GLB 459 Midterm Chapter 5

the balance scorecard

- helps managers achieve their strategic objectives - uses internal and external performance metrics - balances both financial and strategic goals

At 3M one strategic objective that has been implemented is that 30% of revenues must be obtained from new product introductions. This is an objective that would arise as an answer to which of the following balanced scored questions?

How do we create value?

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

accounting profitability economic value shareholder value

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

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

True or false: Stock market valuations are often unreliable due to market fluctuations and are therefore not used to assess competitive advantage.

fALSE

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

The pay-as-you-go model is ______.

gaining momentum

A company's stock price increases if the company ______.

grows faster than expected

Which of the following would be labeled variable costs by a computer manufacturer? (Check all that apply.)

hard drives display screens

COGS/revenue

how efficiently a company can produce a good

A balanced scorecard is a tool for strategy ______.

implementation

intangibles/revenue

intangibles include patents, copyrights, and trademarks, goodwill, and brand value

To understand how effectively a firm uses its capital, one can use the ratio ______.

net profits/invested capital

Managers implement the blueprint of their business model through which of the following? (Check all that apply.)

structures processes culture

shareholders

own shares of stock, are legal owners of public companies

total return to sharehodlers

stock price appreciation + dividends

The business model used by telecommunication companies when they provide a basic cell phone at no charge when the customer signs a two-year contract is a combination of which of the following types of business models? (Check all that apply.)

subscription razor--razor-blade

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

access to a product or service

accounting profitability

- Accurately assesses firm performance - Compares firm performance to competitors / industry average

Which statements about stock market valuations are true?

- Stock market valuation is equal to the number of outstanding shares multiplied by the share price. - Viewed over the long term, stock market valuation is a useful metric for assessing competitive advantage.

limitations of economic value creation

- valuing a consumer good isn't easy the value of a good changes in the eyes of consumer's income, preferences, time, etc - to measure firm-level competitive advantage, we must estimate economic value created for all products and services offered by the firm

The Luminarium Corporation has a market capitalization of $100,000,000, and each share is worth $100. How many outstanding shares of Luminarium Corporation are there?

1,000,000

3 traditional frameworks to measure and assess firm performance

1. accounting profitability 2. shareholder value and creation 3. economic value creation

Two integrative frameworks, combining quantitative data with qualitative assessments:

1. balanced scorecard 2. triple bottom line

Which of the following statements is best illustrated by the decades-long business rivalry between the technology giants Apple and Microsoft?

A firm's competitive advantage is transitory.

Which of the following describes how Amazon disrupted the traditional wholesale model for book publishers?

Amazon sold e-books for its e-reader device at a loss to promote sales of the e-reader.

Which of the following statements are true about the rival businesses Apple and Microsoft? (Check all that apply.)

Apple introduced a series of popular consumer electronic devices. Microsoft leveraged its computer operating system to sell other software programs.

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

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

False

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

False

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

Which statements about creating and implementing an effective business model are true?

Firms must implement their competitive strategy blueprint through processes, procedures, culture, and structure. Firms must transform their competitive strategy into a blueprint of initiatives and actions that support their goals.

What is one potentially negative outcome that firms face when they deliver higher than expected growth?

Investors will expect a similarly high level of growth in the future.

Which of the following are true of a firm's book value? (Check all that apply.)

Its importance has declined over time. It captures the historical cost of a firm's assets. It is calculated as costs of assets minus accumulated depreciation.

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

Magazines Internet providers Cellphone providers

When one wants to further explore the difference in return on revenue (ROR) for two competitors, one can look at which of the following ratios? (Check the three that apply.)

R&D expense/revenue SG&A expense/revenue COGS/revenue

A company's total return to shareholders consists of which of the following? (Check all that apply.)

Stock price appreciation Dividends received

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

The price determines in part the stock's market valuation.

Which of the following correctly describe the information used for comparing the performance of public companies based on accounting profitability? (Check all that apply.)

The relative performance is evaluated using standardized financial metrics. The information is derived from such data as income statements and balance sheets. The information is filed in a 10-K report.

Which of the following statements about the disadvantages of the value creation perspective are correct?

