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标题: Equity Valuation【 Reading 36】Sample [打印本页]
作者: sabaruch    时间: 2012-3-30 16:33     标题: [2012 L2] Equity Valuation【Session 11- Reading 36】Sample

Frank Palmer, CFA, is preparing a report on the tobacco industry for investors in his home country of Molvania. Molvania is a small coastal country of approximately 15 million inhabitants that is run by a strong monarchy headed by reigning King Alexander III. The country is blessed with warm summers and moderate winters and has a thriving tourist industry. The country’s main industry, however, is tobacco. Molvania has adopted the U.S. dollar as its currency of business.
Despite numerous health-related problems, lawsuits, and rising prices associated with tobacco products, there is still something attractive about tobacco—strong earnings. Legal battles continue to affect the tobacco industry, however. Smokers stricken with cancer and other smoking-related health problems have tried to pool their complaints together in large class-action lawsuits. Nevertheless, the global industry continues to maintain its profitability even if growth is limited. Tobacco sales in Molvania are dominated by Royal Tobacco Incorporated (RTI) and Universal Tobacco Products Incorporated (UTP). These two large companies control 80% of the domestic market. In 1998, Molvania established a 51% state-owned tobacco company through a joint venture with RTI and UTP. The plan was for the new entity, Molvania Tobacco International (MTI), to develop a thriving export business and to become known around the world. A handful of smaller companies continued to compete domestically and held the remaining 20% of the home market but did little or no export business.
A unique aspect of the Molvanian tobacco industry is that, along with its rich supply of tobacco plants—considered by experts to produce the best tobacco in the world—there is a special hand-rolling skill which enables local manufacturers to produce a premium product. This ability is passed from generation to generation in what amounts to a closely guarded secret that permits high quality output. Indeed, several South American and Caribbean-based companies have made numerous unsuccessful attempts to acquire the Molvanian skill. There are several strong international competitors that produce premium brand products and have well-developed distribution networks. However, Molvanian tobacco products are generally considered to be among the best anywhere. To maintain control, MTI decided to appoint an exclusive group of dealers around the world to distribute Molvanian tobacco products. Only these select dealers would have access to the Molvanian supply. In addition, MTI was responsible for all marketing efforts worldwide. A recent government survey determined that by the end of last year, the export business accounted for more than one-half of the dollar volume of the Molvanian tobacco industry.
Even though many of the country’s plantations were originally state-owned, King Alexander bowed to the will of the majority and permitted tobacco farmers to buy land through low cost loans with the understanding that partial repayment could be made through higher-yielding harvests.
Palmer makes the following two statements regarding the threat of substitutes within the industry:
Statement 1:Substitutes exist, but this threat is relatively low due to the premium nature of Molvania’s products.
Statement 2:The threat should be considered as very low due to the existence of competitors who also make premium products.

Palmer is evaluating the price sensitivity and the bargaining power of buyers and makes the following statements in his report.
Statement 3:Since a premium product is being offered, price sensitivity is relatively less important.
Statement 4:Due to the presence of other competitors worldwide, pricing issues cannot be ignored.
Which of the following is least likely to be a barrier to entry in the Molvanian tobacco industry?
A)
The supply of labor is limited due to the skill required.
B)
The country is small, making land difficult to acquire.
C)
Cigarette consumption has declined in recent years.


The supply of labor is limited due to the skill required. The country is small, making land difficult to acquire. Moreover, the state is strongly involved and controls the export business. It would be extremely difficult to penetrate the tobacco industry in Molvania. (Study Session 11, LOS 36.a)
Which of the following is most accurate regarding the bargaining power of buyers (the select group of tobacco dealers) and buyers’ bargaining leverage?
A)
Buyers have very little leverage since they are appointed by the majority state-owned company and have little or no access to additional supply.
B)
Buyers have significant leverage because they purchase the tobacco products.
C)
Buyers have leverage because they have the ability to initiate lawsuits against the industry.


