Schweser Vol 2, Exam 1, q34. Which event is LEAST likely to lead to increased competitive advantage for either co. in car industry? a. Increased # of steel producers b. Decreased interest in public transport c. Increased cost to switch between brands d. Reduction to Federal safety regs Answer is D??? Schweser says A reduction in federal safety regulations would erode barriers to entry in the automotive industry. With lower costs to enter the market, many competitors would enter the market and dilute the profitability of the existing companies. (Study Session 11, LOS 41.c) WHAT?? Oh right, I make hamburgers now, and the govt lowers safety standards…Hang on, let’s convert this McD’s into a car plant! There are still HUGE barriers to entry! I’m confused!!!
There would still be large barriers to entry, but none the less, they would be lower. The other options are all positive for sustaining a competitive advantage… a-Increased bargaining power by having more suppliers b-Decresed interest in a substitute product c-Higher switching costs Leaves D as the only option This is one of my worst areas of the cirriculum though… hope this helps
That’s a pretty good explanation - thanks. I guess I have to stop overanalyzing these things.
I know what your saying nittany. I’ve learned to not fight and just take it for what it is. When the question says least, I don’t really worry about how realistic it is, just try to find which one of the answers is the best! best of luck
good strategy
like it was said above, this is a purely b.s. question that tests your process of elmination. don’t let it get you down.