IMANET CMA Exam - Topic 4 Question 4 Discussion

Actual exam question for IMANET's CMA exam

Question #: 4
Topic #: 4

[All CMA Questions]

When demand uncertainty is low, firms tend to adopt a strategy of preemptive expansion. The conditions for successful preemption expansion include which of the following?

AThe firm should avoid market signals that alert competitors to the firm's plans

BThe expansion should be small relative to the market to minimize risk

CEconomic of scale should be large relative to demand

DThe business should be strategically vital to competitors

Show Suggested Answer

Suggested Answer: C

Economics of scale should be large in relation to demand, or the learning-curve effect should give an initial large investor a permanent cost advantage. For example, the preemptive firm may be able to secure too much of the market to allow a subsequent firm to invest at the efficient scale. That is, the residual demand available to be met by the later firm is less than the efficient scale of production. The later firm therefore must choose between intense competition at the efficient scale or a cost disadvantage.

by Casie at May 07, 2022, 07:09 AM

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Naomi

4 months ago

Really? I’m surprised that avoiding market signals is so important.

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Stevie

4 months ago

D is crucial, if it's vital to competitors, they’ll react fast!

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Stephaine

4 months ago

C seems a bit off, how can you have large economies of scale with low demand?

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Lelia

4 months ago

I think B makes sense too, small steps reduce risk.

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Alita

5 months ago

A is definitely a must, can't let competitors catch on!

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Ryann

5 months ago

I feel like option D could be important too, since if a business is vital to competitors, they might react strongly to any expansion moves.

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Delmy

5 months ago

I vaguely recall that economies of scale play a role in expansion strategies, but I'm not confident if they need to be large relative to demand.

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Tricia

5 months ago

I think I came across a similar question where the focus was on minimizing risk. Maybe option B makes sense since small expansions can be less risky?

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Katie

5 months ago

I remember studying that preemptive expansion is about getting ahead of competitors, but I'm not sure if avoiding market signals is the key condition.

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Christiane

5 months ago

The JDBC connector sounds familiar, but I can't quite remember what it's used for. I'll have to review my notes on Infor integration before answering this.

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Kimbery

5 months ago

Hmm, I'm a bit confused by the terminology here. What's the difference between "expert mode" and "clish"? I'll need to review those concepts before I can confidently answer this.

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Kyoko

5 months ago

This seems like a straightforward question about the color of run lines indicating slope. I'm pretty confident I know the answer, but I'll double-check my notes just to be sure.

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Margo

5 months ago

I feel like option A might be right, but it's tough because the overhead costs change everything. Remembering our practice questions on product groups really helps, though!

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