MGT 301 Ch. 5

From an investor's or shareholder's perspective, the measure of competitive advantage that matters most is the A) return on risk capital. B) economic value created. C) consumer surplus. D) inventory turnover.

A

Which of the following is an advantage of a triple-bottom-line approach? A) The approach takes an integrative and holistic view in assessing a company's performance. B) The approach does not rely on an external view of a firm to assess its performance. C) The approach is more of a quantitative performance metric rather than a mere conceptual framework. D) The framework can help managers assess a firm's competitive advantage without taking into account the firm's performance along noneconomic dimensions.

A

________ are best described as the value of the best forgone alternative use of the resources employed. A) Variable costs B) Opportunity costs C) Social costs D) Switching costs

B

________ are the legal owners of public companies. A) Employees B) Shareholders C) Category captains D) Creditors

B

Tom is attempting to measure how his customers views his firm. To do this, he uses the balanced-scorecard framework because he knows that A) customer surveys will help him determine future industry attractiveness. B) this will guarantee his company a sustainable competitive advantage. C) the framework will help him increase his stock price. D) the customer perspective is directly linked to firm revenues and profits.

D

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? A) agency B) wholesale C) pay-as-you-go D) freemium

D

Which of the following statements is true of the balanced-scorecard? A) It is a more or less a one-dimensional metric of measuring competitive advantages of a firm. B) It is one of the traditional approaches of measuring firm performance. C) Its primary focus is to base a firm's strategic goals entirely on external performance dimensions. D) It attempts to provide a holistic perspective on firm performance.

D

________ 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. A) Agency B) Freemium C) Bundling D) Wholesale

D

A company's total asset base consists of its current assets plus plant, property, and equipment (PPE).

false

A firm will always see its stock price appreciate when it demonstrates measurable growth.

false

A manager's only responsibility is to monitor and assess the performance of his or her firm.

false

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

false

A sustainable strategy is one that produces a competitive advantage that can be maintained over time.

false

Competitive advantage goes to the firm that maximizes the difference between the cost of producing a good and the retail price that consumers pay.

false

Generally speaking, a firm will create value if its return on invested capital (ROIC) is less than the cost of capital.

false

There are several major limitations of employing the balance scorecard framework; which of the following below is not one of those limitations? A) choosing the right metrics to use B) asking the four key questions C) the skills and abilities of the manager using the framework D) the type of marketing and HR functions used to employ the framework

D

In the why, what, who, and how of business models framework, the why dimension asks "why does the business model create value?"

true

Economic value creation is best expressed as A) producer surplus minus consumer surplus. B) consumer surplus minus cost of production. C) consumer surplus plus firm profit. D) producer surplus plus firm profit.

C

Which of the following is a disadvantage of the balanced-scorecard approach? A) It fails to link the strategic vision to responsible parties within the organization. B) It fails to translate the vision into measureable operational goals. C) It provides limited guidance for designing and planning business processes. D) It provides limited guidance about which metrics to choose.

D

Denise is the CEO of a profitable business called 4-Ever-Sun Inc. which harnesses solar power, a renewable energy source that is sustainable over time. Instead of pursuing a sustainable competitive advantage, Denise decides to focus on minimizing detrimental effects on society and the planet. This strategy is known as A) sustainable strategy. B) the balanced scorecard. C) corporate diversification strategy. D) cost leadership strategy.

A

During the process of formulating an effective business model, a firm's managers should first A) transform their strategy of how to compete into a blueprint of actions and initiatives. B) implement their strategy at corporate, strategic business unit, and functional levels. C) implement their blueprint of actions and initiatives through structures, processes, culture, and procedures. D) evaluate the firm's strategy already in effect and take corrective actions if necessary.

