449 exam 2
A firm incurs $400 to manufacture a television. In the market, customers are willing to 30) pay a maximum of $600 for the television priced at $500. The difference of $200 ($600 minus $400) is the ________. A) economic value created B) consumer surplus C) total return to shareholders D) customer lifetime value
A
A firm's resource is most likely to be an internal strength and a core competency when 32) the resource is: A) valuable and costly to imitate. B) easily accessible and mobile. C) easy to substitute. D) valuable but common.
A
Andrew invested $200,000 in the shares of a company. At the end of a year, he had 48) earned $7,000 as dividends on his shares along with a $1,000 appreciation in the overall value of his shares. However, if Andrew had invested the same amount on an asset, like gold, the appreciation in its value would have earned him $10,000 at the end of the year. In this scenario, which of the following is Andrew's opportunity cost? A) $10,000 B) $200,000 C) $2,000 D) $7,000
A
Competitive advantage goes to the firm that achieves the: 44) A) largest economic value created. B) highest payable turnover. C) lowest producer surplus. D) highest Cost of goods sold/Revenue ratio.
A
Competitors have found it extremely difficult to imitate Gene Electronics Inc.'s 40) valuable resources, capabilities, or competencies. This is primarily because the source for the company's success has been unclear. The competitors are uncertain if Gene Electronics Inc.'s success is due to its strong leadership, the skills of its research and development team, or the timing of the company' s product introductions. Gene Electronics Inc. has been protected from losing its competitive advantage as a result of ________. A) causal ambiguity B) time compression diseconomies C) resource homogeneity D) path dependence
A
Creating resources that meet the VRIO criteria is strategically important to a firm 34) because it: A) helps the firm to gain and sustain a competitive advantage. B) leads to competitive parity within the industry. C) facilitates greater knowledge diffusion in the industry. D) helps the firm curb its resource heterogeneity and resource immobility.
A
Dandelions Max is a consumer electronics company. It has acquired an edge over its 3) competitors through its ability to provide breakthrough technology at the lowest price in the market. This advantage of Dandelions Max best exemplifies a ________. A) core competency B) resource flow C) capital gain D) markup
A
How does a firm capture its producer surplus for a good or service? 37) A) As profit per unit sold B) As cost per unit sold C) As market price per share D) As earnings per share
A
In an economic context, strategy for producers is primarily about: 41) A) capturing the economic value created as much as possible. B) lowering producer surplus and increasing consumer surplus. C) distributing the economic value created equally between consumers and themselves. D) reducing the difference between consumer's willingness to pay for a product and the cost to produce it.
A
It is difficult even for Apple's managers to pinpoint the underlying cause of the 48) company's phenomenal success. The term that best applies to this difficulty is known as ________. A) causal ambiguity B) competitive dependence C) resource mobility D) path dependence
A
Maroon Inc. is a leading international apparel company. Competitors across the globe 26) have failed to imitate Maroon Inc.'s production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Maroon Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate? A) Resource immobility B) Resource equality C) Resource perishability D) Resource homog
A
Nike has come a long way from its humble beginnings. It has been able to outperform 1) adidas in sales and become the undisputed leader in the athletic shoe and apparel industry. Which of the following statements accurately explains one of the main reasons for Nike's success? A) It made the unorthodox move to spend basically its entire budget for a specific sport on a single star athlete. B) It focused on sponsoring future athletic superstars who embodied a likely success story. C) It spread its marketing budget more widely. D) It stopped spending money on celebrity endorsements and started restricting its expenditure for sponsoring only track and field sports stars.
A
The difference between the price charged for a product and the cost to manufacture it is 34) referred to as the ________. A) producer surplus B) consumer surplus C) break-even price D) reservation price
A
The competitive advantage that one firm has will be short-lived in an industry where: A) perfect competition exists. B) capabilities of a firm are not easily replicable. C) resource immobility is high. D) resource heterogeneity is high.
