3830 ch. 5

Failure to achieve competitive advantage is an indication of: A. Using the incorrect measurement tools. B. A poor economy. C. A failure in strategy. D. Being in the wrong strategic group.

A failure in strategy.

Ecological concerns such as sustainability can: A. Be a useful tool for differentiation. B. Generate goodwill in the marketplace. C. Foster firm innovation. D. All of these.

All of these

Hyundai's reputation for quality is an asset that: A. Will not be reflected in Hyundai's accounting information. B. Will be reflected in Hyundai's market valuation. C. Will be important to Hyundai's competitive advantage D. All of these.

All of these

The triple bottom line is important to competitive advantage because: A. Social and ecological implications are important to firm performance. B. Achieving the triple bottom line can lead to sustained competitive advantage(s). C. These dimensions are important to stakeholders. D. All of these

All of these

"Stakeholders" under the stakeholder theory are: A. Only concerned with return on risk. B. Governmental bodies who oversee industry regulations. C. Interested in maximizing profit. D. Anyone who makes contributions to a firm and expects inducement in return.

Anyone who makes contributions to a firm and expects inducement in return.

According to Chapter 5, which of the following firms could have benefited from the values contained in the triple bottom line? A. BMW B. BP C. Interface, Inc. D. Google

BP

3M requires that 30 percent of revenues come from new-product introductions. It also measures how much external learning and collaboration the firm is engaging in. 3M is clearly implementing a(n) ____________ approach to assessing competitive advantage. A. Triple bottom line B. Balanced scorecard C. Accounting profitability D. Shareholder value creation

Balanced scorecard

From an accounting profitability perspective, competitive advantage is achieved by the firm that does which of the following? A. Projects the highest book value for the upcoming year. B. Delivers the most positive profitability metrics. C. Has the highest value of intangible assets. D. Has the highest value of off-balance sheet items.

Delivers the most positive profitability metrics.

Total return to shareholders includes stock price appreciation and is an __________ measurement that reflects how the market views a firm's competitive position. A. Internal B. External C. Intangible D. Integrated

External

Non-economic factors such as _________ and ________ are often the rewards of adopting the triple-bottom-line framework. A. Access to raw materials; supplier relationships B. Firm reputation; goodwill C. Product imitation; substitution D. Diversification; localization

Firm reputation; goodwill

The triple bottom line and the balanced scorecard are ____________ frameworks that help a firm evaluate whether its strategy is working. A. Short-term B. Transitory C. Holistic D. Narrow

Holistic

The balanced scorecard is a tool for strategy _________, not ___________. A. Formulation; implementation B. Implementation; formulation C. Analysis; sustainability D. Formulation; sustainability

Implementation; formulation

Shareholders include individuals and organizations that are the ___________ of a public company. A. Targeted consumers B. Largest patrons C. Legal owners D. Client base

Legal owners

When viewed from an economic value creation perspective, the major strategic objective for a firm is to: A. Distribute the value created to the consumer. B. Maximize the economic value created. C. Improve the qualitative attributes of the product/service. D. Decrease the producer surplus.

Maximize the economic value created.

Shareholders are most concerned with _____________ when it comes to measuring a firm's competitive advantage. A. Value creation B. Global expansion C. Return on risk capital D. Market share

Return on risk capital

Under the balanced-scorecard framework, management concentrates on all of the following areas when it comes to improving how customers view the firm EXCEPT: A. Service. B. Quality. C. Stock price. D. Cost.

Stock price.

Under the shareholder value creation framework, ______________ makes it difficult to evaluate firm performance, particularly in the short term. A. Internal volatility B. Stock market volatility C. Value chain volatility D. Supplier volatility

Stock market volatility

The types of assets that are the primary focus of accounting data but are no longer most important to competitive advantage are: A. Intangible. B. Tangible. C. Indefinable. D. Unobserved.

Tangible

The return on risk capital that includes stock price appreciation plus dividends received over a specific period is: A. Total return on assets. B. Normalized returns. C. Total return to shareholders. D. Capitalized returns.

Total return to shareholders.

