Reading 40: Industry Analysis-LOS d 习题精选 factors, technology, government, 2011, foreign

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Session 11: Equity Valuation: Industry and Company Analysis in a Global Context
Reading 40: Industry Analysis

LOS d: Analyze the impact of external factors (e.g., technology, government, foreign influences, demography, and social changes) on industries.

 

Strawline, Inc. manufactures garbage bags and straws using blown-film extruders. Strawline is planning to purchase a new machine, based on a new technology. Before making this purchase, however, the company wants to consider external forces that can have industry-specific impacts on the plastic straw industry. Which of the following is least likely a force that can have an industry-specific impact?

A) Demographics.

B) Social changes.

C) Termination of agency relationships.

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The outside forces that have an impact on industries include technology, government, social changes, demographics and foreign influences. Termination of agency relationships has no meaning within the CFA exam curriculum.

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Infomaster Inc. is a financial web portal company that collects and translates financial news releases into Chinese for Chinese readers worldwide. The technology platform that Infomaster developed several years ago is now operating smoothly. Nevertheless from time to time, there are a few flaws in the system. Currently Infomaster is aggressively marketing its products via financial forums and investor websites. Last year, Infomaster was able to earn a small profit.

Which stage of the industry cycle is Infomaster operating in?

A) Pioneer.

B) Mature.

C) Growth.

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Characteristics of a pioneer stage include: early development, low penetration of the market, net loss or barely break-even. Infomaster recently developed its product and is still working to improve it. It is aggressively doing marketing to gain more customers, and it managed to record a small profit last year.

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Which of the following external forces have the most favorable impact on Infomaster?

A) Widespread use of the Internet among Chinese investors to read financial news.

B) Technological innovations that encourage new product development.

C) Aging baby-boomers have higher disposable incomes to invest.

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The increase in usage of the Internet among Chinese investors to read news will have the most favorable impact on Infomaster’s subscriber base. While technological innovation may bring about improved products, it may not necessarily attract Chinese investors who have no access to the Internet or computers.

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In conducting a demand and supply analysis of Infomaster’s industry, which of the following is least likely a factor to consider?

A) Both of the choices listed are factors to consider.

B) Software that can translate English into Chinese.

C) The current availability of Chinese financial news on the Internet.

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Both are relevant factors. Supply-side analysis includes the current availability of (other sources of) Chinese financial news on the Internet and the existence of software that can translate English into Chinese.

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Outside forces impact industries in various ways. Analysts need to concentrate on how these outside forces might affect an industry over a three- to five-year horizon. Which of the following is NOT a force that can have an industry-specific impact?

A) Business Cycle.

B) Technology.

C) Demographics.

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The outside forces that have an impact on industries include technology, government, social changes, demographics and foreign influences. The business cycle can have a differing effect across industries, but it is not industry-specific.

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Which of the following statements concerning industry external factors is CORRECT?

A) For industries in the pioneering phase, that are introducing new technologies, an important question is: Are there laws that prevent competitors from copying their technology and inventions?

B) Companies that cater to the retirement population need not worry about demographic trends, since there will always be plenty of retirees.

C) Companies need not be concerned with foreign competition because the government can be relied upon to erect barriers to imported goods so as to prevent countries with a comparative advantage from decimating another country's industries.

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Protection of technologies is of major concern to companies who bring new products and technologies to the market. If their investment cannot be protected in the form of patents, etc., companies will have little incentive to make risky investments in developing new technologies, and the society as a whole will suffer due to lack of innovation. An industry can stagnate and lose its comparative advantage in the absence of such protection of economic rights.