A
The management of a company is assessing the value of all the tangible resources the 5) company owns. Which of the following will be included in this assessment? A) The company's machinery B) The company's patents C) The company's brand equity D) The company's copyrights
A
The perfectly competitive industry structure differs from the resource-based model in 22) its view that: A) all firms have access to the same resources. B) accessibility to bundles of resources differ across firms. C) competencies differ across firms working in the same industry. D) resources tend to be "sticky."
A
The value a consumer attaches to a product or service is captured in the: 35) A) consumer's maximum willingness to pay for it. B) difference between the price charged for it and the cost to produce it. C) expenses incurred by the firm in manufacturing it. D) least price a consumer is willing to pay for it.
A
True Home Inc., Super Cart Inc., and Daily Things Inc. are three consumer-product 12) retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Which of the following is an implication of the market condition indicated in this scenario? A) Any advantage that one firm has will be short-lived. B) Barriers to entry within the industry will be high. C) Resource immobility of the firms will be low. D) The industry structure will be far from perfect competition.
A
True Sync Inc. is a software company, which has built and acquired numerous assets 11) over the years. According to the resource-based view of a firm, which of the following assets of True Sync Inc. will best enable it to gain and sustain a competitive advantage? A) The expertise acquired by the employees in the company B) The capital raised by the company from its shareholders C) The headquarters owned by the company D) The resources of the company that are mobile
A
Trust Machines Inc. is a company that manufactures and markets consumer electronics. 14) The unique microprocessors developed by the company contribute to its high resource immobility. According to the resource-based view of competitive advantage, which of the following is an implication of this situation? A) The resources of Trust Machine Inc. are difficult to replicate or imitate. B) The competitive advantage of Trust Machine Inc. will soon be lost. C) The resource heterogeneity of Trust Machine Inc. is low within the industry. D) The environment in which Trust Machine Inc. operates is closest to perfect competition.
A
Unlike the financial ratios based on accounting data, total return to shareholders is: 28) A) an external performance metric. B) backward-looking and historic in nature. C) an absolute measure of competitive advantage. D) unaffected by market volatility or macroeconomic factors.
A
Which of the following equations best expresses return on revenue? 2) A) Net profits/Revenue B) Sales/Revenue C) Revenue - Gross profits D) Revenue - Cost
A
Which of the following is NOT an accurate expression of the economic value created 42) per unit of a product sold? A) The difference between the price charged and the firm's cost B) The sum of consumer surplus and firm profit C) The difference between consumer's reservation price and firm's cost D) The sum of consumer surplus and producer surplus
A
Which of the following is NOT true of risk capital? 15) A) Risk capital invested in a firm can be legally recovered if the firm goes bankrupt. B) Return on risk capital includes stock price appreciation plus dividends received over a specific period. C) A person who provides capital to a firm gets equity shares in return. D) From the shareholders' perspective, the measure of competitive advantage is primarily based on return on their risk capital.
A
Which of the following is an example of a firm's intangible resources? A) The firm's organizational culture B) The firm's land and building C) The firm's cash at bank D) The firm's finished goods inventory
A
Which of the following is an external performance metric? 23) A) Total return to shareholders B) Inventory turnover C) Return on revenue D) Fixed assets turnover
A
Which of the following ratios best expresses inventory turnover? 12) A) Cost of goods sold/Inventory B) Inventory/Working capital C) Inventory/Per unit cost of production D) Annul profits/Inventory
A
Which of the following statements accurately brings out the difference between tangible and intangible resources? A) Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased. B) Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. C) Tangible resources contribute to a company's competitive advantage, whereas intangible resources fail to do the same. D) Tangible assets are difficult to imitate, whereas intangible assets can be easily replicated.
A
Which of the following statements is true of accounting data? 20) A) Accounting data are historical data and thus backward-looking. B) Accounting data consider off-balance sheet items, such as pension obligations of a firm. C) Accounting data do not have to be adjusted in any manner to compare companies with different capital structures. D) Accounting data focus mainly on intangible assets, rather than tangible assets.
