CEA Market & Industry Analysis 4 — Questions and Answers
Question 1: Which analytical tool segments a company's business units based on market growth rate and relative market share?
- Porter's Value Chain
- BCG Growth-Share Matrix (Correct answer)
- Ansoff Matrix
- McKinsey 9-Box
Correct answer: BCG Growth-Share Matrix
The BCG (Boston Consulting Group) Matrix plots business units as Stars, Cash Cows, Question Marks, or Dogs based on growth and share.
Question 2: Which demand forecasting method relies on polling industry experts iteratively until consensus is reached?
- Regression analysis
- Box-Jenkins method
- Delphi method (Correct answer)
- Moving average
Correct answer: Delphi method
The Delphi method gathers structured expert opinions through multiple survey rounds with feedback until convergence, making it useful when historical data is limited.
Question 3: A firm operating in an industry with low barriers to entry and exit, even if there are only a few competitors, may still price at competitive levels due to:
- Regulatory price ceilings
- Contestable market theory (Correct answer)
- Bertrand equilibrium
- Kinked demand curve
Correct answer: Contestable market theory
Contestable market theory holds that the threat of potential entry disciplines incumbent firms to price near competitive levels even in concentrated markets.
Question 4: In value chain analysis, 'primary activities' include all of the following EXCEPT:
- Inbound logistics
- Operations
- Human resource management (Correct answer)
- Marketing and sales
Correct answer: Human resource management
Human resource management is a support activity in Porter's value chain, not a primary activity, which include logistics, operations, marketing, sales, and service.
Question 5: The 'critical mass' concept in market analysis typically refers to:
- Minimum efficient scale needed for cost competitiveness
- The threshold adoption rate needed to sustain a network effect (Correct answer)
- Total industry capacity divided by number of firms
- Maximum output before diminishing returns set in
Correct answer: The threshold adoption rate needed to sustain a network effect
Critical mass in market analysis refers to the minimum number of users or adopters required for a network effect to become self-sustaining and drive further adoption.
Question 6: In industry analysis, 'switching costs' primarily affect which of Porter's Five Forces?
- Threat of new entrants
- Bargaining power of suppliers
- Bargaining power of buyers (Correct answer)
- Threat of substitutes
Correct answer: Bargaining power of buyers
High switching costs reduce buyer bargaining power because customers face significant costs to change suppliers, locking them into existing relationships.
Question 7: An analyst notes that an industry's price-cost margin has narrowed significantly over five years while output has increased. This pattern most suggests:
- Increasing market power by incumbents
- Entry of new competitors increasing supply (Correct answer)
- Rising demand shifting the demand curve outward
- Cartel formation among existing firms
Correct answer: Entry of new competitors increasing supply
Narrowing price-cost margins with rising output is consistent with increased competition from new entrants driving prices toward costs.
CEA Market & Industry Analysis 4
Which analytical tool segments a company's business units based on market growth rate and relative market share?