CFAI 2024 EQ M6

1. An alternative method of grouping companies by geography is least likely to be completed using:

• 1. location of head office

• 1. geographic composition of revenue

• 1. primary listing of its equity securities

1. A market consists of three firms with market shares of 50%, 30%, and 20%. The Herfindahl-Hirschman Index (HHI) is closest to

• 0.38

• 25%

• 3800

1. Lower industry concentration is usually associated with a high degree of competitive intensity unless the industry is most likely

• 1. global

• 1. service-oriented

• 1. one with low product differentiation

1. Increased environmental regulations on automotive manufacturers will most likely have which of the following effects on the threat of new entrants?

• 1. An increase

• 1. A decrease

• 1. No change

1. PESTLE analysis is a framework for identifying:

• industry themes

• the level of industry concentration

• determinants of industry profitability

The means of executing cost leadership competitive strategies do not include

which of the following?

• 1. proximity to customers

• 1. favorable access to raw materials

• 1. economies of scale from fixed costs

Which of the following is most likely a risk of executing a differentiation competitive strategy?

• pricing premiums become too high

• larger competitors outcompete on price

• a desire for premium-ization among customers

A common measure of industry concentration is:

• 1. Porter’s Five Forces

• 1. the PESTLE framework

• 1. the Herfindahl-Hirschman Index

The price competition historically demonstrated by automakers and aircraft manufacturers is best described as an example of:

• 1. the threat of substitutes

• 1. the bargaining power of suppliers

• 1. the rivalry among existing competitors

Impression Ltd. is a fictional company that designs, manufactures, and sells skin care and beauty products. A PESTLE analysis for Impression Ltd. would most likely identify which of the following?

• 1. A customer of Impression Ltd., a large e-commerce retailer, is acquiring a private-label manufacturer of skin care products

• 1. Increased discussion by legislatures around instituting an excise tax on disposable plastic packaging as part of a package of carbon taxes

• 1. An online, direct sales competitor has launched a suite of photo filters that integrate with leading social media apps based on its beauty products