A
A high percentage of R&D/Revenue ratio indicates a(n): 5) A) strong focus on marketing and sales to promote products and services. B) strong focus on innovation to improve current products and services. C) negligent investment toward research and development. D) inefficiency in the management to focus on new products.
B
After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is 36) willing to pay that amount for the dress. However, the dress was priced at $80. What is the amount, $100, referred to as? A) The firm's cost (C) in manufacturing the dress B) The value (V) the consumer attaches to the dress C) The producer surplus D) The consumer surplus
B
An observer may conclude that the organizational culture of Zappos, an online retailer 49) for shoes and clothing, might be the basis for its competitive advantage. However, reverse social engineering to crack Zappos' code of success might be much more difficult for a company trying to exactly imitate its strategy. Thus, the source of Zappos competitive advantage is said to be ________. A) non-substitutable C) inexhaustible B) socially complex D) non-ambiguous
B
Both Vibrant Phones Inc. and Oryxo Inc. incur a cost of $200 to manufacture a single 31) unit of a cell phone. However, Vibrant Phones creates more economic value than what Oryxo does. What does this imply? A) Oryxo has a competitive advantage over Vibrant Phones. B) Vibrant Phones sells its products at a better price than Oryxo. C) Oryxo's offering has greater total perceived consumer benefits than Vibrant Phones' offering. D) Vibrant Phones and Oryxo have achieved a competitive parity.
B
Economic value creation is best expressed as ________. A) producer surplus minus consumer surplus B) consumer surplus plus firm profit C) producer surplus plus firm profit D) consumer surplus minus cost of production
B
Even though many valuable, rare, and inimitable resources were generated at Xerox's 36) Palo Alto Research Center (PARC), the management at Xerox's headquarters failed to gain a competitive advantage by exploiting the breakthroughs in computing software and hardware. What is the most likely implication of this example? A) Competitive advantage cannot be gained through unrelated diversification. B) A firm must be effectively organized to capture value. C) It is better to build competitive advantage on tangible assets rather than intangible assets. D) It is advisable to outsource research and development functions.
B
Gina paid $900 for a camera that she thought was worth $1100 for all the features 38) included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario? A) $900 B) $200 C) $550 D) $1,100
B
Onyx Tech Inc.'s competency in designing and manufacturing efficient microprocessors 19) has made its laptops the most advanced computers in the market. This competency, along with the just-in-time manufacturing system, has enabled Onyx Tech Inc. to increase its profitability by lowering its production costs. Thus, Onyx's competency in designing and manufacturing microprocessors will be considered a(n) ________ resource in the VRIO framework. A) perishable B) valuable C) tangible D) inexhaustible
B
Otion Inc. is a relatively new firm in the consumer electronics industry. The company's 33) primary objective is to become the market leader in less than 5 years, for which it has to gain and sustain a competitive advantage. In the context of the VRIO framework, which of the following resources should Otion Inc. primarily focus on to achieve its objective? A) Inexpensive unskilled labor that is easily accessible by all companies B) Production systems that reduce costs by 30 percent below the current industry standards C) Quality standards, which are common and mandatory throughout the industry D) Component parts that are sourced from competitors' suppliers
B
The fixed asset turnover of a company is 8.3. What do you infer from this? 9) A) The cost of capital invested on fixed assets is 8.3% of the total profit. B) Every dollar spent on the company's fixed assets generates $8.30 of revenue. C) The return on fixed assets will break even in 8.3 years. D) 8.3% of the company's revenue is invested in fixed assets.
B
The resource-based view of a firm assumes that the: A) resources of firms are highly scarce and hence the government interferes to ensure equal distribution. B) resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another. C) resource bundles of firms competing in the same industry tend to be highly mobile, moving easily from firm to firm. D) resources of firms are highly exhaustible and hence they cannot contribute to their competitive advantage.
