Kenton Koncepts, a maker of aircraft parts, just announced a new strategic plan, and LeMond wants to know whether MegaMax (one of the worlds largest broker dealers) should upgrade the stock from its current Neutral rating. With Kenton’s strategic plan are several pieces of information – a chart showing global aircraft orders and backlog over the last three years, detailed cost-cutting initiatives, a list of proposed plant upgrades, and a detailed list of Kenton’s products and the niches they address. LeMond prepares a short analysis of Kenton. Which of the following information on Kenton Koncepts is most valuable in the analysis of long-term? Supply trends? Profitability? A) Order chart Cost-cutting initiatives B) Order chart Product list C) Plant upgrades Product list D) Plant upgrades Cost-cutting initiatives
Try this one tooo… Which of the following statements is least accurate regarding cost leadership? A) Cost leadership requires that a firm achieve the lowest production costs and not be one of several firms trying to be the cost leader. B) Cost leaders will be above average performers if their products are priced at or just below the industry average. C) The cost leader’s product must not be too different from its competitors. D) Cost leadership requires that a firm achieve the lowest production costs and be one of several firms trying to be the cost leader.
qn 1 - C Qn 2 - D ? Not sure, just guessing 
agree C, D order chart to me is demand not supply side. 2nd part i think is harder- cost cutting i’d think would more be a ST not long term thing- if you had product list you could do analysis more for the long term profitability of products, niches? like D for the 2nd one b/c i’d think you wouldn’t have to be one of several firms trying to be the cost leader.
c d
d, d
D.D.
C. D. Edit: Unsure on the first one. If the list of niche products are new products than they could be going for a differentiation strat, and I would like C. But if they are the same products they have always gone after then the costs play a more important role. In that case I wouldl like D. Hard to tell because you can cut costs and still not be going for a cost leadership or cost focus.
D,D
I went A, D “a chart showing global aircraft orders and backlog over the last three years” the backlog provides info regarding supply. if there was a backlog there was a shortage of supply. How much, how often. and it said global so it is data for the industry. I am grasping but that seemed more in tune with supply trends than upgrades a single firm in the industry made to its plant. On the profitability side I am torn. lower costs ==> higher profitability. But I could see how product and niche info is needed. If you are selling seat cushions or hi tech jet engine parts that is relevant to pricing and profitability.
I read the responses and still don’t under stand why plant upgrades would be more important than the order chart which shows backlog, etc. I’m going with B for the first, D for the second.
slouiscar Wrote: ------------------------------------------------------- > I went A, D > > “a chart showing global aircraft orders and > backlog over the last three years” > > the backlog provides info regarding supply. if > there was a backlog there was a shortage of > supply. How much, how often. and it said global > so it is data for the industry. > > I am grasping but that seemed more in tune with > supply trends than upgrades a single firm in the > industry made to its plant. > > On the profitability side I am torn. lower costs > ==> higher profitability. But I could see how > product and niche info is needed. If you are > selling seat cushions or hi tech jet engine parts > that is relevant to pricing and profitability. I agree. Torn on the profitability side too between niche products and cost cutting measures. Cost cutting measures could be for a firm that is “stuck-in-the-middle” though. They might not have a good product and just keep trying (unsuccessfully) to sell more of a bad one.
slouiscar Wrote: ------------------------------------------------------- > I went A, D > > “a chart showing global aircraft orders and > backlog over the last three years” > > the backlog provides info regarding supply. if > there was a backlog there was a shortage of > supply. How much, how often. and it said global > so it is data for the industry. Good point.
Dwight - Nailed it in the head!! slouiscar - you almost had it Correct Answers: B, D For the first question - I had also chosen plant upgrades, but as slousicar mentioned, even though order chart initially seems like it will give the demand side, but the backlog provides the insight on the supply trends. Plus plant upgrades are only for this firm, whereas they were asking for industry supply trends… As far as cost cutting vs product list is concerned…I’m still not sure I’m entirely convinced that the product list would be MORE valuable than the cost cutting strategies for long term profitability. anyway Schweser’s explanations: All four of the pieces of information have value, but two stand out. The list of plant upgrades is useful for estimating Kenton’s production, but an industrywide chart of orders and backlogs illustrates more than demand trends. By considering both orders and backlogs, an analyst can back into supply analysis and draw useful conclusions about the current supplies and industry production capacity. While cost-cutting initiatives will have an effect on profit margins, particularly in the short term, of more importance in the long term is the company’s ability to produce items the market wants. Kenton’s list of products and niches has substantial value for determining whether the company can continue to operate profitably. Almost everyone got the second questions right…good on ya! Answer is D - that was fairly straightforward I guess…I just made an idiotic mistake on that one!