Ch 5 Strategic Management

The balanced scorecard approach helps managers balance ______ goals.

financial and strategic

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

freemium

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

freemium

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

firm's competitive advantage is transitory.

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?

$100,000,000/$100 per share = 1,000,000 shares

Which of the following statements about the disadvantages of the accounting profitability perspective are correct?

Accounting data focus primarily on tangible assets Accounting data are historical and therefore backward-looking

Which of the following industries use a subscription model?

Cellphone providers Magazines Internet providers

A company's total return to shareholders consists of which of the following?

Dividends received Stock price appreciation

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

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 statements are true concerning a firm's business model?

It indicates the way the firm works with buyers and suppliers. It details the firm's competitive tactics and initiatives. It essentially explains how the firm intends to make money.

Which of the following are true of a firm's book value?

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

Which of the following statements are true about the rival businesses Apple and Microsoft?

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

To determine a product's producer surplus, which of the following must be compared?

The cost of production The price charged

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 is true about shareholders of a public company?

They can be individuals or organizations.

Which of the following are the key questions for understanding the balanced scorecard? (

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

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

access to a product or service

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

accounting profitability

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

When a firm goes bankrupt, shareholders ______.

cannot recover their risk capital

he financial metric ROIC stands for return on invested

capital

Combining the razor-razor-blade model and the subscription model means that telecom providers make their money through lengthy service plans, which in turn means that it is crucial that they keep their ______ rate, or the proportion of subscribers who leave, down.

churn

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

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

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

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

According to the efficient-market hypothesis, information about which of the following is embedded in a stock price?

expectations of the firm's future performance a firm's past a firm's current state

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

false

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

false

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

Which of the following would be labeled variable costs by a computer manufacturer?

hard drives display screens

Which of the following are elements of the social dimension of the triple bottom line?

human sustainability achieving work/life balance

Fixed costs are ______ consumer demand.

independent of

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

net profits/invested capital

Which of the following are considered off-balance sheet items?

operating leases pension obligations

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

organizational learning competitiveness innovation

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

outperform

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

Another name for producer surplus is

profit

Which of the following performance dimensions matter in judging the effectiveness of a firm's strategy?

qualitative quantitative

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

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

share price number of outstanding shares

Which of the following dimensions make up the triple bottom line?

social economic ecological

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

some of the economic value

Managers implement the blueprint of their business model through which of the following?

structures processes culture

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

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

total perceived consumer benefits

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

total return to shareholders

True or false: The freemium business model can be considered an evolutionary variation on the razor--razor-blade model

true

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

value

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.

Achieving competitive advantage means maximizing the difference between which of the following?

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

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

correlated

The balanced scorecard framework draws from which of the following?

from multiple internal and external performance metrics

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