Strategic Management- Chapter 5

True or false: When companies commit to sustainable strategies, they do so purely out of a spirit of charity.

False. : Recall that companies such as Interface Inc. have seen sustainable strategies lead to improved overall profits.

True or false: When a user values two products equally, they are negatively correlated.

False. Negative correlation means that the user values one product more than the other.

A firm uses the ______ business model when it sells a set of products that have different levels of demand for a price less than their total combined prices.

bundling

Premium services cost money with complimentary basic services, is a description of which type of business model?

freemium

The balanced scorecard framework draws from which of the following?

from multiple internal and external performance metrics

For a product that has a large economic value, a firm can choose to charge the same price as competitors in order to ______

gain market share

When a company offers video-game consoles at a steep discount, but charges customers high fees for games, they are operating on a ______ business model.

razor—razor-blade

Which of the following are among the most commonly used metrics for comparing the performance of different companies? (Check all that apply.)

return on equity return on revenue return on assets

In general, a firm generates ______ when its cost of capital is lower than its ROIC.

value

When a firm goes bankrupt, shareholders ______.

cannot recover their risk capital

If Firm A and Firm B both produce a laptop at the same total cost, but the reservation price for Firm A's laptop is $1,000 and the reservation price for Firm B's laptop is $1,200, who has the competitive advantage?

Firm B. The reservation price is the absolute maximum one would be willing to pay for the laptop. In this case, people are willing to pay a higher maximum price for Firm B's laptop while it doesn't cost Firm B more to produce it. Hence, Firm B is able to create more economic value and therefore has the competitive advantage.

Which of the following is true about a sustainable strategy for a business?

It is a strategy that can be pursued over time without harmful effects on people or the environment.

Economic value created is the ______ the cost to produce a product/service and the amount the buyer is willing to pay for it.

difference between

Which of the following dimensions make up the triple bottom line? (Check all that apply.)

economic ecological social

The balanced scorecard approach helps managers balance ______ goals.

financial and strategic

The pay-as-you-go model is ______

gaining momentum

Which of the following are standard performance dimensions for a company? (Check all that apply.)

how much economic value a firm generates a firm's accounting profitability how much shareholder value a firm creates

The balanced scorecard framework enables managers to do which of the following?

implement feedback and organizational learning communicate and link the strategic vision translate the strategic vision into operational goals

A balanced scorecard is a tool for strategy _____

implementation. The firm's managers formulate a strategy. The balanced-scorecard helps provide guidance on which metrics to choose to measure competitive advantage. It is a tool for implementation.

Which of the following industries use a subscription model? (Check all that apply.)

magazines internet providers cellphone providers

Answering the balanced scorecard question of "how we create value?" challenges managers to develop strategic objectives that ensure future ______. (Check all that apply.)

organizational learning innovation competitiveness

In order to be considered a legal owner of a public company, a person or organization must _____

own at least one share of the company's stock

When you join the vehicle-sharing company Zoooomm, you are allowed to use a motorized scooter whenever you like, though you do not have to own the machine. You have to pay by the hours of usage. Zoooomm operates on a ______ model.

pay-as-you-go

If a firm has a successful ______ strategy, its product will have a higher perceived value and the firm will have a competitive advantage over a competitor that creates a product at equal cost but with a lower reservation price.

product differentiation

In a subscription-based business model, customers pay for ______

product or service

The legal owners of publicly traded companies are called ______

shareholders

From the view of a shareholder, the measure of competitive advantage that matters most is return on ______.

risk capital. From the shareholders' perspective, the measure of competitive advantage that matters most is the return on their risk capital.

According to ______ theory, a firm exists within an interconnected network of constituencies, both within and outside the organization, and the firm is responsible to these constituencies.

stakeholder. Shareholders are a subset of stakeholders.

Wholesaling is considered a(n) ______ business model.

traditonal

For a balanced scorecard to be effective, managers must do which of the following?

translate their strategy into measurable objectives manage objectives according to the balanced-scorecard approach formulate an effective strategy for achieving competitive advantage

Which of the following statements is true about a firm's stock price?

The price determines in part the stock's market valuation. The stock price is what investors are willing to pay for the stock at any given time, and it is not based exactly on the firms profitability.

Which of the following are the key questions for understanding the balanced scorecard? (Check all that apply.)

What core competencies do we need? How do customers view us? How do shareholders view us? How do we create value?

When competitive advantage is assessed from an analysis of publicly available data, a firm measures its ______.

accounting profitability. : 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 or (V-C). Values for both V and C are not publicly available.

Which of the following are elements of the social dimension of the triple bottom line? (Check all that apply.)

achieving work/life balance human sustainability

Under a wholesale model, RETAILERS (not the wholesalers) sell goods for ______.

any price they want. holesalers might sell products to retailers at a fixed price. Retailers, however, are free to set their own price on these products and profit from the difference between their selling price and the cost to buy the product from the wholesaler.

In order to ensure that a firm is implementing the triple-bottom-line approach successfully, managers must ______.

audit the company's results in fulfilling its social and ecological obligations. The triple-bottom-line ensures that managers maintain and improve not only the firm's economic performance but also its social and ecological performance. The balanced-scorecard is also an approach to creating and sustaining competitive advantage, but it does not emphasize the same performance criteria.

Which of the following frameworks work to provide a more holistic perspective on firm performance?

balanced scorecard triple bottom line

With a(n) ______, firms describe how they turn strategy into action.

business model

Netflix had a successful business model based on a large library of streaming content but then achieved even more success by also producing and distributing original content. This is an example of the potential value of ______.

business model innovation

Netflix had a successful business model based on a large library of streaming content but then achieved even more success by also producing and distributing original content. This is an example of the potential value of ______

business model innovaton

Which of the following are offered by a balanced scorecard?

common financial metrics operational measures on customer satisfaction measures of internal processes

Public companies are required by law to release detailed accounting data, which enables ______.

comparative analysis of firms. The mere release of detailed accounting data does not create shareholder value.

When implementing the razor-razorblade strategy, companies make their profit from ______.

complementary goods. In the particular example of razors, companies would be making profit form the razorblades instead of the razors (which they sell cheaply). However, the business model goes beyond razors and is applicable to other products such as printers/ink and game consoles/games.

The firm's accounting profitability, ability to create shareholder value, and ability to generate economic value tend to be ______.

correlated

Achieving competitive advantage means maximizing the difference between which of the following? (Check the two that apply.)

cost to produce the good or service consumers' willingness to pay

Which of the following are among the standard dimensions for measuring competitive advantage? (Check all that apply.)

economic value shareholder value accounting profitability

The difference between the cost of producing a product and the price consumers are willing to pay for that product is known as ______

economic value created. The profit margin is the difference between the PRICE charged (which is not always the same as the price consumers are willing to pay) and the cost of producing a product.

Everybody can use the basic version of Dropbox for free, but needs to pay for premium services. Dropbox operates on a ______ business model.

freemium. The model described, in which a company offers some services free of charge, is not called a premium business model.