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Free IIA-CIA-PART4 Exam Braindumps (page: 32)

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PDF with 535 Questions

A global industry is one that:

  1. Contains competitors that are multinationals.
  2. Has secured a competitive advantage based on economies of scale in centralized production.
  3. Has a strategic advantage by establishing coordinated competition in many national markets.
  4. Has made large direct investments abroad.

Answer(s): C

Explanation:

The analysis of a competition in an industry requires consideration of the economics of the industry and the characteristics of competitors. However, in a global industry, the analysis is not limited to one market, but extends to all markets (geographic or national) taken together. Michael E. Porter defines a global industry as one in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global positions."Thus, an industry becomes global because it perceives a net strategic advantage to competing, as Porter says, in a coordinated way in many national markets."



Which of the following is a source of global competitive advantage?

  1. Low fixed costs.
  2. Production economies of scale.
  3. Weak copyright protection.
  4. Intensive local service requirements.

Answer(s): B

Explanation:

Production economies of scale exist when a firm can produce and sell the output at which the average total cost of production is minimized. (The archetypal example is oil refining.) In other words, economies of scale in centralized production may yield a cost advantage achievable only when output exceeds the demand in one country, and exports are feasible.



The reason(s) governments most likely restrict trade include

I).To help foster new industries.
II).To protect declining industries.
III).To increase tax revenues.
IV).To foster national security.

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

Answer(s): D

Explanation:

Governmental impediments to global competition are generally imposed for the announced purpose of protecting local firms and jobs, developing new industries, and fostering national security. They also may have the effect of raising revenue in the short run. In the long run, tax and revenues will decline because of reduced trade. Examples of governmental impediments are tariffs; duties; quotas; domestic content rules; preferences for local firms regarding procurement, taxes, R&D, labor regulations, and other operating rules; and laws (e.g., antibribery or tax) enacted by a national government that impede national firms from competing globally. These impediments are most likely when industries are viewed as crucial.



Impediments to global competition may increase direct costs, make management more difficult, be imposed by governments or other institutions, or consist of resource limitations. Which of the following is most likely to be an impediment to global competition?

  1. A certain nation has a competitive advantage regarding the cost of producing a product.
  2. Proprietary technology provides a competitive advantage regarding the quality of a product.
  3. The product is highly differentiated.
  4. Product needs vary from country to country.

Answer(s): D

Explanation:

Product needs may differ from country to country because of culture, climate, degree of economic development, income, legal requirements, technical standards, and other factors. This barrier inhibits global procurement and achievement of economies of scale and experience. The height of the barrier depends on the costs of product modifications. Complex segmentation within geographic markets has similar effects.






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