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NEW QUESTION: 1
Rogcrt Markets is the nation's third largest retail grocery chain, and usually has the largest or second largest market share in every city in which it competes. In its most successful large cities, Rogert has as much as a 25% market share, although its share is sometimes greater in small cities. Rogert is known for its excellent customer service and has a wide variety of grocery selections in almost every part of its stores. Its profit margins on sales are slightly above industry averages, and its return on assets and return on equity are above average.
Rogert has an equity beta of 0.78 and a debt-to-capital ratio of approximately 50%. Recent economic difficulties, including higher commodity prices and higher unemployment, resulted in lower profit margins for Rogert. Still, Rogert's decline in profit margin was less than for its competitors. Rogert did not experience substantial losses of sales from customers switching to lower-priced competitors as its market share remained substantially constant.
Zephine Markets is one of Rogert's smaller competitors. Zephine operates in roughly 15% of the same cities as Roger. Zephine is publicly traded, and one of the members of Rogert's board of directors has asked the staff to evaluate an acquisition of Zephine. The staff believes that Zephine is slightly underpriced and that it could be acquired for a 20% premium over its current price. In recommending against the acquisition, staff member Pierre Chiraq says:
"I agree that eliminating Zephine as a rival would probably enhance our profit margins. However, I am skeptical about this acquisition. First, because our market share is almost never dominant, much of the benefit of eliminating a smaller rival will be shared by our other rivals. They will free-ride on our investment.
Second, if our profit margins do increase, wc will eventually attract new rivals into our markets. And finally, our cost of capital should increase substantially because the firm will be diversifying horizontally instead of vertically, increasing the firm's risk." Over the last several years, grocery industry growth has tended to follow the general economy. The competitors in the industry, like Rogert, compete for market share in a stable industry. The industry's cyclical behavior has shown stable performance in both the ups and downs of the business cycle.
In assessing Rogert's competitive position, Chiraq makes comments about the threat of new entrants:
"My concern about new entrants into our business is low for several reasons. Economies of scale are achievable at a low size of operations relative to that of our firm. Our brand identity is high in the markets in which we compete. And, finally, access to distribution channels is difficult to achieve in the grocery business. While there are many competitive forces that concern mc, new entrants is low on my list." Finally, the staff discusses industry changes that might have a negative effect on Rogert's industry position. Three phenomena are mentioned that could have such an effect. They are:
1. Industry growth rates are low and declining;
2. Several suppliers are sponsoring national television advertisements for their products;
3. The government has approved a new method of extending the shelf life of fruits and vegetables.
Which industry change mentioned by the staff is least likely to reduce Rogert's profitability?
A. The approval of a method for extending the shelf life of fruits and vegetables.
B. The national advertising campaign by suppliers.
C. Lower industry growth rates.
Answer: A
Explanation:
Explanation/Reference:
Explanation:
The method of extending the shelf life of fruits and vegetables could increase (not decrease) Rogcrt's profitability. Lower industry growth lates often result in greater rivalry, including price wars, a focus on differentiating products, and searching for new market niches and geographic segments. If suppliers increase their brand awareness through national advertising, that could increase their bargaining position relative to RogertV (Study Session 11, LOS 37.e)
NEW QUESTION: 2
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A. Use a separate VLAN or switches for iSCSI trafficGigabit full duplex hard set for all iSCSI portsEnsure switches used for iSCSI are of a non-blocking design
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C. Use a separate VLAN or switches for iSCSI trafficAuto-negotiate for all switchesEnsure switches used for iSCSI are of a non-blocking design
D. Use a separate supernet or switches for iSCSI trafficGigabit full duplex hard set for all iSCSI portsEnsure switches used for iSCSI are of a blocking design
Answer: A
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