MGT 4300 Chapter 5
What tactic did Amazon use when entering the book selling space and introducing the Kindle?
Amazon used disruption.
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?
What is one potentially negative outcome that firms face when they deliver higher than expected growth?
Investors will expect a similarly high level of growth in the future.
Which of the following is true about a sustainable strategy for a business?
It is a strategy that can be pursued over time without harmful effects on people or the environment.
Achieving competitive advantage means maximizing the difference between which of the following?
-Consumers' willingness to pay -Cost to produce the good or service
Which of the following are among the most commonly used metrics for comparing the performance of different companies?
-return on revenue -return on assets -return on equity
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
The money a firm spends to set up a sales website can be considered a ______ cost.
fixed
A company's stock price increases if the company ______.
grows faster than expected
Fixed costs are ______ consumer demand.
independent of
Since about the year 2000, assets not captured in firms' accounting data have become ______ to a firm's competitive advantage.
much more important
Managers implement the blueprint of their business model through which of the following?
processes structures culture
As a consequence of the rapid development of business models, ______ may breach existing rules of commerce.
producers
Which of the following performance dimensions matter in judging the effectiveness of a firm's strategy?
qualitative quantitative
The subjectively determined maximum amount a customer would pay for a product is its ______ price.
reservation
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
Wholesaling is considered a(n) ______ business model.
traditional
Which of the following makes it more likely that producers will breach existing rules of commerce when responding to rapid developments in business models?
when the business models are disruptive
The balanced scorecard approach helps managers balance ______ goals.
financial and strategic
A balanced scorecard is a tool for strategy ______.
implementation
Opportunity costs refer to the value of what could have been gained had a person pursued ______.
an alternative use of his or her resources
When a person decides to quit his or her job and start a company, the salary that person gave up when quitting can be considered ______.
an opportunity cost
To measure firm-level competitive advantage, a company must ______.
estimate the economic value created for all products and services offered by the firm
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?
subscription razor--razor-blade
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 a trade occurs, the consumer and producer both capture ______.
some of the economic value
In a subscription-based business model, customers pay for ______.
access to a product or service
A firm's actual ______ minus depreciation is called the book value.
costs of assets
Which of the following is true about shareholders of a public company?
They can be individuals or organizations.
Companies are required to provide ______ to shareholders, which are used in determining a firm's competitive advantage.
benchmarks
A firm uses the ______ business model when it sells a set of products that have different levels of demand for a price less than their total combined prices.
bundling
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
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.
Which of the following are standard performance dimensions for a company?
-how much shareholder value a firm creates -how much economic value a firm generates -a firm's accounting profitability
The pay-as-you-go model is ______.
gaining momentum
Another name for producer surplus is _____________
profit
When implementing the razor-razorblade strategy, companies make their profit from ______.
complementary goods
In general, a firm generates ______ when its cost of capital is lower than its ROIC. Multiple choice question.
value
In their annual filing with the Securities and Exchange Commission, public companies in the United States must report which of the following?
-the total return to shareholders -benchmarks
Premium services cost money with complimentary basic services, is a description of which type of business model?
freemium
Which of the following frameworks work to provide a more holistic perspective on firm performance?
-triple bottom line -balanced scorecard
To determine how efficiently a company can produce a good, managers look to the ______.
COGS/revenue ratio
When a firm goes bankrupt, shareholders ______.
cannot recover their risk capital
The financial metric ROIC stands for return on invested
capital
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
From the view of a shareholder, the measure of competitive advantage that matters most is return on _____.
risk capital
Which of the following dimensions make up the triple bottom line?
ecological economic social
Economic value creation is calculated as ______.
the sum of consumer and producer surplus
The balanced scorecard framework enables managers to do which of the following?
-communicate and link the strategic vision -translate the strategic vision into operational goals -implement feedback and organizational learning
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 of the following statements is true about a firm's stock price?
The price determines in part the stock's market valuation.
Public companies are required by law to release detailed accounting data, which enables ______.
comparative analysis of firms
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
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
The most a consumer is willing to pay for a product is equivalent to the product's ______.
total perceived consumer benefits
True or false: The best measure of competitive advantage can be found in the performance of specific departments.
false
True or false: When companies commit to sustainable strategies, they do so purely out of a spirit of charity.
false
Everybody can use the basic version of Dropbox for free, but needs to pay for premium services. Dropbox operates on a ______ business model.
freemium
To understand how effectively a firm uses its capital, one can use the ratio ______.
net profits/invested capital
According to ______ theory, a firm exists within an interconnected network of constituencies, both within and outside the organization, and the firm is responsible to these constituencies.
stakeholder
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.
Under a wholesale model, RETAILERS (not the wholesalers) sell goods for ______.
any price they want
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 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.
When one wants to further explore the difference in return on revenue (ROR) for two competitors, one can look at which of the following ratios?
-R&D expense/revenue -COGS/revenue -SG&A expense/revenue
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.
Which of the following are considered disadvantages of the shareholder value creation approach?
-Stock prices can be highly volatile. -Stock prices are influenced by the psychological mood of investors. -Overall macroeconomic factors have a direct bearing on stock prices.
Which of the following correctly describe the information used for comparing the performance of public companies based on accounting profitability?
-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.
According to the efficient-market hypothesis, information about which of the following is embedded in a stock price?
-a firm's past -expectations of the firm's future performance -a firm's current state
Which of the following are elements of the social dimension of the triple bottom line?
-achieving work/life balance -human sustainability
Which of the following are among the standard dimensions for measuring competitive advantage?
-economic value -shareholder value -accounting profitability
Answering the balanced scorecard question of "how do we create value?" challenges managers to develop strategic objectives that ensure future ______.
-innovation -organizational learning -competitiveness
Which of the following are offered by a balanced scorecard?
-measures of internal processes -common financial metrics -operational measures on customer satisfaction
In order to determine market capitalization, one multiplies which of the following together?
-number of outstanding shares -share price
Which of the following are considered off-balance sheet items?
-pension obligations -operating leases
For a balanced scorecard to be effective, managers must do which of the following?
-translate their strategy into measurable objectives -manage objectives according to the balanced-scorecard approach -formulate an effective strategy for achieving competitive advantage
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?
1,000,000
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 describes how Amazon disrupted the traditional wholesale model for book publishers?
Amazon sold e-books for its e-reader device at a loss to promote sales of the e-reader.
Which of the following industries use a subscription model?
Magazines Internet providers Cellphone providers
When one wants to further explore the difference in return on revenue (ROR) for two competitors, one can look at which of the following ratios?
SG&A, COGS/revenue and R&D expense/revenue
To determine how well money devoted to sales support is being spent, managers look at the marketing intensity ratio, which is also known as ______.
SG&A/revenue
The acronym SG&A stands for sales, general, ____________________ and expenses.
administrative
In order to ensure that a firm is implementing the triple-bottom-line approach successfully, managers must ______.
audit the company's results in fulfilling its social and ecological obligations
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
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
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: When a user values two products equally, they are negatively correlated.
false
The balanced scorecard framework draws from which of the following?
from multiple internal and external performance metrics
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
When the high market valuation of internet-based firms, such as Facebook or Google, is analyzed, the importance of ______ becomes clear.
intangibles
When a firm does favorably compared to similar firms, it is said to ______.
outperform
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
Because external factors create volatility in stock prices, a better measure of a firm's performance over the long term is the ______.
total return to shareholders
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