B
The top management at BioTrue Pharma Inc. through rigorous testing ensures that the 58) company develops and sells drugs that are free of harmful side-effects. Also, the company ensures that the chemical waste generated in the manufacturing process is kept to a bare minimum and is disposed of according to the regulations of the Environmental Protection Agency. The management assesses its overall performance based on these dimensions. Thus, the managers at Bio True Pharma are applying the ________ approach to measure firm performance. A) accounting profitability B) triple bottom line C) economic value creation D) shareholder value creation
B
The translation of strategy into action primarily takes place in a firm's ________. 60) A) mission statement C) code of conduct B) business model D) executive summary
B
The working capital of a small home-based business is $200,000. The revenues 8) generated account to $600,000, and the profits incurred are $300,000. What would be the company's working capital turnover? A) 2, that is, $600,000/$300,000 B) 3, that is, $600,000/$200,000 C) $300,000, that is, $600,000 - $300,000 D) $100,000, that is, $300,000 - $200,000
B
The working capital turnover of Tesva Systems Corp. is 6.0. What does this financial 7) data suggest? A) For every $6.00 Tesva Systems puts to work, the company realizes a sales of $1.00. B) For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales. C) For every dollar Tesva Systems puts to work, the company realizes $6.00 in loss. D) For every $6.00 Tesva Systems puts to work, the company incurs a cost of $1.00.
B
True Autos Inc. has been trying to directly copy the strategies of Red Autos Inc. Even 47) though it is evident that Red Auto's Inc.'s success comes from its just-in-time inventory system, True Auto's Inc. has not been able to effectively apply the system in the same way. This is because the organizational structures, employees, cultures, and the overall business systems of both the companies vary from each other. Which of the following barriers to imitation does this scenario best illustrate? A) Path dependence C) Resource homogeneity B) Social complexity D) Resource mobility
B
TrueCandy Inc., a confectionery manufacturing company, lost its competitive 28) advantage when its strategy of placing kiosks at prominent locations throughout the state was followed by most of its competitors. In this scenario, TrueCandy Inc.'s loss of competitive advantage can be primarily attributed to ________. A) technology convergence B) knowledge diffusion C) divergent production D) resource immobility
B
Which of the following approaches to assess competitive advantage is based on the 56) view that noneconomic factors can have a significant impact on a firm's financial performance? A) The balanced scorecard B) The triple-bottom-line approach C) The accounting profitability approach D) The economic value creation framework
B
Which of the following competitively important assets is typically excluded from a 21) firm's balance sheet? A) Accounts payable B) Customer experience C) Land and building D) Patents
B
Which of the following is a disadvantage of measuring firm performance through total 27) return to shareholders and firm market capitalization? A) These tools fail to indicate how the stock market views all available public information about a firm's expected future performance. B) Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term. C) These tools measure competitive advantage in absolute terms rather than relative terms. D) Only the book value of the share prices is taken into account when applying these measures, and not the market value.
B
Which of the following is an advantage of applying the economic value creation 50) perspective to assess a firm's performance? A) It is the most efficient tool for assessing corporate-level competitive advantage of highly diversified companies with large product portfolios. B) In economic value perspective, analysts not only consider historical costs, but also opportunity costs. C) Arriving at the economic value created is easy because determining the value of a good in the eyes of consumers is a simple task. D) When the need for "hard numbers" arises, managers and analysts rely on economic value creation perspective to measure competitive advantage.
B
________ denotes the dollar amount a consumer would attach to a good or service. 33) A) Utility C) Economic contribution B) Value D) Consumer surplus
B
________ describes a process in which the options one faces in a current situation are 41) limited by decisions made in the past. A) Social complexity C) Causal ambiguity B) Path dependence D) Cannibalization
B
________ describes a situation in which the cause and effect of a phenomenon are not 43) readily apparent. A) Resource immobility B) Causal ambiguity C) Social complexity D) Resource heterogeneity
B
________ indicates how much a firm benefits from interest-free loans extended by its 16) suppliers and creditors. A) Inventory turnover B) Payables turnover C) Assets turnover D) Receivables turnover
B
________ is best described as the difference between a buyer's willingness to pay for a 29) product or service and a firm's total cost to produce it. A) Break-even point B) Economic value created C) Consumer surplus D) Cost of capital
B
________ most precisely measures how well a company leverages its fixed assets, 10) particularly property, plant, and equipment (PPE). A) Working capital turnover B) Fixed asset turnover C) Capital leverage ratio D) Fixed assets to equity ratio
B
________ precisely indicates how much of a firm's sales is converted into profits. A) Break-even price B) Return on revenue C) Inventory turnover D) Working capital turnover
B
in the context of the resource-based model of competitive advantage, if a successful 25) firm exhibits resource immobility it means that the: A) competitors can easily replicate or copy the firm's resource bundles and capabilities. B) firm will have a sustained competitive advantage because of its unique resources. C) resources of the firm cannot be effectively deployed within its own organization. D) rival firms have better accessibility to quality resources.
