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Which basic force(s) drive (s) industry competition and the ultimate profit potential of the industry?

I). Threat of new entrants.
II). Bargaining power of suppliers.
III). Favorable access to raw materials and labor.
IV). Product differentiation

  1. I only
  2. I and II only
  3. III and IV only
  4. I, II, III, and IV

Answer(s): B

Explanation:

Threat of new entrants and bargaining power of suppliers are among the five basic forces that drive industry competition and the ultimate profit potential industry. This potential is measured in terms of long-term return on invested capital. The other three forces are rivalry among existing firms, threat substitutes and threat of buyers' bargaining power.



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A manufacturing company produces plastic utensils for a particular segment at the lowest possible cost. The company is pursuing a cost?

  1. Leadership strategy
  2. Focus strategy
  3. Differentiation strategy
  4. Containment strategy

Answer(s): B

Explanation:

A cost focus strategy aims at cost leadership in a particular segment, such as a regional market or a specialty product line. The rationale for a focus strategy is that the narrower market can be better served.



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Vasil, Inc. conducted a strategy self-assessment of factors contributing to market attractiveness and business strengths as follows:

The factor ratings range from 1 (the lowest) to 5 (the highest). Which one of the following strategies would be the most beneficial for Vasil?

  1. Build selectively on strengths.
  2. Upgrade product line.
  3. Focus on attractive segments.
  4. Avoid investments.

Answer(s): A

Explanation:

Vasil can quantify the results of its strategic self-assessment by weighting and summing each rating.



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Which one of the following managements consideration is usually addressed first in strategic planning?

  1. Outsourcing.
  2. Overall objective of the firm.
  3. Organizational structure
  4. Recent annual budgets.

Answer(s): B

Explanation:

Strategic planning is the process of setting overall organizational objectives and drafting strategic plans. It is a process of long-term planning. Setting ultimate objectives for the firm is a necessary prelude to developing strategies for achieving those objectives. Plans and budgets are then needed to implement those strategies.






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