Buyers have very little leverage, since they are appointed by the majority state-owned company and have little or no access to additional supply. (Study Session 11, LOS 36.a)
Palmer concludes that the bargaining power of suppliers is high because tobacco farmers have some control over the harvest and have a measure of control over the volume of tobacco produced. Which of the following additional factors, when considered in conjunction with the factor Palmer cites, best supports the conclusion that the bargaining power of suppliers is moderate instead of high?
A)
Molvanian manufacturers have managed to protect their relative advantage in producing hand-rolled tobacco products.
B)
Smaller companies within Molvania have little or no export business.
C)
Much of the industry is either state-controlled or influenced by two large domestic companies.


In terms of supply, there are two opposing forces at work. Tobacco farmers control the harvest, and they may have a measure of control over the volume of tobacco produced, as Palmer notes. However, much of the industry is either state-controlled or influenced by two large domestic companies, which is consistent with less supplier bargaining power. When these facts are taken into consideration, the conclusion that the bargaining power of suppliers is moderate is a reasonable one. (Study Session 11, LOS 36.a)
Which statement most accurately portrays the rivalry among existing competitors in the industry? Rivalry among existing competitors in the industry is:
A)
very high.
B)
moderate.
C)
very low.


Rivalry among existing competitors in the industry is moderate. While it is limited domestically, the export business is substantially more competitive due in large part to several international companies having well-developed distribution networks. (Study Session 11, LOS 36.d)
Are Palmer’s statements regarding the threat of substitutes within the industry correct or incorrect?
A)
Both statements are correct.
B)
Only statement 2 is correct.
C)
Only statement 1 is correct.


Substitutes exist, but this threat is relatively low due to the premium nature of Molvania’s products, so Statement 1 is correct. The threat should not be considered as very low due to the existence of competitors who also make premium products, so Statement 2 is incorrect. (Study Session 11, LOS 36.b)
Are Palmer’s statements regarding price sensitivity and bargaining power of buyers correct or incorrect?
A)
Both statements are correct.
B)
Only statement 3 is correct.
C)
Only statement 4 is correct.


Since a premium product is being offered, price sensitivity is of limited importance, so Statement 3 is correct. On the other hand, due to the presence of other competitors worldwide, pricing issues cannot be ignored, so Statement 4 is also correct. (Study Session 11, LOS 36.b)
作者: sabaruch    时间: 2012-3-30 16:33

Which of the following changes to the widget industry is most likely to result in higher profits for all U.S. widget makers 10 years from now?
A)
A sharp increase in the global demand for widgets.
B)
Creation of a widget-makers’ coalition that brokers all widget deals.
C)
Creation of a series of new products that require widgets as components.


An increase in demand for widgets is likely to boost profits in the short run, but could attract new competitors. The same can be said for new products that create a wider market for widgets. However, the creation of a widget-makers’ coalition could change the balance of power in the market. One of Porter’s five forces is the bargaining power of suppliers. A coalition that brokers all widget deals could skew the field in favor of producers, raising widget prices and the profits of companies that make them.
作者: sabaruch    时间: 2012-3-30 16:33

Which one of the following is least likely a competitive force according to Porter's article?
A)
Availability of resources such as cheap labor.
B)
Bargaining power of buyers.
C)
Entry of new competitors.


Porter’s five competitive forces are the threat of new entrants, the threat of substitutes, bargaining power of suppliers, bargaining power of customers, and the rivalry among existing competitors
作者: sabaruch    时间: 2012-3-30 16:34

Determinants of substitute threats include:
A)
relative price performance of substitutes, buyer propensity to substitute, and switching costs.
B)
relative price performance of substitutes, presence of substitute inputs, and switching costs.
C)
buyer propensity to substitute, presence of substitute inputs, and switching costs.


The threat of product substitution is driven by availability, prices, and cost of switching to other products in addition to the inclination of the buyer to switch.
作者: sabaruch    时间: 2012-3-30 16:34

Long-term profitability is determined by:
A)
cost leadership.
B)
industry structure.
C)
supply and demand.


Industry structure determines long-term profitability
作者: sabaruch    时间: 2012-3-30 16:34

According to Porter's Five Forces, all of the following should be considered when analyzing a firm's competitive strategy EXCEPT:
A)
rivalry among existing suppliers.
B)
bargaining power of suppliers.
C)
entry barriers.