A

Fresher Corp. produces electric bathroom fragrance diffusers and sells the electric outer device at a market rate price. However, they lock their clients into a two-year agreement to purchase the perfume refills solely from them on a monthly basis. Which of the following business models does this best illustrate? A) subscription-based B) peer-to-peer C) crowdsourcing D) freemium

A

SonronMedia sells books by having salespeople set up appointments with potential customers and give them a sales pitch for the product. When a salesperson sells a book, he or she gets a predetermined percentage commission. This type of business model is called A) an agency. B) bundling. C) wholesale. D) a freemium.

A

The balanced-scorecard framework is a tool for strategy ________, not ________. A) implementation; formulation B) analysis; sustainability C) formulation, implementation D) sustainability, economic value creation

A

Under the ________ framework, producer surplus is important in the quest for competitive advantage because this is the profit that a firm captures when producing and selling a good or service. A) economic value creation B) accounting profitability C) shareholder value creation D) PESTEL

A

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? A) the triple-bottom-line approach B) the economic value creation framework C) the accounting profitability approach D) the balanced-scorecard

A

Which of the following expressions accurately describes market cap? A) It is the product of the number of outstanding shares and the share price. B) It is the difference between the book value and the market value of a firm's assets. C) It is the ratio of a firm's equity finance and its debt finance. D) It is the difference between a firm's account receivables and account payables.

A

A defining characteristic of the subscription-based business model is that the A) user pays for only the services he or she consumes. B) user pays for access to a product or service whether he or she uses it during the payment term or not. C) basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced features or add-ons. D) initial product is often sold at a loss or given away for free in order to drive demand for complementary goods.

B

Jack and Jill both love hot coffee. Jack likes to keep his coffee hot during the day while Jill doesn't mind drinking room temperature coffee. Jack is willing to spend more money on a thermos than Jill is willing to spend. This example illustrates the following major limitation of employing the Economic Value Creation framework because A) overall macroeconomic factors such as the unemployment rate, and interest and exchange rates all have a direct bearing on stock prices. B) determining the value of a good/service through the perspective of a consumers is not a simple task because consumers have different spending habits. C) accounting data focus mainly on tangible assets, which are no longer the most important. D) accounting data are historical and thus backward-looking.

B

Nam-zim sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is Nam-zim implementing? A) subscription-based B) razor-razor-blade C) pay-as-you-go D) direct sales

B

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. A) offshoring B) crowdsourcing C) peer-to-peer D) binge watching

B

Unlike the financial ratios based on accounting data, total return to shareholders is A) backward-looking and historic in nature. B) an external performance metric. C) an absolute measure of competitive advantage. D) unaffected by market volatility or macroeconomic factors.

B

Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance? A) When the need for "hard numbers" arises, managers and analysts rely on economic value creation perspective to measure competitive advantage. 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) It is the most efficient tool for assessing corporate-level competitive advantage of highly diversified companies with large product portfolios.

B

Which of the following is an advantage of the balanced-scorecard? A) It is a tool for both strategic formulation and strategic implementation. B) It allows managers to translate a firm's vision into measureable operational goals. C) The balanced-scorecard is independent of the skills of the managers responsible for its implementation. D) Its implementation is a one-time effort and does not require continuous tracking of metrics or updating of strategic objectives.

B

Which of the following statements is true of accounting data? A) Accounting data focus mainly on intangible assets, rather than tangible assets. B) Accounting data are historical data and thus backward-looking. C) Accounting data do not have to be adjusted in any manner to compare companies with different capital structures. D) Accounting data consider off-balance sheet items, such as pension obligations of a firm.

B

________ is the benefit that is missed or given up when an investor, individual or business chooses one alternative over another. A) Value creation B) Opportunity cost C) Accounting profitability D) Reservation price

B

Bioplex requires its members to pay a quarterly or an annual fee to use its services. Irrespective of whether they frequently use the services during the payment period or not, members have to pay in advance. Which of the following business models does this best illustrate? A) razor-razor-blade B) pay-as-you-go C) subscription-based D) freemium

C

In an economic context, strategy for producers is primarily about A) distributing the economic value created equally between consumers and themselves. B) reducing the difference between consumer's willingness to pay for a product and the cost to produce it. C) capturing the economic value created as much as possible. D) lowering producer surplus and increasing consumer surplus.

