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Free IIA-CIA-PART4 Exam Braindumps (page: 27)

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PDF with 535 Questions

Strategic choices in an emerging industry are inherently subject to great uncertainty and risk with regard to competitors, industry structure, and competitive rules. Accordingly, a firm considering entry into an emerging industry:

  1. Has little need to be concerned with industry cooperation.
  2. Is least likely to be able to shape the industry structure at this stage.
  3. May enjoy such benefits of pioneering as experience advantages and early commitment to suppliers.
  4. Must be prepared for responding vigorously to competitors' moves.

Answer(s): C

Explanation:

Timing of entry is a critical choice. Pioneering firms face high risk but low barriers and may earn high returns. The following are factors favoring early entry:pioneering improves the firm's reputation, the learning curve (experience) advantage is important and will persist, customer loyalty will be high, and cost advantages (through early commitment to suppliers or distributors) can be secured.



A structural characteristic of an emerging industry is:

  1. Strategic uncertainty.
  2. Customers are sophisticated.
  3. Technological uncertainty has been overcome.
  4. Industry development is unlimited.

Answer(s): A

Explanation:

Strategic uncertainty arises because effective strategies have not yet been identified. Hence, firms are experimenting with product features, production methods, marketing approaches, etc. Moreover, competitive intelligence is necessarily poor because competitors have not been identified and industry sales and other data are not available.



A firm considering entry into an emerging industry must be aware of many strategic factors.
Thus, the firm must anticipate that:

  1. Early mobility barriers are likely to persist.
  2. Early commitment to suppliers is a strategic trap.
  3. The high cost of opening the market favor early entry.
  4. The nature of entrants may change.

Answer(s): D

Explanation:

The nature of entrants may change to include larger firms attracted by the proven and less risky industry. Firms must predict when such entry is likely given existing and probable future barriers and the costs of surmounting them. Firms also need to predict how new entrants will compete, e.g., on the basis of marketing power or economies of scale. Furthermore, new entrants may emerge through vertical integration.



Regulatory approval is most likely to be hardest to obtain in:

  1. Mature industries.
  2. Fragmented industries.
  3. Emerging industries.
  4. Declining industries.

Answer(s): C

Explanation:

Regulatory approval for an emerging industry may be hard to obtain, especially if customer needs are already served by an established regulated industry. However, favorable government policy may jump-start an industry, for example, when use of a safety productbecomes mandatory. Moreover, further growth of an industry may be stunted when it attracts first-time regulation.






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