The rivalry among competitors should be considered, not the rivalry among suppliers.
作者: sabaruch    时间: 2012-3-30 16:35

According to Porter's Five Forces, all of the following should be considered when analyzing a firm's competitive strategy EXCEPT:
A)
exit barriers.
B)
threat of substitutes.
C)
bargaining power of suppliers.


Entry barriers should be considered, not exit barriers.
作者: sabaruch    时间: 2012-3-30 16:35

Short-term profitability is determined by:
A)
bargaining power.
B)
supply and demand.
C)
industry structure.


Supply and demand determines short-term profitability.
作者: pacmandefense    时间: 2012-3-30 16:38

According to Porter's Five Forces, which of the following should least likely be considered when analyzing a firm's competitive strategy?
A)
The bargaining power of suppliers.
B)
The bargaining power of buyers.
C)
The bargaining power of employees.


The bargaining power of buyers and bargaining power of suppliers are relevant, but the bargaining power of employees is not one of the Five Forces.
作者: pacmandefense    时间: 2012-3-30 16:39

According to Porter's Five Forces, which of the following should least likely be considered when analyzing a firm's competitive strategy?
A)
The bargaining power of suppliers.
B)
The bargaining power of buyers.
C)
The bargaining power of employees.


The bargaining power of buyers and bargaining power of suppliers are relevant, but the bargaining power of employees is not one of the Five Forces.
作者: pacmandefense    时间: 2012-3-30 16:39

Which of following is NOT one of Michael Porter’s factors used to determine competition in an industry?
A)
Capital structure and financial flexibility.
B)
Threat of new entrants into the market.
C)
Bargaining power of the firm with its suppliers.


Porter’s competitive factors are: rivalry among the existing competitors; threat of new entrants; threat of substitute products; bargaining power of buyers; bargaining power of suppliers.
作者: pacmandefense    时间: 2012-3-30 16:39

Daniel Tipton and Jesse Torrez are first-year MBA students at the Haas School of Business. Torrez has an economics background, but Tipton’s background is in music. To help Tipton study one of the main tenets of competition theory, Torrez creates the following question and asks Tipton to identify the statement that is most inconsistent with Porter’s five forces. Which statement should Tipton select?
A)
Supplier power is higher when there are only a few suppliers to an industry.
B)
Porter's five forces are: rivalry among current competitors, economies of scale, threat of substitutes, bargaining power of suppliers, and bargaining power of buyers.
C)
To sustain above average returns on invested capital, firms should strive for economies of scale.


Porter’s five forces are: rivalry among current competitors, threat of new entrants, threat of substitutes, bargaining power of suppliers, and bargaining power of buyers. Economies of scale are a way to lessen the threat of new entrants, but are not the only way to discourage competition. Companies can also have barriers to entry such as regulation or high start up capital. The other choices are true.
作者: pacmandefense    时间: 2012-3-30 16:40

Which of following is NOT one of Michael Porter’s factors used to determine competition in an industry?
A)
Threat of substitute products.
B)
Bargaining power of buyers.
C)
Economies of scale.


Porter’s five forces are: rivalry among current competitors, threat of new entrants, threat of substitutes, bargaining power of suppliers, and bargaining power of buyers. Economies of scale are a way to lessen the threat of new entrants, but are not the only way to discourage competition
作者: pacmandefense    时间: 2012-3-30 16:41

Which of the following factors associated with industry competition affect the performance of a firm within that industry?
A)

Industry operating leverage.
B)

The industry's stage in its life cycle.
C)

Threat of new entrants.


New entrants represent increased competition and lower profitability.
作者: pacmandefense    时间: 2012-3-30 16:41

Which of the following is NOT one of Porter’s five factors used to determine industry competition?
A)
Purchasing power of consumers.
B)
Bargaining power of buyers.
C)
Rivalry among existing competitors.


Purchasing power of consumers is not one of the five forces that Porter believes to determine the intensity of competition within an industry. The other two choices are, along with the threat of new entrants and the threat of substitute products.
作者: pacmandefense    时间: 2012-3-30 16:41

Which of the following is NOT one of Porter’s five factors used to determine industry competition?
A)
Purchasing power of consumers.
B)
Bargaining power of buyers.
C)
Rivalry among existing competitors.


