use of complementary management skills to achieve entry into a new market

Answer(s): B

Explanation:

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 usage of the same sales force are other examples of market synergies.



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

  1. Price-cutting
  2. Large adverting budgets
  3. Frequent introduction of new products
  4. Inelastic demand

Answer(s): D

Explanation:

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



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Intense rivalry among firms in an industry increases when there is

l). A low degree of product differentiation
ll). Low consumer switching costs

  1. l only
  2. ll only
  3. Both l and ll
  4. Neither l nor ll

Answer(s): C

Explanation:

The degree of product differentiation and the costs of switching from one competitor's product to another increase the intensity of rivalry and competition in an industry. Less differentiation tends to heighten competition based on price, with price cutting leading to lower profits. Low costs of switching products also increase competition






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