Chapter 5

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

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

freemium

The legal owners of publicly traded companies are called _____

shareholders

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

True

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

complementary goods

The balanced scorecard framework draws from which of the following?

from multiple internal and external performance metrics

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

operating leases pension obligations

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

outperform

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

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

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.

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

Cellphone providers Magazines Internet providers

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

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.

The money a firm spends to set up a sales website can be considered a ______ cost. Multiple choice question.

Fixed

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

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

Another name for producer surplus is

Profit

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.

To determine a product's producer surplus, which of the following must be compared? (Check the two that apply.)

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.

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

access to a product or service

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

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

comparative analysis of firms

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

display screens hard drives

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 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? (Check all that apply.)

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

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

freemium

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

gaining momentum

Which of the following are standard performance dimensions for a company? (Check all that apply.)

how much shareholder value a firm creates a firm's accounting profitability how much economic value a firm generates

Which of the following are elements of the social dimension of the triple bottom line? (Check all that apply.)

human sustainability achieving work/life balance

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

net profits/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

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

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 assets return on revenue return on equity

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

risk capital

Which of the following are elements of the social dimension of the triple bottom line? (Check all that apply.)

social ecological economic

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

some of the economic value

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

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

value

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

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

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

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

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 of the following are the key questions for understanding the balanced scorecard? (Check all that apply.)

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

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

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

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

accounting profitability

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

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

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

Which of the following are standard performance dimensions for a company? (Check all that apply.)

a firm's accounting profitability how much shareholder value a firm creates how much economic value a firm generates

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