Purchasing power of consumers is not one of the five forces that Porter believes to determine the intensity of competition within an industry. The other two choices are, along with the threat of new entrants and the threat of substitute products.
作者: pacmandefense    时间: 2012-3-30 16:41

Which of the following statements about Porter's five factors is least accurate?
A)
Profitability is enhanced by increases in the bargaining power of buyers or suppliers within an industry.
B)
Rivalry increases when many firms of relatively equal size compete within an industry.
C)
The presence of substitute products limits the profit potential of an industry.


If buyers bargaining power is increased, firms' profitability will decrease.
作者: pacmandefense    时间: 2012-3-30 16:42

Which of the following statements about Porter's five factors is least accurate?
A)
Profitability is enhanced by increases in the bargaining power of buyers or suppliers within an industry.
B)
Rivalry increases when many firms of relatively equal size compete within an industry.
C)
The presence of substitute products limits the profit potential of an industry.


If buyers bargaining power is increased, firms' profitability will decrease.
作者: pacmandefense    时间: 2012-3-30 16:42

Which of the following is NOT one of Porter's five competitive forces that determines the attractiveness or profitability of any industry?
A)
Bargaining power of buyers.
B)
Industry average return on equity.
C)
Entry of new competitors.


Porter's five competitive forces are the entry of new competitors, the threat of substitutes, the bargaining power of buyers, the bargaining power of customers, and the rivalry among existing competitors.
作者: pacmandefense    时间: 2012-3-30 16:43

Mary Smith, a Level II CFA candidate, was recently hired for an analyst position at The Bank of Ireland. Her first assignment is to examine the competitive strategies employed by various French wineries. Smith is eager to impress her boss, Ron VanDreisen, and has taken care to make sure she is following the CFA Institute Standards of Practice when writing her research report.
Smith’s report identifies four wineries that are the major players in the French wine industry. Key characteristics of each are cited below in Figure 1.

Figure 1: Characteristics of Four Major French Wineries
South
Winery		North
Winery		East
Winery		West
Winery
Founding Date1750190318121947
Generic Competitive Strategy?Cost
Leadership		Cost
Leadership		Cost
Leadership
Major Customer Market
(more than 80% concentration) 		FranceFranceEnglandUSA
Production SiteFranceFrance FranceFrance

In the body of Smith’s report, she includes a discussion of the competitive structure of the French wine industry. She notes that over the past five years, the French wine industry has not responded to changing consumer tastes. Profit margins have declined steadily and the number of firms representing the industry has decreased from 10 to 4. It appears that participants in the French wine industry must consolidate in order to survive.
Smith’s report notes that French consumers have strong bargaining power over the industry. She supports this conclusion with five key points.
Bargaining Power of Buyers
After completing the first draft of her report, Smith takes it to VanDriesen to review. VanDriesen tells her that he is a wine connoisseur himself, and often makes purchases from the South Winery. Smith tells VanDriesen, “In my report I have classified the South Winery as a stuck-in-the-middle firm. It tries to be a cost leader by selling its wine at a price that is slightly below the other firms, but it also tries to differentiate itself from its competitors by producing wine in bottles with curved necks, which increases its cost structure. The end result is that the South Winery’s profit margin gets squeezed from both sides. VanDriesen replies, “I have met members of the management team from the South Winery at a couple of the wine conventions I have attended. I believe that the South Winery could succeed at being at both a cost leadership and a differentiation strategy if they separated its operations into distinct operating units, with each unit pursuing a different competitive strategy.” Smith makes a note to do more research on generic competitive strategies to verify VanDriesen’s assertions before publishing the final draft of her report.If the French home currency were to greatly appreciate in value compared to the English currency, what is the likely impact on the East Winery?
A)
Make the firm less competitive in the English market.
B)
No impact since the major market for East Winery is England, not France.
C)
Make the firm more competitive in the English market.