B
A firm has 30 million shares outstanding, and each share is traded at $100. Also, each 24) shareholder gets a dividend of $2000 annually. In this case, the market capitalization is ________. A) $200,000, that is, $2000 × $100 B) 30,000 shares, that is, 30 million shares/$100 C) $3 billion, that is, 30 million shares × $100 D) 20:1, that is, $2000/$100
C
A firm's resources and capabilities are costly to imitate. This is because rival companies 45) do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by ________. A) social complexity B) path dependence C) causal ambiguity D) dependence complexity 46) Vior Systems Inc. took many decades to build its core competencies, and
C
As a result of ________, a critical assumption in the resource-based model of a firm, 27) the resource differences that exist between firms are difficult to replicate. A) resource equality B) resource homogeneity C) resource immobility D) resource perishability
C
Brown Foods Inc., a leading chocolate producer, anticipated that the prices of cocoa 39) beans would double in less than three years. This would disrupt the availability of cocoa in the industry. Thus, Brown Foods Inc. decided to purchase cocoa plantations in Ghana. As predicted, the prices of cocoa increased twofold. Because of the company-owned cocoa plantations, Brown Foods Inc. was able to sustain its competitive advantage in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate? A) Causal ambiguity B) Time compression diseconomies C) Better expectations of future resource value D) Social complexity
C
By selling a laptop at $1000 for which consumers are willing to pay up to $1200, a 43) consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1200 - $1000) + $400, is the ________. A) opportunity cost B) consumer surplus C) economic value created D) reservation price
C
Coral Think Inc. is a new company in the publishing industry. It has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Coral Think Inc. to acquire using its capital? A) Tools and equipment B) Land and building C) Brand name D) Inventory
C
Gene Craft Inc. is the market leader in the pharmaceutical industry. Though most of its 20) resources are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Gene Craft Inc. is most likely to be considered a rare resource that is best contributing to its competitive advantage? A) The company's raw material supplies B) The company's plant and machinery C) The company's chemical patents D) The company's land and buildings
C
How are the critical assumptions of the resource-based model of a firm fundamentally 21) different from the way in which a firm is viewed in the perfectly competitive industry structure? A) In perfect competition, it is extremely difficult to replicate the resource bundles of a firm, whereas in the resource-based model, it is extremely easy to imitate them. B) In the resource-based model, resources are freely available and mobile, whereas in the perfectly competitive industry structure, resources are highly immobile. C) In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry. D) In the resource-based model, only physical assets of a firm are considered as resources, whereas in perfect competition, a firm's capabilities and competencies are also considered as resources.
C
If a resource is rare or unique to a particular firm, then: 18) A) the industry in which the firm operates will experience perfect competition. B) it will be less costly for rivals to imitate the resource. C) the firm will be able to maintain a competitive advantage for a long period. D) the mobility of the resource will be high.
C
In the fiscal year 2012, BlackBerry's Cost of goods sold (COGS)/Revenue ratio was 19) higher than that of its competitor, Apple. This implies that BlackBerry needs to work toward: A) increasing its fixed costs and decreasing its variable costs. B) lowering its inventory turnover. C) driving down its costs. D) reducing its return on revenue.
