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CFA Institute CFA-Level-I Exam - Topic 1 Question 7 Discussion

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) To sustain above average returns on invested capital, firms should strive for economies of scale.
D) Rivalry increases when firms of equal size compete within an industry.

CFA Institute CFA-Level-I Exam - Topic 1 Question 7 Discussion

Actual exam question for CFA Institute's CFA-Level-I exam
Question #: 7
Topic #: 1
[All CFA-Level-I Questions]

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?

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by Tomoko at Sep 13, 2024, 06:48 PM

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Karrie
9 months ago
Totally agree with A, it's a classic concept in competition theory!
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Christiane
9 months ago
Wait, are we sure about that? I thought supplier power could vary.
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Noe
9 months ago
D seems right, equal rivals do ramp up competition.
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Annelle
10 months ago
I think B makes sense too, economies of scale are key!
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Kristeen
10 months ago
A is definitely true, fewer suppliers mean more power.
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Karl
10 months ago
I’m a bit lost on this one; I thought all the options were related to competition theory, but maybe one doesn’t fit as well?
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Daniela
10 months ago
I practiced a similar question about rivalry before, and I think D aligns with what we learned about competition.
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Arletta
10 months ago
I'm not entirely sure, but I feel like B might be the odd one out since it talks about returns rather than competition directly.
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Kerry
10 months ago
I remember discussing how supplier power can really impact an industry, so I think A makes sense.
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Leota
10 months ago
Alright, I've got a strategy here. I'm going to start by identifying the key elements of Porter's five forces, then systematically evaluate each statement against that framework. Methodical approach is key on these types of questions.
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Kimberely
10 months ago
Ugh, I'm a little unsure about this one. Porter's five forces can be tricky to apply, especially when the statements aren't straightforward. I'll have to re-read the question and options a few times.
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Sarah
11 months ago
Okay, let me think this through. Supplier power, economies of scale, and industry rivalry - those are all important factors in Porter's model. I'll need to analyze each option closely.
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Lorrie
11 months ago
Hmm, this question is really testing my understanding of Porter's five forces. I'll need to carefully consider each statement and how it relates to the key tenets of that framework.
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Marget
11 months ago
Hmm, I'm not sure about this one. Could it also be a hidden node problem? I'll have to think it through carefully.
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Ceola
2 years ago
Haha, I bet Tipton's music background is really helping him here. Maybe he should've chosen a different major if he wanted to ace this exam!
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Dion
2 years ago
Tipton: Oh, I see. Thanks for the help, Torrez.
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Mari
2 years ago
Torrez: Actually, the correct answer is option D.
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Annabelle
2 years ago
Tipton: I think I should go with option B.
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Dominga
2 years ago
D) Rivalry increases when firms of equal size compete within an industry. This is literally one of the key points of Porter's five forces, so it can't be the most inconsistent statement.
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Twana
2 years ago
B) To sustain above average returns on invested capital, firms should strive for economies of scale.
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Brande
2 years ago
A) Supplier power is higher when there are only a few suppliers to an industry.
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Melina
2 years ago
But doesn't Porter emphasize the importance of supplier power in his framework?
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Salome
2 years ago
I disagree, I believe option A is the most inconsistent with Porter's five forces.
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Melina
2 years ago
I think Tipton should select option B.
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Earleen
2 years ago
I think B) is the most inconsistent statement. Economies of scale are a key competitive advantage, not something that goes against Porter's framework.
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Rima
2 years ago
A) Supplier power is higher when there are only a few suppliers to an industry. This seems like the most inconsistent statement with Porter's five forces.
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Ernestine
2 years ago
It's important to understand these concepts for our MBA studies at Haas School of Business.
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Glendora
2 years ago
D) Rivalry increases when firms of equal size compete within an industry also fits with Porter's five forces.
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Layla
2 years ago
I agree, B) To sustain above average returns on invested capital, firms should strive for economies of scale, is more in line with Porter's theory.
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Joye
2 years ago
I think you're right, A) Supplier power is higher when there are only a few suppliers to an industry does not align with Porter's five forces.
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