Chapter 5: Competitive Advantage, Firm Performance, and Business Models

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

-qualitative -quantitative

Investors in a company are mostly concerned about the company's ______. -opportunity cost -planned emergence -total return to shareholders -return on invested assets

-total return to shareholders

Which of the following statements is best illustrated by the decades-long business rivalry between the technology giants Apple and Microsoft? -A company that shrinks to less than 10% market share cannot grow again significantly. -Once a company becomes highly dominant in its industry, it cannot be displaced. -Technological change has little influence on a firm's competitive advantage. -A firm's competitive advantage is transitory.

-A firm's competitive advantage is transitory.

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. -Apple's primary business for several decades was to sell computers to corporations. -Microsoft almost went bankrupt in late 1990s. -Microsoft leveraged its computer operating system to sell other software programs.

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

Another name for producer surplus is __________(a). (Remember to enter only one word in the blank.)

(a) profit

Achieving competitive advantage means maximizing the difference between which of the following? (Check the two that apply.) -Advertising costs -Consumers' willingness to pay -The number of rival firms -Cost to produce the good or service

-Consumers' willingness to pay -Cost to produce the good or service

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

-False

To determine a product's producer surplus, which of the following must be compared? (Check all that apply.) -Sunk costs -Price charged -The overhead costs -Total cost of production

-Price charged -Total cost of production

A company's total return to shareholders consists of which of the following? (Check all that apply.) -Wages -Stock price appreciation -Capital depreciation -Dividends received

-Stock price appreciation -Dividends received

Which of the following is true about shareholders of a public company? -They can be individuals or organizations. -They must be individuals who are employed by the company. -Those qualified as owners must own at least 100 shares. -They are eligible to be elected as owners of the company.

-They can be individuals or organizations.

Which statements about creating and implementing an effective business model are true? -Firms must use a blueprint to come up with strategies for how the firms will compete in the market. -Firms that wish to be truly innovative and original must avoid using a blueprint, which might be limiting. -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.

-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.

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 -cover opportunity costs -maximize profit -increase return on invested capital

-gain market share

Which of the following are standard performance dimensions for a company? (Check all that apply.) -how much economic value a firm generates -how much shareholder value a firm creates -the fixed and variable costs -a firm's accounting profitability -how a firm's mission statement relates to its strategic intent

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

Which of the following are elements of the social dimension of the triple bottom line? -human sustainability -improving recycling efforts -reducing overhead costs -achieving work/life balance

-human sustainability -achieving work/life balance

When competitive advantage is assessed from an analysis of publicly available data, a firm measures its _____. -economic value created -accounting profitability -triple bottom line -balanced scorecard

-accounting profitability

Fixed costs are ______ consumer demand. -inversely proportional to -independent of -reduced by -directly proportional to

-independent of

Which of the following statements are true concerning a firm's business model? (Check all that apply.) -It details the firm's competitive tactics and initiatives. -It indicates the way the firm works with buyers and suppliers. -It essentially explains how the firm intends to make money. -It reports the firm's latest accounting profitability.

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

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

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

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 ______. -consumer cost sharing -overhead maximization modeling -revenue depreciation -business model innovation

-business model innovation

When a firm goes bankrupt, shareholders ___. -can sue for loses -are entitled to help pay off debtors owed money by the firm -cannot recover their risk capital -are entitled only to a fraction of their investment

-cannot recover their risk capital

The money a firm spends to set up a sales website can be considered a ______ cost. -variable -fixed -sunk -marginal

-fixed

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. -agency -freemium -scorecard -churn

-churn

When implementing the razor-razor-blade strategy, companies make their profit from: -subscription fees. -initial products. -complementary goods. -razors.

-complementary goods.

The firm's accounting profitability, ability to create shareholder value, and ability to generate economic value tend to be ______. -correlated -unrelated -unrealistically bound -perpendicularly related

-correlated

Managers implement the blueprint of their business model through which of the following? (Check all that apply.) -culture -structures -processes -voice memos

-culture -structures -processes

Economic value created is the ______ the cost to produce a product/service and the amount the buyer is willing to pay for it. -total sum of -lesser of either -difference between -greater of either

-difference between

Which of the following dimensions make up the triple bottom line? (Check all that apply.) -ecological -economic -international -social

-ecological -economic -social

The difference between the cost of producing a product and the price consumers are willing to pay for that product is known as ______. -stock price appreciation -overhead derivative pricing -economic value created -a profit margin

-economic value created

The balanced scorecard framework draws from which of the following? -from internal metrics only -from external metrics only -from multiple internal and external performance metrics -from the same metrics applied to internal resources and the external environment

-from multiple internal and external performance metrics

From the view of a shareholder, the measure of competitive advantage that matters most is return on _____. -revenue -risk capital -invested capital -assets

-risk capital

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 -shareholder analysis -strategic emergence -the accounting metric framework

-the balanced scorecard

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. -wholesale -pay-as-you-go -razor—razor-blade -motivator-motivation

-razor—razor-blade

The legal owners of publicly traded companies are called ______. -stock brokers -shareholders -business holders -executives

-shareholders

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 -pay-as-you-go -freemium

-subscription -razor--razor-blade