C
Pulse Mobiles Inc. is a cell phone manufacturing company. Its latest range of 35) smartphones bears a straight resemblance to the Y-series range of smartphones from Talkie Gen Inc., in terms of its shape and look-and-feel. Which of the following strategies has Pulse Mobiles Inc. used to replicate the valuable and rare resource of Talkie Gen Inc.? A) Substitution B) Innovation C) Direct imitation D) Strategic equivalence
C
Samantha is a recent fashion graduate. She started her own apparel store with an 47) investment of $300,000. In the first year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Samantha's ________. A) social cost C) opportunity cost B) reservation price D) break-even price
C
The market capitalization of a public company is $5 billion. Each share of the company 25) is traded at $200. What do you infer from this financial data? A) The firm's total return to shareholder is $5 billion. B) The firm's economic value created is $5 billion. C) The firm's number of outstanding shares is 25 million. D) The firm pays an annual dividend of 10 percent.
C
True Machine Inc. and One Electrona Inc. are two competing consumer electronics 3) companies. While True Machine's COGS/Revenue is 66%, One Electrona's is 74%. What do you infer from this financial data? A) One Electrona has a competitive advantage over True Machine. B) One Electrona is more efficient than True Machine by eight percentage points. C) True Machine's profit margin is higher than that of One Electrona. D) True Machine should focus more on driving down costs, while increasing revenues, and One Electrona should focus more on increasing its fixed asset turnover.
C
Using the ________ approach, managers audit their company's fulfillment of its social 59) and ecological obligations to stakeholders such as employees, customers, suppliers, and communities as conscientiously as they track its financial performance. A) accounting profitability B) shareholder value creation C) triple-bottom-line D) economic value creation
C
Vior Systems Inc. took many decades to build its core competencies, and these 46) competencies were based primarily on the decisions made by the company's top management in the past. This process is called: A) causal dependence. B) dependence complexity. C) path dependence. D) path immobility.
C
When GD Inc. declared a dividend of $20,000,000, its market value increased from $8 49) billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as GD Inc.'s ________. A) producer surplus B) social cost C) opportunity cost D) consumer surplus
C
When the knowledge of a valuable and rare resource diffuses throughout an industry, 29) the: A) structure of the industry will no longer be perfectly competitive. B) ability to sustain a competitive advantage will be restricted to one firm. C) firms in the industry will be better positioned to achieve competitive parity. D) mobility and homogeneity of the resource will decrease.
C
When using the balanced scorecard approach to assess a firm's performance, which of 52) the following is NOT a key question that managers need to answer? A) How do shareholders view us? B) What core competencies do we need? C) How do we reduce the economic value created? D) How do customers view us?
C
Which of the following expressions accurately describes market cap? 26) A) It is the difference between a firm's account receivables and account payables. B) It is the ratio of a firm's equity finance and its debt finance. C) It is the product of the number of outstanding shares and the share price. D) It is the difference between the book value and the market value of a firm's assets.
C
Which of the following is NOT a limitation of the economic value creation framework? 51) A) The framework cannot be effectively applied for assessing corporate-level performance of diversified conglomerates. B) The framework falls short when managers are called upon to operationalize competitive advantage. C) The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies. D) The framework is not as effective as accounting profitability or shareholder value creation when the need for "hard numbers" arises.
C
Which of the following is an example of a firm's resources? A) Liabilities such as bills payables and short-term debts B) Routine activities like order taking and invoicing customers, performed in a firm C) Assets such as land and building owned by a firm D) Assistance available from the government in the form of rules and regulations
C
Which of the following statements is true of the balanced scorecard? 53) A) Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. B) It is one of the traditional approaches of measuring firm performance. C) It attempts to provide a holistic perspective on firm performance. D) It is a more or less a one-dimensional metric of measuring competitive advantages of a firm.
C
Which of the following statements is true of the triple bottom line? 57) A) Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. B) According to this approach, achieving positive results in any one of the dimensions, economic, social, and ecological, can lead to a sustainable strategy. C) Three dimensions, economic, social, and ecological, make up the triple bottom line. D) It is more or less a one-dimensional metric of measuring competitive advantage of a firm.