__________ is measured by a product's performance characteristics and its attributes for which customers are willing to pay. A. Competitive advantage B. Profit potential C. Contribution D. Value

Value

In the economic value creation framework of measuring competitive advantage (VPCs), V - P = __________. A. Profits B. Deadweight loss C. Goodwill D. Consumer surplus

consumer surplus

____________ is created when a customer is willing to pay more for a good or service than it costs the firm to produce it. A. Economic value B. Product value C. Consumer value D. Economic advantage

economic value

Assets such as innovation and quality are ________ assets that contribute to growth potential but are typically not included in a firm's book value. A. Intangible B. Off-balance sheet C. Tangible D. Historical

intangible

Return on invested capital, return on equity, return on revenue, and _____________ are the profitability metrics that are commonly used by a firm in the quest for competitive advantage. A. Return on surplus B. Return on assets C. Return on value D. Return on production

return on assets

Which of the following is NOT one of the three critical factors used to evaluate economic value creation and competitive advantage? A. Value B. Price C. Stock price D. Cost

stock price

Measuring profitability on a relative rather than absolute basis is important because of all of the following EXCEPT: A. It indicates how much profit a firm earns per dollar of revenue instead of overall profit. B. It helps to compare firms of different sizes. C. Relative profitability is a better reflection of competitive advantage than is absolute profitability. D. A firm that has the greatest overall profit will sustain competitive advantage(s).

A firm that has the greatest overall profit will sustain competitive advantage(s)

Understanding the shareholder's view of value creation under the balanced scorecard leads a firm to: A. Focus on value chain activities. B. Select which product markets to be in. C. Decide how many shares of stock it should sell. D. Adopt a more future-oriented perspective.

Adopt a more future-oriented perspective.

Performance metrics used to assess the effectiveness of a firm's strategy should be: A. Aggregated and viewed from an overall company perspective. B. Aggregated and viewed from a functional-level perspective. C. Focused on quantitative, not qualitative, measurements. D. Broken down by specific parts of the company.

Aggregated and viewed from an overall company perspective.

A firm's _________ captures the historical costs of a firm's assets. A. Market value B. Value created C. Book value D. Economic value

Book value

The basic way that the balanced scorecard provides competitive insight to managers is through the use of: A. Employee feedback. B. Concise reports that track and measure chosen metrics. C. Balance sheets and income statements. D. Stakeholder surveys.

Concise reports that track and measure chosen metrics.

Measuring how a customer views a firm under the balanced-scorecard framework is important because: A. Customer perspective is directly linked to firm revenues and profits. B. The customer viewpoint tells a firm much needed information about rivals. C. Surveying customers makes them feel important to the firm. D. It is a good indicator of future stock price.

Customer perspective is directly linked to firm revenues and profits.

The ______________ is the idea that the market price of a firm's stock includes all publicly available information about a firm's performance. A. Efficient-market hypothesis B. Normalized market hypothesis C. Rational-market hypothesis D. Shareholder knowledge hypothesis

Efficient-market hypothesis

When crafting strategy under an economic value context, the goal is to achieve all of the following EXCEPT: A. Capturing as much economic value as possible. B. Making sure that the relationship between value, cost, and price results in a positive economic contribution. C. Creating more economic value than rivals. D. Ensuring that the value captured is equally distributed between producer and consumer.

Ensuring that the value captured is equally distributed between producer and consumer.

Under the balanced-scorecard framework, the question "How do we create value?" is relevant to all of the following EXCEPT: A. Increasing the value added to a product along the supply chain. B. Challenging managers to come up with new strategic objectives. C. Focusing on future competitiveness. D. Improving innovation and organizational learning.

Increasing the value added to a product along the supply chain.

When viewed from a balanced-scorecard approach, a strategic objective for a firm is to: A. Balance the firm's investment portfolio in order to minimize risk. B. Take incremental strategic actions to protect the firm from retaliation. C. Integrate internal and external performance data to assess and strengthen the firm's current position. D. Integrate internal departments and processes and flatten the organization.

Integrate internal and external performance data to assess and strengthen the firm's current position.

When comparing Exxon Mobil and Liberty Media using the return on revenue metric, __________ had a relative competitive advantage in 2010. A. Neither firms B. ExxonMobil C. Liberty Media D. Both Exxon and Liberty

Liberty Media

As discussed in Chapter 5, the chemical manufacturer FMC Corporation overcame short-term thinking and underperforming business units by adopting a balanced-scorecard approach. All of the following are true about FMC's successful implementation of a balanced scorecard EXCEPT: A. Managers could focus on new-product introductions. B. Managers were able to formulate new strategies. C. Managers could focus on core competencies within each division D. Managers were able to align different perspectives to create a more overall focus.

Managers were able to formulate new strategies.

Under the triple-bottom-line framework, being proactive with __________ dimensions makes good business sense. A. Economic B. Non-economic C. Technological D. Operational

Non-economic

To _________ a stock return means to compare the percentage change of a stock price over the course of a certain time period from a common base year. A. Normalize B. Standardize C. Regulate D. Stabilize

Normalize

One of the drawbacks to the accounting profitability approach to measuring competitive advantage is that it does not consider: A. Tangible assets such as land. B. Off-balance sheet items such as pension obligations. C. Profit earned per dollar. D. How the company performed in the past.

