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Free IIA-CIA-PART4 Exam Braindumps (page: 18)

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When firms compete in different geographical locations or have multiple product lines that do not necessarily overlap, the most effective way of responding to an aggressive move by a competitor without directly triggering destructive moves and countermoves is to

  1. Mislead the competitor into taking or not taking an action.
  2. Make a prior announcement of intended moves.
  3. Initiate a move in the market where the competitor is strong.
  4. Initiate direct aggressive moves

Answer(s): C

Explanation:

Initiating a move in the market where the competitor is strong is a cross- parry. A cross- parry is an effective way to signal displeasure and raise the threat of more serious retribution without directly triggering destructive moves and countermoves.



Prior announcements of moves have value as market signals in part because an announced move need not actually occur. Which of the following is true regarding the effects of prior announcements of moves on the market?

I). The effects may preempt competition
II). The effects may express pleasure or displeasure with a competitor's action
III). The effects may be a means of ending all external debate
IV). The effects may test competitor sentiment

  1. I, II, and Ill only.
  2. I, II, and IV only.
  3. II, Ill, and IV only.
  4. I, II, Ill, and IV).

Answer(s): B

Explanation:

Among other things, prior announcements of moves may preempt competition, threaten action, test competitor sentiment, express pleasure or displeasure with a competitor's action, and act as a means of ending internal debate. Moreover, prior announcements of moves may be a means of ending some external debate (i.e., if the announcement was aimed at the financial community in order to answer questions about the firm's liquidity). However, all external debate would be impossible to end, even by means of prior announcements of moves.



A firm discounts never-before-discounted items. This action is an example of a:

  1. Divergence from industry precedent.
  2. Cross-parry.
  3. Divergence from prior strategic objectives.
  4. Bluff.

Answer(s): A

Explanation:

The discounting of never-before-discounted items implies aggressive intent. It is an example of a divergence from industry precedent.



Firm A mostly does business in markets in the southern part of the country. Firm B mostly does business in markets in the western part of the country. However, Firm A has recently moved to compete with Firm B in the western part of the country by introducing its existing products there. Accordingly, Firm B has entered Firm As primary markets. What kind of market signal did Firm B send?

  1. A cross-parry.
  2. A bluff.
  3. An introduction of a fighting brand.
  4. A direct response.

Answer(s): A

Explanation:

The cross-parry is a response to a competitor's move in one area with a move in another. For example, Firm X, which is well entrenched in region A, may move to compete with Firm Y in its stronghold in region B. Firm Ys cross-parry is to enter the market in region
A. A cross-parry is an indirect response by the defending firm that potentially avoids destructive conflict in the newly penetrated market. However, it also signals the possibility of retaliation, especially if it occurs in one of the initiating firm's key markets. For example, price cutting as a cross-parry may be very effective against a firm with a large share of the market where the parry is made. This firm has more to lose in a price war in that market. Consequently, maintenance of a presence in a cross market deters the large-share firm from attacking elsewhere.






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