C
With regard to the VRIO framework, Crocs Shoes was unable to sustain its competitive 31) advantage primarily because its products were: A) non-substitutable. B) invaluable and common. C) easy to imitate. D) extremely expensive
C
________ are barriers to imitation that prevent rivals from competing away the 37) advantage a firm may enjoy. A) Market niches B) Cartel arrangements C) Isolating mechanisms D) Embargoes
C
________ are best described as the value of the best forgone alternative use of the 46) resources employed. A) Social costs B) Switching costs C) Opportunity costs D) Variable costs
C
________ are the legal owners of public companies. 22) A) Employees B) Creditors C) Shareholders D) Category captains
C
________ indicates how fast a firm is collecting the credit amount extended by a firm 13) to its customers. A) Payables turnover C) Receivables turnover B) Assets turnover D) Inventory turnover
C
16) The "Gold Crisps" potato wafers manufactured by True Foods Inc. have been the 16) highest selling wafers in the market. Though the market for wafers is flooded with competitors, True Foods Inc. has been able to maintain its market position for a long time. This is mainly attributed to the unique taste of the wafers that comes from the unique natural flavoring used by the company. This competency of True Foods Inc. will be considered as a(n) ________ resource in the VRIO framework. A) intangible B) virtual C) inexhaustible D) rare
D
A firm incurs $100 to manufacture an office table. It fixes the market price of the table 32) as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario? A) $200 B) $100 C) $250 D) $180
D
Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic 24) industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area where One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated? A) Resource mobility B) Resource maturity C) Resource equality D) Resource heterogeneity
D
Connect Plus Cellular is a leading mobile network operator. Since most of the resources 17) used by Connect Plus Cellular is easily available, the company's brand name is the only resource that distinguishes it from the other operators. No other competitor in the industry has a strong brand name like that of Connect Plus Cellular. This unique asset that has helped the company gain a competitive advantage will be considered as a(n) ________ resource in the VRIO framework. A) imperishable B) mobile C) tangible D) rare
D
From an investors' or shareholders' perspective, the measure of competitive advantage 4) that matters most is the ________. A) consumer surplus B) inventory turnover C) economic value created D) return on risk capital
D
In order to achieve a competitive advantage, a firm should be able to: 45) A) keep its producer surplus low. B) increase the difference between consumer surplus and its profits. C) increase its payable turnover. D) increase the difference between the value created and the cost to produce it.
D
GN Corp. and BC Inc. are two competing firms in the same industry. GN Corp.'s 7) tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. BC Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information? A) There is no resource heterogeneity between the two firms, BC Inc. and GN Corp. as they operate in the same industry. B) It is easier to buy intangible assets with cash than tangible assets. C) It takes longer time to build tangible assets than intangible assets. D) It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage.
D
How does causal ambiguity act as an isolating mechanism for organizations? 44) A) It makes it difficult for competitors to imitate core competencies quickly due to time compression diseconomies. B) It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures. C) It creates a situation in which different social and business systems interact with one another. D) It makes it difficult for the competitors to understand why a company has been so successful.
D
In the context of the resource-based model of competitive advantage, which of the 23) following scenarios best exemplifies resource immobility? A) Blue Elixir Corp. has been able to gain a competitive advantage because of its ability to efficiently move its resources from one manufacturing unit to another. B) AP Corp. has earned a good reputation among its shareholders by investing more in tangible assets over intangible assets. C) Two Triangle Inc. has lost its market share because its resources are not mobile, that is rigid, inflexible, and static. D) True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate.
D
Intangible assets add great value to a firm primarily because the firm's: A) tangible assets require a higher degree of capital than its intangible assets. B) capabilities are by nature typically tangible. C) reputation and brand equity are accumulated quickly and can be leveraged easily. D) knowledge and culture take time to develop and are generally difficult to imitate.
