Ch 4-6 BUSN 450

List the dimensions of which a firm can create greater economic value.

A firm's advantage can be based on superior product differentiation leading to higher perceived value. Competitive advantage can also result from a relative cost advantage over rivals, assuming all firms can create the same total perceived consumer benefits. Hence, the source of the competitive advantage is a relative cost advantage over rivals

Which of the following statements is true of accounting data? A. Accounting data are historical data and thus backward-looking. B. Accounting data consider off-balance sheet items, such as pension obligations of a firm. C. Accounting data do not have to be adjusted in any manner to compare companies with different capital structures. D. Accounting data focus mainly on intangible assets, rather than tangible assets.

Accounting data are historical data and thus backward-looking

What are they key questions managers must answer to formulate an appropriate business-level strategy?

Business-level strategy details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. It may involve a single product or a group of similar products that use the same distribution channel. It concerns the broad question, "How should we compete?" To formulate an appropriate business-level strategy, managers must answer the "who-what-why-and-how" questions of competition: Who—which customer segments—will we serve? What customer needs, wishes, and desires will we satisfy? Why do we want to satisfy them? How will we satisfy our customers' needs?

How does availability of complements act as a value drier? A) Complements add value to a product by offering an inferior substitute to it. B) Complements add value to a product by competing with it. C) Complements add value to a product when they imitate it. D) Complements add value to a product when they are consumed in tandem with it.

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

What are the three financial ratios that constitute return on revenue, and what do they tell us?

Cost of goods sold/Revenue provides information on how efficiently a company can produce a good. R&D/Revenue, indicates how much of each dollar that the firm earns in sales is invested to conduct research and development. A higher percentage is generally an indicator of a stronger focus on innovation to improve current products and services, and to come up with new ones. SG&A/Revenue, indicates how much of each dollar that the firm earns in sales is invested in sales, general, and administrative (SG&A) expenses. Generally, this ratio is an indicator of the firm's focus on marketing and sales to promote its products and services.

_______ is best described as decreases in cost per unit as output increases. A. Economies of scale B. Economies of scope C. Time compression economies D. Economies of replication

Economies of scale

What does it mean for a firm to have an 80 percent learning curve? A) Every time the cumulative output increases by 80 percent, the cost per unit will decline by 20 percent. B) Every time the cumulative output is doubled, the cost per unit will decline by 80 percent. C) Every time the cumulative output goes up by 20 percent, the cost per unit will decline by 80 percent. D) Every time the cumulative output is doubled, the cost per unit will decline by 20 percent.

Every time the cumulative output is doubled, the cost per unit will decline by 20 percent

Which of the following scenarios exemplifies a sustainable strategy under the triple bottom line approach? Rather than complying with the restrictive recycling laws in the United States, Impervious Plastics outsourced its manufacturing to a country that has fewer environmental restrictions. Impervious Plastics developed a chemical additive that doubled the life of its plastics. The additive was currently legal, but environmental groups argued that it harmed the environment. Impervious Plastics reformulated its products to eliminate chemicals that were widely used in the industry but were being investigated for their potential negative effects on the environment. Impervious Plastics' nearest competitor increased the salaries of its production workers by 30 percent, but Impervious kept its wages the same to gain a cost advantage over its competitor.

Impervious Plastics reformulated its products to eliminate chemicals that were widely used in the industry but were being investigated for their potential negative effects on the environment.

Which of the following is an advantage of the balanced-scorecard? A. It allows managers to translate a firm's vision into measureable operational goals. B. Its implementation is a one-time effort and does not require continuous tracking of metrics or updating of strategic objectives. C. The balanced-scorecard is independent of the skills of the managers responsible for its implementation. D. It is a tool for both strategic formulation and strategic implementation.

It allows managers to translate a firm's vision into measureable operational goals

Which of the following expressions accurately describes market cap? A. It is the product of the number of outstanding shares and the share price. B. It is the difference between the book value and the market value of a firm's assets. C. It is the ratio of a firm's equity finance and its debt finance. D. It is the difference between a firm's account receivables and account payables.

It is the product of the number of oustanding shares and the share price

How does casual ambiguity act as an isolating mechanism for organizations? A. It creates a situation in which different social and business systems interact with one another. B. It makes it difficult for the competitors to understand why a company has been so successful. C. It makes it difficult for competitors to imitate core competencies quickly due to time compression diseconomies. D. It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures.

It makes it difficult for the competitors to understand why a company has been so successful

What must a cost-leadership strategy accomplish to be successful? A. It must increase the firm's cost above that of its competitors while offering adequate value. B. It must reduce the firm's cost below that of its competitors while offering adequate value. C. It must increase the firm's cost above that of its competitors while offering superior value. D. It must reduce the firm's cost below that of its competitors while offering superior value.