Foreign exchange rates can significantly affect the competitiveness and profitability for a given industry. For industries that derive a significant proportion of sales via exports, an appreciating currency is usually bad news because it makes the industry less competitive in the overseas market. In this case, the appreciating French currency makes French imports more expensive in England. (Study Session 11, LOS 39.c)
Smith would categorize the French wine industry into which of the following life cycle phases?
A)
Pioneer Phase.
B)
Mature Phase.
C)
Decline Phase.


The decline life cycle phase has the following characteristics:

(Study Session 11, LOS 38.b)

VanDriesen tells Smith that he likes the fact that the conclusions in her report are backed up with facts, but tells her that he is concerned about the section concerning the Bargaining Power of Buyers. He says that while all of the points she listed may be factual, they do not all support her conclusion. Which of Smith’s points support the conclusion that consumers have strong bargaining power over the industry?
A)
Points 2, 3, and 4.
B)
Points 2 and 4.
C)
Points 1, 2, and 4.


Determinants of buyer power include buyer concentration, buyer volume, buyer information, available substitutes, switching costs, brand identity, and product differences. Point 1 addresses available substitutes, Point 2 addresses buyer information, and Point 4 addresses buyer and buyer concentration. Point 3, which addresses the number of competitors in the industry and Point 5, new entrants, may be factual statements but do not support the conclusion that consumers have strong bargaining power. (Study Session 11, LOS 36.b)
Smith notes in her report that the West Winery might differentiate its wine product on attributes that buyers perceive to be important. Which of the following attributes would be the most likely area of focus for the West Winery to create a differentiated product?
A)
The price of the product.
B)
The method of delivery for the product.
C)
A focus on customers aged 30 to 45.


Product differentiation can be based on the product itself, the method of delivery, or the marketing approach. (Study Session 11, LOS 37.b)
作者: pacmandefense    时间: 2012-3-30 16:44

Mary Moore is preparing a report on the commercial banking industry. As she gleaned information from the competitors annual reports she encountered the following statements in the CEO’s letters to their shareholders and the Management Discussion and Analysis (MD&A) section:
William Spencer, CEO of Western Banks, stated in the MD&A: “Consolidation within the industry will continue at its current pace, or perhaps accelerate, as banking concerns seek to increase their presence and market share.”
Margaret Acosta, CEO of Southwest Banking, stated in her letter to the shareholders: “Competition is becoming increasingly diverse as banks continue to increase in size and offer products ranging from insurance and mutual funds to high tech interaction with customers.”
Maria Bellini, CEO of Atlantic Mercantile Banks, noted in the MD&A that: “Cost advantages in most traditional banking activities seem to be mostly gone now, which will impact the industry future profitability.”
Moore is most likely to report that the commercial banking industry has high rivalry among competitors based on:
A)
Margaret and Maria's statements only.
B)
William and Margaret's statements only.
C)
William and Maria's statements only.


William and Maria's statements support arguments for rivalry among commercial banks in that they indicate that banks must increase market share through mergers and acquisitions and that traditional banking activities are now commodities. Margaret's statement suggests that banks are offering increasingly diverse products in an attempt to differentiate – the opposite of a commodity-type business.
作者: pacmandefense    时间: 2012-3-30 16:44

While Joseph Donovan, CFA, was interviewing Gene Hickman, the CEO of Hickman Supply, Hickman made the following comments on the auto supply industry:
Given these statements, Donovan is most likely to conclude that barriers to entry to the auto supply industry have increased due to:
A)
Statements 2 and 3 only.
B)
Statements 1 and 2 only.
C)
Statements 1 and 3 only.


Based on the Porter model, increased specialization and an increase in capital investment may each act to increase barriers to entry. The fact that auto manufacturers are relying more and more on their suppliers may be interpreted as an industry dynamic that would attract more competition. Finally, the negotiation for lower prices by auto manufacturers suggests that suppliers are losing some bargaining power.
作者: pacmandefense    时间: 2012-3-30 16:44

an analyst was assessing a pharmaceutical company’s competitive strategy, the length of the drug patent would be related to which of Porter's Five Forces?
A)
Bargaining power of buyers.
B)
Threat of new entrants (Entry barriers).
C)
Rivalry among existing competitors.


