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IIA IIA-CIA-PART4 Exam
Certified Internal Auditor - Part 4, Business Management Skills (Page 16 )

Updated On: 12-Jan-2026
Page 16 of 108
PDF with 535 Questions

Which of the following statements is true with regard to a vertically integrated acquisition?

  1. A grocery store chain that purchases a dairy and begins to make milk-based products under its own brand is forward integrated.
  2. A movie producer that acquires a chain of theaters is backward integrated.
  3. A clothing manufacturer that acquires a chain of clothing stores is forward integrated.
  4. A soda maker that purchases its leading competitor is backward integrated.

Answer(s): C

Explanation:

Vertical integration occurs upstream (backward) by acquiring suppliers or downstream (forward) by acquiring wholesalers and retailers. An example of forward integration is a clothing manufacturer's acquisition of a chain of clothing stores in which to sell its products.



A strategic group analysis does all but which of the following?

  1. Determines what mobility barriers exist.
  2. Forecasts future group actions and trends.
  3. Considers how the firm compares with the competitors within the chosen strategic group.
  4. Predicts reaction patterns to events such as competitive attacks.

Answer(s): C

Explanation:

An overall industry analysis, not a strategic group analysis, considers how the firm compares with the competitors within the chosen strategic group, e.g., on the basis of its scale of operations, the intensity of group rivalry, and the differences in the ability of the group members to implement their strategies.



According to Arthur D Little, a competitor firm that can act independently and sustain itslong-termstatus irrespective of the behavior of others holds which of the following competitive positions?

  1. A dominant position.
  2. A strong position.
  3. A favorable position.
  4. A tenable position.

Answer(s): B

Explanation:

Evaluating a competitor's market position is necessary to judge how and whether to challenge it. A firm in a strong competitive position can act independently and sustain its long-term status irrespective of the behavior of others.



The retail petroleum industry consists of a few large firms that sell a standardized product.Which of the following best describes this industry?

  1. Monopoly.
  2. Oligopoly.
  3. Monopolistic competition.
  4. Pure competition.

Answer(s): B

Explanation:

An oligopoly consists of a few large firms. If products are standardized, competition may be based solely on price. If products are partially differentiated, each firm may attempt to lead the industry regarding a given attribute, e.g., price, quality, service, or features. The retail petroleum industry is dominated by a small number of firms that control a vast majority of the market. Furthermore, it is an example of an industry that sells a standardized product, with competition based primarily on price.



A corporation produces uniforms that it sells and rents to businesses. The corporation recently acquired a textile mill that produces synthetic cloth. This acquisition is an example of:

  1. Horizontal integration Forward integration
  2. Horizontal integration Backward integration
  3. Vertical integration Forward integration
  4. Vertical integration Backward integration

Answer(s): D

Explanation:

The degree of backward and forward vertical integration along the value chain varies with the industry. The corporation acquired one of its suppliers, which is on a different level of the value chain. Thus, the combination involved vertical integration. Moreover, the acquisition of a supplier is characteristic of backward integration.



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