It must reduce the firm's cost below that of its competitors while offering adequate value

Which of the following is an accurate statement about learning effects? a. Learning effects are captured at one point in time. b. Learning effects occur over time as output accumulates c. Learning effects are significant in all production processes. d. Learning effects can produce diseconomies

Learning effects occur over time as output accumulates

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization? A. Only the book value of the share prices is taken into account when applying these measures, and not the market value. B. These tools fail to indicate how the stock market views all available public information about a firm's expected future performance. C. Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term D. These tools measure competitive advantage in absolute terms rather than relative terms.

Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term

After conducting a SWOT analysis, your firm has decided to focus on addressing issues located in the Weaknesses-Opportunities quadrant. Which of the following steps are you most likely to take A. Deploy top sales personnel to prevent buyers from migrating towards lower-priced competition. B. Shut down struggling retail outlets in an economically depressed region. C. Devote more resources to an extremely popular advertising campaign to promote an exciting new product. D. Reorganize the inefficient research and development department to bring innovative products to market more quickly.

Reorganize the inefficient research and development department to bring innovative products to market more quickly

Which of the following statements accurately describes a firm's resource stock? A.Resource stocks are a firm's level of resources that are common to competitors. B.Resource stocks are a firm's future estimate of both tangible and intangible resources. C.Resource stocks are a firm's current level of intangible resources. D.Resource stocks are a firm's level of investments to maintain or build a resource.

Resource stocks are a firm's current level of intangible resources

Which of the following statements accurately brings out the difference between tangible and intangible resources? a) Tangible resources contribute to a company's competitive advantage, whereas intangible resources fail to do the same. b) Tangible assets are difficult to imitate, whereas intangible assets can be easily replicated. c) Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. d) Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased.

Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased

Which of the following is an advantage of a triple-bottom-line approach? a. The approach takes an integrative and holistic view in assessing a company's performance. b. The approach is more of a quantitative performance metric rather than a mere conceptual framework. c. The approach does not rely on an external view of a firm to assess its performance. d. The framework can help managers assess a firm's competitive advantage without taking into account the firm's performance along noneconomic dimensions.

The approach takes an integrative and holistic view in assessing a company's performance

Which of the following applies to the Strength-Threats quadrant of the SWOT matrix? A) The local fast-food chain Easy Hot Dogs expanded its limited menu to maintain its advantageagainst stiff competition. B) The local fast-food chain Easy Hot Dogs added a salad bar to maintain its competitiveadvantage against stiff competition. C) The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitiveadvantage against stiff competition. D) The local fast-food chain Easy Hot Dogs revised its image of being a cheap-food place to being awholesome family place to maintain its competitive advantage against stiff competition.

The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition

Elaborate on the resource-based view of competitive advantage.

The resource-based view of a firm provides a model that systematically aids in identifying core competencies. It is a model that sees certain types of resources as key to superior firm performance. If a resource exhibits VRIO attributes, the resource enables the firm to gain and sustain a competitive advantage. It is important to note that the resource-based view of the firm uses the term resource much more broadly than previously defined. In the resource-based view of the firm, a resource includes any assets as well as any capabilities and competencies that a firm can draw upon when formulating and implementing strategy.

What are the two different generic business strategies available to firms?

There are two fundamentally different generic business strategies--differentiation and cost leadership. A differentiation strategy seeks to create higher value for customers than the value that competitors create, by delivering products or services with unique features while keeping the firm's cost structure at the same or similar levels A cost-leadership strategy, in contrast, seeks to create the same or similar value for customers by delivering products or services at a lower cost than competitors enabling the firm to offer lower prices to its customers.

Which of the following examples uses a focused differentiation strategy? a. a tennis pro shop that sells low-quality racquets priced at 150 dollars per racquet b. a coffee shop that offers mediocre lattes at a price of five dollars for a small latte c. a hotel chain that offers high-quality furnishings and service with room rates of under 75 dollars per night d. a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

a cosmetics brand that offers superior skin lotion for sensitive skin priced at 100 dollars per bottle

The tenet behind the triple-bottom-line is that a. a firm's return on revenue can be broken down into three ratios; COGS / Revenue, R&D / Revenue, and SG&A / Revenue. b. a firm should solely focus on increasing the economic value created for its customers. c. a firm's primary objective should be increasing the total returns to its shareholders. d. a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.

a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.

When wireless service providers offer free or discounted mobile phones for subscriptions to their wireless voice and data service, the perceived value of the service offering increases. In this case, the value driver would be A)economies of scale. B)learning-curve effects. C)experience-curve effects. D)availability of complements.

availability of complements

A __________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. Corporate strategy Synergy strategy Functional strategy Business strategy

business-level strategy

Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as A. Tangible Resources B. Reserves C. Capital Gains D. Capabilities

capabilities

Assume a firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by a. path dependence b. dependence complexity c. casual ambiguity d. social complexity

causal ambiguity

Economic value creation is best expressed as A) producer surplus minus consumer surplus B) consumer surplus plus firm profit C) producer surplus plus firm profit D) consumer surplus minus cost of production

consumer surplus plus firm profit

A resource-based view of a firm provides a model that systematically aids in identifying related competencies. core competencies. competitive disadvantage. competitive parity.

core competencies

Which of the following competitively important assets is typically excluded from a firm's balance sheet? A) land and building B) accounts payable C) patents D) customer experience

customer experience

in a focused cost-leadership strategy, a firm a. caters to the segment of the market that is least cost sensitive. b. provides high-priced products for many different segments of the mass market. c. delivers low-cost products and services to a specific, narrow part of the market. d. focuses on reducing the economic value created to drive down costs.

delivers low-cost products and services to a specific, narrow part of the market.

