QUIZ C

A firm incurs $100 to manufacture an office table. It fixes the market price of the table 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?

$180

When a firm manufactures 2,000-3,000 units of a product, it incurs an average cost of $10 per unit. When it manufactures 3,000-4,000 units of the same product, the average cost per unit reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit to $9. Which of the following is the firm's minimum efficient scale?

3,000-4,000 units

At a certain output level, the per-unit cost incurred by a firm to manufacture a product was $60. Once the cumulative output doubled, the cost per unit reduced to $54. All other factors remaining constant, the firm has been able to achieve a(n)

90 percent learning curve.

Balanced Scorecard Approach

A process for translating a company's strategy into measurable objectives and plans organized into four perspectives.

In 2014, Apple had a return on revenue of 29.3 percent, and Microsoft had a return on revenue of 32 percent. Even so, Apple had a higher return on invested capital than Microsoft. Why did this happen?

Apple was able to charge a much higher margin for its products and services than Microsoft.

Which of the following statements about competitive advantage is true?

Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value.

How does availability of complements act as a value driver?

Complements add value to a product when they are consumed in tandem with it.

How is differentiation parity different from cost parity?

Differentiation parity deals with value not pricing.

Which of the following statements accurately brings out the difference between economies of scale and economies of scope?

Economies of scope are the savings that come from producing two or more outputs from the same resources, whereas economies of scale are decreases in per-unit cost with increases in output.

The fixed asset turnover of a company is 8.3. What do you infer from this?

Every dollar spent on the company's fixed assets generates $8.30 of revenue.

_____ of receivables turnover imply more efficient management in collecting accounts receivable and shorter durations of interest-free loans to customers.

Higher ratios

Which of the following is a key question managers must answer to formulate an appropriate business-level strategy?

How will we satisfy our customer needs?

Allure is a cosmetic brand that pursues a cost-leader strategy. Which of the following statements is true of the cosmetic brand?

It appeals to the price-conscious buyers

Which of the following is NOT an advantage of the balanced-scorecard approach to assess firm performance?

It is a tool which can be effectively used by managers for both strategic implementation and strategic formulation.

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.

_____ is the money shareholders provide in return for an equity share, which they cannot recover if the firm goes bankrupt.

Risk capital

_____ are the legal owners of public companies.

Shareholders

minimum efficient scale

The lowest rate of output at which a firm takes full advantage of economies of scale

Return on Invested Capital (ROIC)

The ratio of after-tax operating income to total invested capital; it measures the total return that the company has provided for its investors.

_____, which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period

Total return to shareholders

opportunity cost

_____ are best described as the value of the best forgone alternative use of the resources employed.

Which of the following examples uses a focused differentiation strategy?

a cosmetics brand that offers superior-quality skin lotion priced at 100 dollars per bottle

Wear Crush Inc. is an apparel company known for its affordable clothes that follows a cost-leadership strategy. In this scenario, Wear Crush should ideally compare its strategic position with

an apparel company popular among price-conscious customers.

In a successful _____ strategy, the trade-offs between differentiation and low cost are reconciled.

blue ocean

The translation of strategy into action primarily takes place in a firm's

business model.

Firms pursuing a differentiation strategy primarily seek to

create higher customer perceived value than the value that competitors create.

The concept of a(n) _____ attempts to capture both learning effects and process improvements at firms.

experience curve

A firm pursuing a differentiation strategy as opposed to a low-cost strategy will

focus its research and development on product technologies to add uniqueness.

Pilot Games Inc. allows users to play the trial versions of its games without any charge. However, users have to purchase the games to access the upgraded version of the games with advanced features. Which of the following business models is Pilot Games using in this scenario?

freemium

Return on Revenue (ROR)

indicates how much of the firm's sales is converted into profits

Which of the following drivers simultaneously increases value while lowering cost?

innovation

As the cumulative output in a firm increases, managers learn how to optimize the production process and improve workers' performance through repetition. This drives down the per-unit cost. Which of the following phenomena is best described here?

learning effects

Bass Watches Inc. initially spent eight man-hours to assemble a wristwatch. But as the production doubled, the number of hours spent on assembling a watch reduced by 20 percent. This increase in productivity reduced the company's cost per unit. What is this phenomenon referred to as?

learning-curve effect

risk capital

money invested in companies where there is financial risk

To be cost-competitive, a firm should

operate at the minimum efficient scale.

Free Spirit Communications Inc. is a cellular service provider that charges its customers $1 for three hours of talk time. So, if a customer's talk time for a month is 60 hours, the company charges him or her $20 at the end of the month. Which of the following business models does this best illustrate?

pay-as-you-go

Triple Bottom Line

recognition of the need for organizations to improve the state of people, the planet, and profit simultaneously if they are to achieve sustainable, long-term financial growth

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

strong focus on innovation to improve current products and services.

Which of the following business models has been traditionally used by the magazine and newspaper industry?

subscription-based

Which of the following is more of a value driver than a cost driver?

superior customer service

Which of the following is an accurate expression of the economic value created per unit of a product sold?

the difference between consumer's reservation price and firm's cost

Value drivers contribute to a firm's competitive advantage only if

the increase in value creation exceeds the increase in costs.

In the freemium business model, the

users are not charged for the basic features of a product or service, but the user must pay for premium advanced features or add-ons.

A defining characteristic of the pay-as-you-go business model is that the

users pay for only the services they consume.

A value curve indicates a lack of effectiveness in a firm's strategic profile when it

zigzags.