Strat Exam

Successful ________ requires managers to design and shape structure, culture, and control mechanisms.

strategy implementation

You are the CEO of a tech company and have recently undertaken a review of your company's strategy. In comparing your stock market valuation to that of your closest competitor, you note that your firm is currently valued at $50 billion, while your competitor is valued at $40 billion. How should you proceed?

Compare the current valuations with past valuations to determine a trend.

_______________ are independent of consumer demand

Fixed costs

The working capital turnover of Complete Systems Corp. is 6.0. What does this financial data suggest?

For every dollar Complete Systems puts to work, the company realizes $6.00 of sales.

__________ captures the total dollar market value of a company's total outstanding shares at any given point in time

Market Capitalization (market cap)

________ precisely indicates how much of a firm's sales is converted into profits.

Return on revenue

What is a framework to help managers achieve their strategic objectives more effectively by harnessing multiple internal and external performance metrics in order to balance both financial and strategic goals

The balanced scorecard

The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data?

The firm's number of outstanding shares is 25 million.

When C is greater than P, the firm has a________ producer surplus

loss/negative

Which of the following is an external performance metric?

total return to shareholders

A firm has 10 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2,000 annually. In this case, the market capitalization is

$1 billion, that is, 10 million shares × $100.

______________ goes to the firm that achieves the largest economic value created

Competitive advantage

_________is the total unit cost of the good and/or service

Cost

________ is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it.

Economic value created

_____________ is the difference between a buyer's willingness to pay for a product or service and the firm's total cost to produce it.

Economic value created

_____________ therefore equals consumer surplus plus firm profit, or

Economic value creation

Sasha is the CEO of Enterprise Technologies, a consumer electronics manufacturer. Last year, Enterprise's return on invested capital (ROIC) was 11.6 percent, while Enterprise's closest competitor, Federation Tech, had an ROIC of 17 percent. Which of the following factors might Sasha use to convince investors to invest in Enterprise rather than Federation Tech?

Enterprise's intangible intensity was 6 percent, while Federation Tech's was 3 percent.

Which of the following scenarios exemplifies a sustainable strategy under the triple-bottom-line approach?

Gogozoom reformulated its products to eliminate chemicals that were widely used in the industry but were being investigated for their potential negative effects on the environment.

____________ seek to define and direct employee behavior through a set of explicit, codified rules and standard operating procedures

Input controls

Which of the following is an advantage of the balanced-scorecard?

It allows managers to translate a firm's vision into measurable operational goals.

________ are a category of financial metrics used to determine a debtor's ability to pay off current debt obligations without raising external capital.

Liquidity ratios

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?

Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term.

Which of the following best exemplifies the use of input controls?

McDonald's use of standard operating procedures

_______________ capture the value of the best for non-alternative use of the resources employed

Opportunity costs

___________ seek to guide employee behavior by defining expected results (outputs), but leave the means to those results open to individual employees, groups, or SBUs

Output controls

________________ is the difference price and cost

Profit/producer surplus

What categories can financial ratio analysis be broken down into?

Profitability Liquidity Activity leverage

________ are a class of financial metrics that are used to assess a business's ability to generate earnings relative to its revenue, operating costs, balance sheet assets, and shareholders' equity over time, using data from a specific point in time. Profitability ratios measure the relative effectiveness of a firm.

Profitability ratios

______________ are output controls that attempt to tap intrinsic (rather than extrinsic) employee motivation, which is driven by the employee's interest in and the meaning of the work itself

Results-only-work-environments (ROWEs)

What is the money shareholders provide in return for an equity share, money that they usually cannot recover if the firm goes bankrupt

Risk capital

Why are controls like budgets and operating procedures that McDonald's implements known as input controls?

They are considered before employees make any decisions.

______________denotes the dollar amount a consumer attaches to a good or service.

Value

_______________ change with the level of consumer demand

Variable costs

Threadless allows customers to submit their own designs and to vote on which designs they would like to see printed on a T-shirt. This business uses a ________ technique.

crowdsourcing

The idea that all available information about a firm's past, current state, and expected future performance is embedded in the market price of the firm's stock is called the _____________

efficient-market hypothesis

A high percentage of R&D/Revenue ratio indicates a(n)

strong focus on innovation to improve current products and services.

The management team for Forever Power came up with the following vision statement: "Forever Power will conscientiously track its financial performance to ensure profits for its investors, enhance its community through employment and supporting charities, and dispose of waste in a manner that will not harm the environment." This vision statement is most likely based on the

triple-bottom-line approach.

Both UTech Inc. and Mirco Corp. incur a cost of $200 to manufacture a single unit of a cell phone. However, UTech Inc. charges a higher price than Mirco Corp. does, but it still sells a higher number of phones. What does this imply?

UTech Inc. creates more economic value than Mirco Corp. does.