Long drug patents make entry into the industry difficult; therefore this relates to barriers to entry
作者: pacmandefense    时间: 2012-3-30 16:45

An industry that manufactures and sells a commodity-like product will face increased competition primarily because of greater:
A)
bargaining power of buyers.
B)
threat of substitute products.
C)
threat of new entrants.


Substitute products limit the profit potential of an industry.  Why?  They limit the prices firms can charge.  There will be higher levels of competition and lower profit margins for more commodity-like products.
作者: pacmandefense    时间: 2012-3-30 16:45

Which of the following is NOT one of Porter’s five factors determining the intensity of competition within an industry?
A)
Threat of substitute products.
B)
Bargaining power of the firm's creditors.
C)
Rivalry among existing competitors.


The bargaining power of the firm’s customers and suppliers along with the threat of substitute products, the threat of new entrants, and the rivalry among existing competitors comprise Porter’s five factors. The bargaining power of the firm’s creditors is not one of Porter’s five factors.
作者: pacmandefense    时间: 2012-3-30 16:45

With respect to industry attractiveness, the key concern is whether the:
A)
industry is currently profitable.
B)
industry is attractive in terms of long-term profit potential.
C)
industry is currently experiencing significant sales growth.


The key concern of industry attractiveness is whether the industry is attractive in terms of long-term profit potential.
作者: pacmandefense    时间: 2012-3-30 16:46

Which of the following are likely to result in higher profitability for a firm in a competitive industry?
A)
Low supplier concentration, low buyer concentration, and commoditization of the industry’s products.
B)
High barriers to entry, low barriers to exit, and high switching costs.
C)
Product differentiation, low switching costs, and high barriers to exit.


All else equal, high barriers to entry, low barriers to exit, and high switching costs will tend to result in higher profitability for a firm in a competitive industry.
作者: pacmandefense    时间: 2012-3-30 16:46

Joel Mason, owner of a ball-bearing factory in Cleveland, finds two interesting stories while reading The Wall Street Journal at breakfast. He reads that the government instituted a tariff on imported bearings, and that overall sales of ball bearings in the region rose 18% over the last year. Of the two changes mentioned above, which are likely to have a positive effect on Mason’s company over the long run?

A) Neither of them.

B) The newly passed tariff.

C) The higher industry growth rate.





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Neither of the issues presented are likely to have any long-term effect on the company, as the market generally responds to such changes and finds a new equilibrium. High growth rates tend to attract more competitors, and the effectiveness of tariffs is questionable even in the short term.
作者: pacmandefense    时间: 2012-3-30 16:46

Grant’s Candies, a retail store in downtown Grempton, has seen a sharp increase in demand for candy over the last several months. The construction of a new school and a factory that employs 1,500 people has drawn many new families to Grempton. Willie Grant, owner of Grant’s Candies, is ecstatic about the new business and puts in a bid for a vacation home based on his higher expected profits. Accountant Callie Trakh, CFA, warns against getting too excited. Her chief concern is most likely fears of:
A)
an influx of new competitors.
B)
new and innovative products entering the market.
C)
a population exodus should the economic climate change and the factory shut down.


While all of the concerns listed are legitimate worries for any business, we have no information that particularly bears on new products or economic issues. However, a larger market and higher growth is likely to attract competitors to the market.
作者: pacmandefense    时间: 2012-3-30 16:47

Strawline, Inc. manufactures straws using a new technology which allows straws to be made with an 11% reduction in costs. According to Porter’s model, which of the following is most likely?
A)
Strawline’s increased profit margins will allow it to increase financial leverage.
B)
Any initial advantage will eventually be eliminated as competitors adopt the same technology.
C)
Strawline’s increased profit margins will allow it to decrease financial leverage.


New technology does not offer a lasting advantage since the technology is available to all of Strawline’s current and potential competitors.
作者: pacmandefense    时间: 2012-3-30 16:47

Zanzibar Zanies, a novelties manufacturer, faces a number of competitive problems. It decides to use the six-step process to determine how Porter’s five forces affect its industry. Zanzibar just finished identifying competitors, buyers, suppliers, potential entrants, and potential substitutes. The next step is to:
A)
assess possible changes in each force.
B)
analyze the industry structure and determine how each of the five forces affect pricing.
C)
determine the strength or weakness of each of the five forces.