The value that a consumer places on a good can vary according to how the consumer feels at a particular moment. It is difficult to determine the value that consumers place on a given good. For large firms, it is difficult to estimate the economic value created for all products and services offered by the firm.

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

comparative analysis of firms

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

complementary goods

If Tom would have paid $1,000 for a new laptop but was able to purchase one for $800, the $200 he saved is considered his ______.

consumer surplus

A firm's actual ___ minus depreciation is called the book value.

costs of assets

Compared to the past, the importance of firms' intangibles has increased. Therefore the importance of a firm's book value has _____ as part of the firm's total stock market valuation.

decreased

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 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

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

Which of the following are considered off-balance sheet items? (Check all that apply.)

pension obligations operating leases

As a consequence of the rapid development of business models, ______ may breach existing rules of commerce.

producers

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

Which of the following performance dimensions matter in judging the effectiveness of a firm's strategy? (Check all that apply.)

quantitative qualitative

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

The subjectively determined maximum amount a customer would pay for a product is its ______ price.

reservation

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

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

risk capital

The legal owners of publicly traded companies are called ______.

shareholders

Which of the following would provide the best benchmark of a computer firm's performance relative to other high-tech firms?

the NASDAQ computer index

When managers analyze a wide variety of internal and external performance metrics in order to set financial and strategic goals, they often turn to a framework known as ______.

the balanced scorecard

Which business model evolved from the razor—razor-blade model and involves a firm providing a base product for free, then finding ways to monetize the usage?

the freemium business model

Economic value creation is calculated as ______.

the sum of consumer and producer surplus

In their annual filing with the Securities and Exchange Commission, public companies in the United States must report which of the following? (Check all that apply.)

the total return to shareholders benchmarks

opportunity costs

the value of the best forgone alternative

The most a consumer is willing to pay for a product is equivalent to the product's ______.

total perceived consumer benefits

Because external factors create volatility in stock prices, a better measure of a firm's performance over the long term is the ______.

total return to shareholders

Investors in a company are mostly concerned about the company's ______.

total return to shareholders

Wholesaling is considered a(n) ______ business model.

traditional

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

business model

market capitalization

- dollar value of total shares outstanding - number of outstanding shares x share price

PPE/revenue

- how much of a firm's revenues are dedicated to cover plant, property, and equipment - critical assets and difficult to get rid of

risk capital

- money provided for an equity share - cannot be recovered if a firm goes bankrupt

When a firm goes bankrupt, shareholders ___.

cannot recover their risk capital

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

The acronym SG&A stands for sales, general, and --- expenses.

administrative, administration, or ADMINISTRATOR

Opportunity costs refer to the value of what could have been gained had a person pursued ______.

an alternative use of his or her resources

When a person decides to quit his or her job and start a company, the salary that person gave up when quitting can be considered ______.

an opportunity cost

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

balanced scorecard triple bottom line

Companies are required to provide ______ to shareholders, which are used in determining a firm's competitive advantage.

benchmarks

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

To measure firm-level competitive advantage, a company must ______.

estimate the economic value created for all products and services offered by the firm

To determine the value of a good in the eyes of consumers, a firm can ______.

examine consumers' purchasing habits for their revealed preferences

True or false: The best measure of competitive advantage can be found in the performance of specific departments.

false

The balanced scorecard approach helps managers balance ______ goals.

financial and strategic

selling, general, and administrative expense (SG&A)/revenue

how much of each dollar earned is invested in SG&A

Since about the year 2000, assets not captured in firms' accounting data have become ______ to a firm's competitive advantage.

much more important

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

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

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

freemium

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

organizational learning innovation competitiveness

When a firm does favorably compared to similar firms, it is said to ______.

outperform

When a trade occurs, the consumer and producer both capture ______.

some of the economic value

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

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

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

value

The financial metric ROIC stands for return on invested

capital

In order to determine market capitalization, one multiplies which of the following together? (Check all that apply.)

number of outstanding shares share price

R&D/revenue

how much of each dollar earned is invested in R&D

working capital/revenue

how much working capital the firm has tied up in its operations

Which of the following are offered by a balanced scorecard?

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

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