i’m 100% certain it didn’t say stage, but said industry classfication - that’s why i put cyclical.
over05 Wrote: ------------------------------------------------------- > Mature is probably wrong coz the text clearly > mentions the profit of the whole industry is > shrinking…and that is the sign of a declining > industry. profits do shrink in the mature stage after coming out of a growth phase. the firm was acquiring other smaller firms to make things more efficient which is what happens in the mature phase.
I also remember it said industry classification with regard to business cycles, had to read it 3 times…
hk, where did you write it? i’m hoping that there are a few versions of this.
cyclical not doubt…
frankfurt, germany. 5050 and 5151.
Bless!
shiat. i had the same exam i honestly do not remember the part about the reference to the business cycle!!!
over05 Wrote: ------------------------------------------------------- > cyclical not doubt… mature no doubt…
What were the other q’s here?
hk Wrote: ------------------------------------------------------- > I also remember it said industry classification > with regard to business cycles, had to read it 3 > times… Same here 5050 and 5151. Yes. I remember the business cycle part.
How much differentiation can be lost in a scrapped metal and recycling. Yes, differentiaton lost is one of the risks. But does it apply in this case? CFA book page 181, there are other risks with cost leadership strategy. One of them is cost leadership is not sustained and the other is cost focusers achieve even lower cost in segments. One of the answes was other big firms can attain/imitate better cost advantage. Just a thought.
there’s no way it was mature, they were doing 16% eps growth!
capital intensive = clearly barriers to entry.
It was cyclical for sure – There are only 3 options in business cycle reaction classification for industries : growth, defensive and cyclical. And it cannot be growth because growth outperforms the economy in all business cycles and the vignette said that their profits were hurt during a recession. Mature is not even an option there since that is an industry classification (long run) rather than a business cycle reaction classification of industries.
LanceTX Wrote: ------------------------------------------------------- > It talked about how its profits were variable due > to changing input prices that moved with the > business cycle. Absolutely cyclical. i think it’s amazing that we can’t even agree on this question…gotta love the CFA. Not to claim that I’m right but…the profits will always vary with the business cycle. How much they move, determines whether the company is a cyclical or defensive company. I put defensive as the vignete did not focus on how much the revenues moved. Also scrape metal industry def does not sound like a cyclical industry.
THe question also clearly said that the number one risk to them was a slowdown in the economy.
This almost definitely was one question that was different between the two versions of the exam. People, it isn’t a hard question. It’s HIGHLY unlikely you confused industry life cycle vs. response to business cycle. I know personally that there was no chance I would have made this mistake, and I’m confident you wouldn’t either. I can almost guarantee every single one of us had this train of thought: “Hey, some of these answers are stages in the industry life cycle, and some of these are responses to the business cycle. Wait, so which one is the question asking about?” At which point you’d reread the question and answer appropriately. If it was asking for the business cycle, you would obviously put cyclical since it basically said as much in the text (this was how my exam was). I can’t vouch for the industry life cycle of the company, but for the most part this vignette’s wording was pretty straightforward so I’m sure that wasn’t too hard either.
I guess the only good thing is that the same excuricating internal debates I had during the test are the ones that seems to be showing up on the forum. I too noticed it said industry cycle though cyclical seemed the better fit based on the info. So it was, “is this just a gimme question or a trick based on the exact wording?” I guess that would be my main problem with it - some questions we have to interpret exact meanings of words like lawyers, while other times that would just be “reading too much into it/overthinking it” Oftentimes its hard to know the difference.