Off-balance sheet items such as pension obligations.

A(n) ______________ is the value lost due to choosing to use resources for one alternative over another. A. Opportunity cost B. Alternative loss C. Resource loss D. Opportunity loss

Opportunity cost

An assessment tool that takes a multidimensional approach to evaluating a firm's competitive position by utilizing specific questions and performance metrics is: A. The comprehensive scorecard B. The shareholder scorecard C. The balanced scorecard D. The strategic scorecard

The balanced scorecard

Using either the accounting profitability or shareholder value creation approach to determine whether Microsoft or Google have competitive advantage(s) is complicated by the fact that: A. The key to their performance is based on intangible assets. B. The technology sector is difficult to evaluate. C. One-dimensional approaches reveal the best information. D. They have no tangible assets.

The key to their performance is based on intangible assets.

Value creation is important to competitive advantage because: A. The product or service that is valued the highest by the firm will deliver competitive advantage(s). B. The product or service that is valued the highest by the customer can charge the highest price. C. The company with the highest future value will have highest profits. D. The company with the highest present value will sustain competitive advantage(s).

The product or service that is valued the highest by the customer can charge the highest price.

"What is our social impact?" is a question most relevant to: A. The balanced scorecard. B. The triple bottom line. C. Value creation. D. Shareholder value.

The triple bottom line.

The effectiveness of the balanced scorecard is contingent upon all of the following EXCEPT: A. The type of technology used. B. The skills of the managers using it. C. The metrics chosen. D. Asking the right questions.

The type of technology used.

From an economic value created perspective, the volume of a firm's goods or services sold is generally driven by the relationship between ___________ and __________. A. The value created for customers; the price of the good or service B. How value is created; how customers view the firm C. The firm's core competencies; how shareholders view the firm D. The unemployment rate; shareholder value

The value created for customers; the price of the good or service

A drawback to evaluating competitive advantage under the balanced-scorecard perspective is: A. There is little guidance for management as to which metrics to use. B. The balanced scorecard concentrates too much on financial performance. C. It pays little attention to how customers view the company's products. D. The focus is on internal performance as opposed to external performance.

There is little guidance for management as to which metrics to use.

Strategy Highlight 5.1 discusses how Interface, Inc. has a strategic intent to become the world's first fully sustainable company. This is an example of which of the following? A. Triple bottom line B. Shareholder value C. Intangible resources D. Competitive force analysis

Triple bottom line

Competitive advantage is best assessed by using: A. Accounting data. B. Value creation. C. A relative benchmark. D. The firm's stock price.

A relative benchmark

All of the following statements are TRUE about strategy EXCEPT: A. There is no single best strategy; only strategies that are better than that of rivals. B. A strategy that has provided competitive advantages in the past will most likely do so in the future. C. Strategy must integrate and align each business unit. D. Performance metrics that measure effectiveness must aggregate upward and reflect overall company performance.

A strategy that has provided competitive advantages in the past will most likely do so in the future.

In 2010, Exxon Mobil posted 19.3 billion in profits and was ranked as the top performer by the Fortune 500 list. However, Liberty Media, which is a smaller organization than Exxon, posted the highest return on revenue for the year at 62.1 percent. Using the accounting profitability framework, Exxon outperformed Liberty in ________ terms, and Liberty outperformed Exxon in _________ terms. A. Accounting; shareholder value B. Shareholder value; profitability C. Absolute; relative D. Competitive; absolute

Absolute; relative

Organizational learning, innovation, and financial performance are all ____________ performance metrics. A. Balanced scorecard B. Accounting profitability C. Value scorecard D. Triple profit

Balanced scorecard

The three traditional approaches that are considered fairly one-dimensional when measuring competitive advantage include all of the following EXCEPT: A. Economic value creation B. Shareholder value creation C. Accounting profitability D. Balanced scorecard

Balanced scorecard

Microsoft compares its stock performance annually to two stock indices: NASDAQ and the S&P 500. The NASDAQ covers over 400 high-tech companies, including Apple, Dell, and Intel. The S&P is a broader index and includes stocks from many industries. These stock indices are useful ________ that allow the public to assess whether Microsoft has a competitive advantage. A. Targets B. Benchmarks C. Reports D. Markets

Benchmarks

As noted in ChapterCase 5, as of the third quarter of 2010, Android is the smart phone leader with 43.6 percent of market share. In 2007, Android (Google's mobile operating system) sold 1 million units in six months when it was launched. However, in November 2010, Microsoft started shipping its Windows Phone 7 operating system and had reached 2 million units in 10 weeks. When it comes to performance, Google and Microsoft are compared to each other using several different metrics. Looking at this, competitive advantage can be viewed as being: A. Both relative and transitory. B. Unattainable in the smartphone industry. C. Sustainable for many companies at the same time. D. Dependent on one best strategy.