The process of identifying competitors, buyers, suppliers, potential entrants, and substitutes is Step 2 of the process. Step 3 is to determine the strength or weakness of the forces
作者: pacmandefense    时间: 2012-3-30 16:47

Automation can help a firm improve its competitive position by affecting:
A)
new entrants to the industry.
B)
suppliers’ bargaining power.
C)
the threat of substitutes.


Automating production can make it more expensive for rivals to enter the market, increasing the width of a company’s economic moat. Automation on its own will not affect the threat of substitutes or increase suppliers’ bargaining power.
作者: pacmandefense    时间: 2012-3-30 16:48

The choice of competitive strategy is driven by two fundamental questions. These fundamental questions involve:
A)
industry attractiveness and competitive advantage.
B)
industry attractiveness and profitability.
C)
competitive advantage and industry growth.


According to Porter, the two key questions in determining a competitive strategy involve industry attractiveness and competitive advantage.
作者: pacmandefense    时间: 2012-3-30 16:48

According to Porter, there are two fundamental questions that determine competitive strategy. Of these two questions, the one that the firm has the most control over is whether the:
A)
firm can position itself to have a competitive advantage.
B)
industry is profitable.
C)
industry is attractive.


The firm typically has little control over the industry’s long-term attractiveness, but it has a great deal of control over its choice of competitive position.
作者: pacmandefense    时间: 2012-3-30 16:49

Martin Kemp, owner of a fast-growing food distributor with one of the state’s largest truck fleets, wants to buy up most of its smaller trucking rivals in an effort to increase its scale and efficiency, thus fattening profit margins. Two of Kemp’s advisers warn that the strategy could backfire.
Bart Able says: “If you clear out the competition and increase profit margins, the business could draw the attention of larger companies that have so far stayed out of this region.”
Andrea Baker says: “If you raise prices on truck shipping, more customers will opt to ship in their food by train.”
Both Able and Baker conclude that Kemp’s acquisition strategy could actually end up reducing profit margins. Which arguments are valid?
A)
Only Baker’s.
B)
Both Able’s and Baker’s.
C)
Only Able’s.


Both Able and Baker offer legitimate reasons why an acquisition strategy might not result in sustainable margin improvement. Both may turn out to be wrong, but their arguments have merit
作者: pacmandefense    时间: 2012-3-30 16:49

Karla Hanover, CEO of Marshall Computers, is gloating during a board meeting. “It’s been a wonderful year, people. First, we received a tax break from the state that allows us to reduce our manufacturing costs. Second, we drove our longtime competitor, Roseland Technology, out of business. Third, we patented a new processor 30% faster than those of our rivals.”
Which of the three victories Hanover cited is least likely to give the firm a lasting advantage over its competitors?
A)
The demise of a competitor.
B)
The new, faster processor.
C)
The tax break.


Government action and technological advancements don’t generally have a lasting effect on an industry. However, such company-specific factors as a state tax break and a patented new technology can strengthen one company at the expense of others. However, the elimination of a rival could result in new competitors entering the market. As such, it is least likely to provide a lasting competitive advantage.
作者: pacmandefense    时间: 2012-3-30 16:50

Zipla Inc is an emerging bio-tech company specializing in neurological diseases. One of Zipla’s drug, Apsia is scheduled to go off patent protection later this year. This change would most likely bring out changes in which Porter’s force?
A)
Bargaining power of suppliers.
B)
Threat of new entrants.
C)
Bargaining power of buyers.


Upon expiration of patent protection, threat of new entrants increases. Bargaining power of suppliers may not be affected (not enough information) and bargaining power of buyers would change only if new firms enter the market.
作者: pacmandefense    时间: 2012-3-30 16:50

Cost-effective video streaming service has impacted the business of video disk rental companies. This is most likely a change in which Porter’s force?
A)
Bargaining power of buyers.
B)
Bargaining power of suppliers.
C)
Threat of substitutes.


Changes in technology altered the price-performance dynamics of video delivery industry. Video-streaming increased the threat of substitutes to video rental business.



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