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IMANET CMA Exam - Topic 4 Question 4 Discussion

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?
C) Economic of scale should be large relative to demand
A) The firm should avoid market signals that alert competitors to the firm's plans
B) The expansion should be small relative to the market to minimize risk
D) The business should be strategically vital to competitors

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?

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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
9 months ago
Really? I’m surprised that avoiding market signals is so important.
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Stevie
10 months ago
D is crucial, if it's vital to competitors, they’ll react fast!
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Stephaine
10 months ago
C seems a bit off, how can you have large economies of scale with low demand?
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Lelia
10 months ago
I think B makes sense too, small steps reduce risk.
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Alita
10 months ago
A is definitely a must, can't let competitors catch on!
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Ryann
10 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
10 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
10 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
10 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
10 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
10 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
11 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
11 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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