Both relative and transitory

Firms use a balanced scorecard for all of the following reasons EXCEPT: A. It links strategic vision to all responsible parties. B. It helps design and plan business processes. C. It encourages the firm to improve its ecological position. D. It aids in organizational learning.

It encourages the firm to improve its ecological position.

When a firm has a greater positive difference between cost and value than its rivals, it can achieve competitive advantage by: A. Raising the price and maintaining market share and volumes. B. Increasing production costs while lowering prices. C. Charging the same or even lower prices and selling more goods or services. D. Minimizing the difference between value and cost and lowering prices.

Charging the same or even lower prices and selling more goods or services.

Analyzing accounting profitability is important to managers because: A. This data reflects how much profit the firm will make in the future. B. How the customer views the firm is reflected in accounting data. C. This information tells management how much to invest in intangibles. D. Comparing "hard numbers" against rivals provides competitive insight.

Comparing "hard numbers" against rivals provides competitive insight.

Firm competitive performance can be best judged by: A. Internal performance metrics of the firm. B. Past performance of the firm. C. Comparisons to rivals and the industry. D. External performance metrics of the firm.

Comparisons to rivals and the industry.

One of the main lessons from the Chapter 5 case comparing Google and Microsoft and measuring overall firm performance is that: A. Competitive performance differences should be measured by using a variety of evaluation tools. B. Qualitative measurements are superior to quantitative measurements when evaluating firm differences. C. Management should utilize just a few measurement tools in order to get exact information when evaluating firm differences. D. The type of measurement tool used by management is dependent on which area of the firm is being measured.

Competitive performance differences should be measured by using a variety of evaluation tools.

From an economic value creation perspective, competitive advantage is achieved by the firm that does which of the following? A. Creates and captures more economic value than its rivals. B. Ensures that the value captured is evenly divided between producer and consumer. C. Concentrates on tangible assets available as opposed to intangible assets. D. Formulates strategy based primarily on the balanced-scorecard approach.

Creates and captures more economic value than its rivals.

As noted in Chapter 5, Microsoft is many times larger than Google and records higher net income, return on assets, and return on equity in absolute terms when it comes to accounting profitability. However, when looking at normalized stock returns, Google has outperformed both Microsoft and the NASDAQ-100 index by a wide margin over the 2005-2010 time period. Suppose you were a manager for Microsoft. Evaluating this information would tell you that: A. Microsoft has a sustained competitive advantage from a shareholder value creation framework. B. Google has a sustained competitive advantage from a shareholder value creation framework. C. Both Microsoft and Google have sustained competitive advantages from a shareholder value creation framework. D. Google has a competitive disadvantage from a shareholder value creation framework.

Google has a sustained competitive advantage from a shareholder value creation framework.

Macroeconomic factors such as the unemployment rate and economic contraction: A. Minimize stock price volatility. B. Are irrelevant to shareholder value creation. C. Have a direct bearing on a firm's stock price. D. Help shareholders evaluate whether a firm's strategy is working.

Have a direct bearing on a firm's stock price.

As noted in Chapter 5, BMW anticipated the need to recycle its automobile parts due to potential industry regulation. It redesigned its manufacturing processes to include quick disassembly and reuse of car components. In addition, BMW sells the used parts in the after-sales market. This is an example of how the triple-bottom-line framework: A. Adds more layers of bureaucracy to a firm. B. Streamlines processes of the firm. C. Shortens product life cycles. D. Improves a firm's social and ecological responsibility.

Improves a firm's social and ecological responsibility.

As of 2010, ______________ have become more important than tangible assets when it comes to a firm's stock market valuation and competitive advantage. A. Business-level strategic initiatives B. Off-balance sheet obligations C. Intangible assets D. Accounting data projections

Intangible assets

Under the accounting profitability framework to competitive advantage, comparing return on revenue (ROR) between companies is important because: A. It adjusts for size differences and provides a relative comparison. B. It reflects the firm's stock price. C. It includes the value of the firm's intangible asset base. D. All of these.

It adjusts for size differences and provides a relative comparison.