A differentiator is least likely to be threatened by increases in input prices due to powerful suppliers when the A. differentiator is able to create a significant difference between perceived value and current market prices. B. new product features added raise costs but not the perceived value in the minds of consumers. C. differentiator is able to significantly reduce the value gap. D. source of a competitor's differential appeal is tangible rather than intangible,

differentiator is able to create a significant difference between perceived value and current market prices

As manager of a relatively new company, you are tasked with analyzing company resources to identify core competencies capable of supporting a competitive advantage. Which of the following resources is most likely to generate a competitive advantage? A. enthusiastic company culture B. stockpile of supplies C. new production facilities D. large cash holdings

enthusiastic company culture

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the A.rival firms have better accessibility to quality resources. B. firm will have a sustained competitive advantage because of its unique resources. C. competitors can easily replicate or copy the firm's resource bundles and capabilities. D. resources of the firm cannot be effectively deployed within its own organization.

firm will have a sustained competitive advantage because of its unique resources that are difficult for others to replicate that are difficult for others to replicate.

A firm will fail to create a sustained competitive advantage when the 1) source of its competitive advantage is causally ambiguous. 2) source of its competitive advantage is socially complex. 3) fit between its internal strengths and the external environment is static. 4) resource bundles exhibit heterogeneity and immobility.

fit between its internal strengths and the external environment is static

When a differentiator charges a similar price as its competitors in the same strategic group but offers more perceived value, it A) gains market share from other firms. B) results in diseconomies of scale. C) loses its competitive advantage. D) lowers the economic value created.

gains market share from other firms

Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will only be successful today if its: A) resource advantage is maintained for a short period of time. B) internal strengths change with its external environment in a dynamic fashion. C) resource advantage is not causally ambiguous or socially complex. D) competitive advantage is derived from static resource or market advantages.

internal strengths change with its external environment in a dynamic fashion.

According to the value chain analysis, which of the following is a primary activity? R&D marketing & sales accounting & finance human resources

marketing and sales

The ratio of SG&A/Revenue is an indicator of a firm's focus on A) researching to produce innovative products and services. B) marketing and sales to promote its products and services. C) producing a good in an efficient manner. D) creating a good that is cost-effective

marketing and sales to promote its products and services

Combining economies of learning with the existing production technology allows a firm to A. move up a given experience curve. B. move down a given learning curve. C. jump to a less steeper learning curve. D. jump to a flatter experience curve.

move down a given learning curve

The competitive advantage that one firm has will be short-lived in an industry in which A.resource immobility is high. B.perfect competition exists. C.resource heterogeneity is high. D.capabilities of a firm are not easily replicable.

perfect competition exists

The ratio cost of good sold/revenue indicates how efficiently a company can A. produce a good. B. sell a good. C. advertise a good. D. design a good.

produce a good

The difference between the price charged for a product and the cost to manufacture it is referred to as the A. consumer surplus. B. break-even price. C. producer surplus. D. reservation price.

producer surplus

A firm experiences diseconomies of scale when it A. has a constant returns to scale. B. moves down the experience curve. C. produces at an output level beyond the minimum efficient scale. D. has a steep learning curve when compared to its competitors.

produces at an output level beyond the minimum efficient scale.

_______ precisely indicates how much of a firm's sales is converted into profits A. Break-even price B. Working capital turnover C. Return on revenue D. Inventory turnover

return on revenue

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in a. collective bargaining B. strategic trade-offs C. arbitration D. mediation

strategic trade-offs

Which of the following best describes a strategic trade-off? A) the tension between innovation and keeping manufacturing costs down B) the tension between maintaining both high-quality products and service C) the tension between value creation and the pressure to keep costs in check D) the tension between raising prices and keeping a loyal clientele

the tension between value creation and the pressure to keep costs in check

Which of the following is an external performance metric? A. return on revenue B. fixed assets turnover C. inventory turnover D. total return to shareholders

total return to shareholders

During the process of formulating an effective business model, a firm's manager should first a) implement their strategy at corporate, strategic business unit, and functional levels. b) evaluate the firm's strategy already in effect and take corrective actions if necessary. c) transform their strategy of how to compete into a blueprint of actions and initiatives. d) implement their blueprint of actions and initiatives through structures, processes, culture, and procedures.

transform their strategy of how to compete into a blueprint of actions and initiatives