D
Mova Electronics, a leading pager manufacturer, recently declared itself bankrupt. This 42) was attributed to a decision the company made in the past. While most of Mova's competitors were shifting their research focus toward cell phones, Mova invested most of its retained earnings on improvising its pagers. Once the pager market drastically declined, Mova Electronics was unable to capitalize on the new technology. Which of the following does this scenario best illustrate? A) Causal ambiguity B) Social complexity C) Knowledge diffusion D) Path dependence
D
Osion Electronics Inc. incurs a cost of $350 to produce one unit of a cell phone. The 40) 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? A) $800 B) $350 C) $200 D) $450
D
Return on risk capital primarily includes: 14) A) account receivables plus account payables. B) economic value created by a firm plus reservation price. C) consumer surplus plus firm profit. D) stock price appreciation plus dividends received over a specific period.
D
Sarah has recently started a restaurant in a commercial area where there are many other 30) established restaurants and popular fast food chains. Sarah owns the plot on which her restaurant is located and this makes her cost of operations lower than the competitors. This factor allows her to offer her products at a competitive price. Sarah has also invested a huge amount on the interiors of the restaurant and in equipping the kitchen with the latest appliances used by her competitors. In this scenario, which of the following is the most valuable resource for Sarah's business? A) The restaurant's late entry into the market B) The investments made by Sarah on the restaurant's interiors C) The latest kitchen equipment that is at par with the restaurant's competitors D) The land owned by Sarah, which reduces cost of operations
D
The payable turnover for Apple and BlackBerry (as of fiscal year 2012) was 7.4 and 17) 24.8 respectively. From this data we can conclude that: A) BlackBerry can extend its payment periods, while Apple is required to pay its creditors more quickly. B) BlackBerry has a clear advantage over Apple as its credits are paid much faster than that of Apple. C) BlackBerry has taken a longer time to pay its creditors as compared to Apple. D) Apple has been more efficient than Blackberry in paying creditors and generating interest-free loans from suppliers.
D
The receivables turnover of GD Products Inc. is 13.6 and that of its competitor, AP 18) Goods Inc., is 6.0. What does this financial data primarily imply? A) GD Products is less efficient than AP Goods in collecting accounts receivables. B) AP Goods has a larger value gap as compared to GD Products. C) AP Goods pays its creditors more quickly as compared to GD Products. D) GD Products collects accounts receivables faster than what AP Goods does.
D
The share price of Groupon, a daily-deal website, fell by 90 percent just a year after its 38) successful initial public offering. The firm was not able to sustain its competitive advantage because of the emergence of other daily-deal sites that were able to better serve the needs of local markets and specific population groups. Which of the following is the most accurate inference from this example? A) Groupon operated in an industry where the barriers to entry were high. B) Groupon's competency was built more on an intangible resource than on a tangible one. C) Groupon invested in resources that were invaluable and common. D) Groupon's competency was not hard to imitate.
D
Which of the following best expresses fixed asset turnover? 11) A) Fixed assets/Total return to shareholders B) Fixed assets/Current liabilities C) Current assets/Fixed assets D) Revenue/Fixed assets
D
Which of the following is NOT an advantage of the balanced scorecard approach to 55) assess firm performance? A) It helps managers to implement feedback and organizational learning in order to modify and adapt strategic goals when indicated. B) It provides a concise report that tracks chosen metrics and measures and compares them to target values. C) It allows managers to communicate and link the strategic vision to responsible parties within an organization. D) It is a tool which can be effectively used by managers for both strategic implementation and strategic formulation.
D
Which of the following is an advantage of the balanced scorecard? 54) A) The balanced scorecard is independent of the skills of the managers responsible for its implementation. B) Its implementation is a one-time effort and does not require continuous tracking of metrics or updating of strategic objectives. C) It is a tool for both strategic formulation and strategic implementation. D) It allows managers to translate a firm's vision into measureable operational goals.
D
________ are best described as unique strengths, embedded deep within a firm, that 2) allow a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost. A) Resource leverages B) Equity reserves C) Capital gains D) Core competencies
D
________ is best described as a measure of how effectively capital is being used by a 6) firm to generate revenue. A) Revenue per employee C) Return on revenue B) Risk capital D) Working capital turnover
D