Which of the following is TRUE concerning the balanced scorecard? A. It is useful when formulating strategy, not when implementing it. B. It does not provide any insight on how to correct a problem once a firm deviates from its goals. C. It is superior to the triple bottom line when it comes to a holistic approach to competitive advantage(s). D. It monitors and reports how balanced a firm's investment portfolio is.

It does not provide any insight on how to correct a problem once a firm deviates from its goals.

A firm's stock market valuation is based on historical accounting data and ___________. A. Off-balance sheet obligations B. Balance sheet obligations C. Market expectations for the future D. Managerial expectations for the future

Market expectations for the future

If Microsoft continues to outsell all other rivals in the smartphone industry for the next five years, it will have achieved a: A. Parity advantage. B. Sustained competitive advantage. C. Competitive parity. D. Competitive disadvantage.

Sustained competitive advantage

Suppose that a firm wanted to find profitability information about its rivals. The most likely source of this information would be: A. Publicly available information including 10-K reports. B. Employees who work for the competition. C. Customers who are loyal to the competition. D. Stakeholders of the competition.

Publicly available information including 10-K reports.

When crafting strategy under a shareholder value creation context, the goal is to achieve all of the following EXCEPT: A. Provide the highest return to shareholders relative to the competition. B. Minimize shareholder risk relative to the competition. C. Sell more stock than the competition. D. Deliver the greatest stock price appreciation relative to the competition.

Sell more stock than the competition.

Under the shareholder value creation approach to measuring competitive advantage, profitability and stock price increases indicate: A. That investors are ignoring macroeconomic factors. B. That the firm is most likely at competitive parity with its rivals. C. That investors will get a poor return on their risk capital. D. That a firm is utilizing effective strategies.

That a firm is utilizing effective strategies.

The fact that in its 2010 annual report, Microsoft outperformed the S&P but underperformed in the NASDAQ over the previous five years indicates all of the following EXCEPT: A. Benchmarks are important to consider in competitive advantage. B. Competitive advantage is defined in relative terms. C. The NASDAQ is not a good indicator of competitive advantage. D. Competitive advantage can be difficult to assess.

The NASDAQ is not a good indicator of competitive advantage.

When a firm assesses its performance by asking questions such as "How do our customers view us?" and "What core competencies do we need?", it is using which tool? A. The strategy map B. The triple bottom line C. The balanced scorecard D. A PESTEL analysis

The balanced scorecard

Under the economic value creation framework, value can be viewed as: A. How much the product improves along the value chain. B. The firm's book value of the product line. C. The consumer's maximum willingness to pay. D. How important the product is to the firm's overall strategy.

The consumer's maximum willingness to pay.

A drawback to evaluating competitive advantage under the shareholder valuation perspective is: A. The effectiveness of a firm's strategy cannot be reflected in its stock price. B. It is not as effective as the accounting profitability approach to measuring competitive advantage. C. The psychological mood of investors does not necessarily reflect how effective a firm's strategy actually is. D. It is the only "one-dimensional" framework that does not compare the firm to its rivals.

The psychological mood of investors does not necessarily reflect how effective a firm's strategy actually is.

Under the economic value creation framework, producer surplus is important in the quest for competitive advantage because: A. This is the profit that a firm captures when producing and selling a good or service. B. The firm will have enough inventory to meet higher future demands. C. The value surplus can be transferred to the consumer. D. The greater the amount of producer surplus, the higher the book value of the firm.

This is the profit that a firm captures when producing and selling a good or service.

The ___________ is related to the stakeholder theory in that it attempts to fulfill obligations to constituencies, including employees, customers, suppliers, and communities. A. Triple bottom line B. Shareholder bottom line C. Balanced bottom line D. Integrative bottom line

Triple bottom line

When a firm attempts to improve its economic, social, and ecological performance, it is taking a(n) ___________ approach to assessing competitive advantage. A. Economic value creation B. Triple-bottom-line C. Balanced scorecard D. Stakeholder valuation

Triple-bottom-line

What is one of the challenges of measuring competitive advantage using the economic value creation approach? A. The value placed on a product or service by the consumer changes according to income and preferences. B. It is difficult to measure the economic value created for all products and services across the organization. C. It is challenging to determine the value of a product or service from a customer's perspective. D. All of these.

all of these

When the value that a customer attaches to a good or service exceeds the price paid for the good or service, this is a(n): A. Economic surplus. B. Consumer surplus. C. Value surplus. D. Consumer value.

consumer surpuls

Economic value can be viewed as the amount of the total value created that is captured and distributed between ________ and ________. A. Stakeholder; shareholder B. Consumer; producer C. Employees; consumer D. Producer; supplier

consumer; producer