C

Swedish furniture giant IKEA reported sales of $44 billion in 2019. The company turned a profit by recycling waste into some of its best-selling products. Before, this waste had cost the company more than $1 million per year. And the company is well on its way to "zero waste to landfill" worldwide. According to Joanna Yarrow, IKEA's head of sustainability for the United Kingdom, "We don't do this because we're tree huggers, we do this because it's very cost-effective." This passage best represents which of the following frameworks below? A) the balance scorecard framework B) the PESTEL framework C) the triple-bottom-line framework D) the economic value framework

C

The balanced-scorecard can accommodate A) only short-term performance metrics. B) only long-term performance metrics. C) both short- and long-term performance metrics. D) neither short- or long-term performance metrics.

C

The tenet behind the triple-bottom-line is that A) a firm should solely focus on increasing the economic value created to/for its customers. B) a firm's primary objective should be increasing the total returns to its shareholders. C) a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy. D) a firm's return on revenue can be broken down into three ratios: COGS/Revenue, R&D/Revenue, and SG&A/Revenue.

C

The top management at Konex Vitamins, through rigorous testing, ensures that the company develops and sells vitamins 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 Konex Vitamins are applying the ________ approach to measure firm performance. A) economic value creation B) shareholder value creation C) triple-bottom-line D) accounting profitability

C

The translation of strategy into action primarily takes place in a firm's A) mission statement. B) executive summary. C) business model. D) code of conduct.

C

Under the ________ framework, the question "How do we create value?" is relevant when trying to improve innovation and organizational learning. A) triple-bottom-line B) economic value creation C) balanced scorecard D) operational effectiveness

C

Which of the following scenarios exemplifies a sustainable strategy under the triple-bottom-line approach? A) Rather than complying with the restrictive recycling laws in the United States, Gogozoom outsourced its manufacturing to a country that has fewer environmental restrictions. B) Gogozoom developed a chemical additive that doubled the life of its plastics. The additive was currently legal, but environmental groups argued that it harmed the environment. C) 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. D) Gogozoom's nearest competitor increased the salaries of its production workers by 30 percent, but Impervious kept its wages the same to gain a cost advantage over its competitor.

C

Bill Burke is the CEO of Project Inc. a supply chain firm. Bill's company considers installing a new piece of machinery in one of his factories. Installing this new machinery will cost money; paying the technicians to install the machinery, transporting the machinery, buying the parts and so on. Bill plans on financing his operations by issuing stock (equity) and issuing bonds (debt). He needs his return on invested capital (ROIC) to exceed his ________ in order to determine if he should take on the project. A) return on revenue B) payback period C) cost of stock D) cost of capital

D

LinkedIn, a professional social media website, allows its users to create their profiles for free, but charges a premium price for additional services. This is an example of a ________ business model. A) subscription-based B) peer-to-peer C) crowdsourcing D) freemium

D

Which of the following below are not one of the three dimensions that make up the Triple Bottom Line framework? A) economic value creation B) accounting profitability C) shareholder wealth creation D) None of the answers are correct.

D

Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm? A) the economic value creation model B) the accounting profitability model C) the shareholder value creation model D) the balanced-scorecard model

D

Which of the following statements about competitive advantage is true? A) Competitive advantage is an absolute measure; it is not relative. B) Competitive advantage is a one-dimensional concept. C) Competitive advantage is permanent and not transitory; once gained by a firm it stays with the firm. D) Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.

D

Once a firm chooses a business model, it must stick with it for the life of the firm.

false

Managers must first develop a strategy that is likely to produce a competitive advantage before implementing a balanced-scorecard approach.

true