Which of the following competitively important assets is typically excluded from a firm's balance sheet?

customer experience

TalkaLot Corp. incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario?

$450

Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm?

the balanced-scorecard model

Which of the following statements is true of accounting data?

Accounting data are historical data and thus backward-looking.

What are a category of financial metrics that measure a firm's ability to convert different accounts within its balance sheets into cash or sales. Activity ratios measure the relative efficiency of a firm based on its use of its assets, leverage, or other similar balance sheet items and are important in determining whether a company's management is doing a good enough job of generating revenues and cash from its resources?

Activity ratios

James is a novice investor who wants to decide between purchasing shares in Captial-UP or Mainframe Inc. Captial-UP's return on invested capital (ROIC) was 15 percent, and its cost of capital was 12 percent. During the same period, Mainframe Inc.'s ROIC was 22 percent and its cost of capital was 25 percent. What does this information tell James?

Captial-UP is more likely to create value while Mainframe Inc. is more likely to destroy value.

Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance?

In economic value perspective, analysts not only consider historical costs, but also opportunity costs.

Sugar Flakes and Cinnamon Texas Toast both produce similar puffed rice breakfast cereals. For both companies, the cost of producing a box of cereal is 45 cents, and it is not possible for either company to lower their production costs any further. How can one company achieve a competitive advantage over the other?

Increase total perceived consumer benefits through differentiation.

A category of financial metrics that look at how much capital comes in the form of debt or assesses the ability of a company to meet its financial obligations. The leverage ratio category is important because companies rely on a mixture of equity and debt to finance their operations, and knowing the amount of debt held by a company is useful in evaluating whether it can pay its debts off as they come due

Leverage ratios

____________is the dollar amount charged for the good and/or service.

Price

_________ are individuals or organizations that own one or more shares of stock in a public or private company

Shareholders

Amber is the manager of gardening supplies wholesaler DigIt Inc. The company's vision is to become the leading supplier of gardening materials in the northeast. In assessing the firm's current state, Amber has determined that the firm could differentiate itself from competitors with an easy-to-use online ordering system and a two-day delivery guarantee. To accomplish this, Amber has determined that DigIt must spend the next two quarters honing its capabilities for sourcing materials quickly and improving its web development competencies. According to the balanced-scorecard approach, what is wrong with Amber's thinking?

She has failed to account for external factors such as customer perceptions and shareholder perceptions.

______________ are internal-governance mechanisms put in place to align the incentives of principals (shareholders) and agents (employees)

Strategic control-and-reward systems

________ is a business model in which the manufacturer sets a fixed price on a product, but the retailer is free to set its own price.

Wholesale

The tenet behind the triple-bottom-line is that

a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.

Nerissa sets up a business consulting firm in which the employees are motivated because they find their work interesting and creative. She carefully hires workers who fit well with their assigned tasks. Also, she clearly defines the results expected of each worker, but allows the workers to determine the means to these results. Which of the following best describes Nerissa's business?

a firm that relies on high output controls to tap into intrinsic motivation

How does a firm capture its producer surplus for a good or service?

as profit per unit sold

The balanced-scorecard can accommodate

both short- and long-term performance metrics.

Treequote Industries has produced a new piece of technology that will monitor the soil moisture in a user's garden and send a notification to an app on the user's phone when it is time to water their plants. The goal of this inexpensive technology is to entice users to purchase Treequote's more expensive automated watering system, so that they can trigger the watering process from the app on their phones. Which business model is most likely to help Treequote Industries accomplish its goals?

freemium

Delos Inc. is an apparel manufacturer. The management at Delos Inc. prefers moderate control over the operations of the different departments such as R&D, design, marketing, and sales. It allocates a budget to each function at the beginning of each quarter. This is an example of implementing control through

input controls.

The ratio of SG&A/Revenue is an indicator of a firm's focus on

marketing and sales to promote its products and services.

The difference between the price charged for a product and the cost to manufacture it is referred to as the

producer surplus.

Managers can justify using the balanced-scorecard framework because research show that both ________ and ________ performance dimensions are important when examining the effectiveness of a firm's strategy.

quantitative, qualitative

The ___________________ of a product (good and/or service) is the absolute maximum a person would pay for the product

reservation price/total perceived consumer benefit

From an investor's or shareholder's perspective, the measure of competitive advantage that matters most is the

return on risk capital.

Which of the following below are the three dimensions that make up the Triple Bottom Line framework?

shareholder wealth creation; economic value creation; accounting profitability

Which of the following approaches to assess competitive advantage is based on the view that noneconomic factors can have a significant impact on a firm's financial performance?

the triple-bottom-line approach

There are several major limitations of employing the balance scorecard framework; which of the following below is not one of those limitations?

the type of marketing and HR functions used to employ the framework