CH 5 - Competitive Advantage, Firm Performance, and Business Models

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To determine how effectively a company can produce a good, managers look to the ______________.

COGS/revenue ratio

When a firm goes bankrupt, shareholders ________________.

Cannot recover their risk capital

Market Capitalization

Captures the total dollar market value of a company's total outstanding shares at any given point in time. (Market cap = Number of outstanding shares x Share price)

Opportunity costs

Refer to the value of what could have been gained had a person pursued an alternative use of his or her resources

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

Risk capital

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

Risk capital

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

- Achieving work/life balance - Human sustainability

Which of the following framework provide a relatively holistic perspective on firm performance?

- Balanced scorecard - Triple bottom line

Which of the following frameworks provide a relatively holistic perspective on firm performance?

- Balanced scorecard - Triple bottom line

Answering the Balance Scorecard question of "how we create value?" challenges managers to develop strategic objectives that ensure future _________________.

- Innovation - Competitiveness - Organizational learning

Which is fundamental to a sustainable strategy?

1. Profits - economic dimension captures the necessity of businesses to be profitable to survive 2. People - social dimension emphasizes the people aspect, such as PepsiCo's initiative of the whole person at work. 3. Planet - ecological dimension emphasizes the relationship between business and natural environment.

Reservation price

Absolute maximum one would be willing to pay

In order to ensure that a firm is implementing the triple-bottom-line approach successfully manager must ___________________.

Audit the company's results in fulfilling its social and ecological obligations.

Benchmarks are useful in determining a firm's ______________.

Competitive advantage

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

A firm's actual ________________ of assets minus depreciation is called the book value.

Costs

Which encapsulates the relationship of accounting data to tangible and intangible assets. Not everything can be counted counts. Not everything that _____________ can be ______________.

Counts; Counted

Compared to the past, the importance of a 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

A firm pursuing a successful __________________ strategy will have a competitive advantage over a competitor that creates a product at equal cost but with a lower reservation price.

Differentiation

The money a firm spends to set up a sales website can be considered a ____________ cost.

Fixed

Balanced Scorecard

Framework to help managers achieve their strategic objectives more effectively. This approach harnesses multiple internal and external performance metrics in order to balance both financial and strategic goals.

A company's stock price increases if the company ________________.

Grows faster than expected

A balanced scorecard is a tool for strategy _______________.

Implementation

When the high market valuation of internet-based firms, such as Facebook or Google, is analyzed, the importance of _______________ becomes clear.

Intangibles

A balanced scorecard offers both common financial metrics and a variety of ________________ on customer satisfaction, internal processes, and the company's innovation and improvement activities.

Operational measures

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.

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

Which of the following statements about the disadvantages of the value creation perspective is not correct?

The meaning of value creation differs between services and products.

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

Total perceived consumer benefits

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

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

Value

For a balanced scorecard to be effective, managers must do which of the following?

- Manage objectives according to the balanced-scorecard approach - Formulate an effective strategy for achieving competitive advantage - Translate their strategy into measurable objectives

Which of the following correctly describes 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

The balanced scorecard framework enables managers to do which of the following?

- Communicate and link the strategic vision - Implement feedback and organizational learning - Design and plan business processes - Translate the strategic vision into operational goals

Public companies are required by law to release detailed accounting data in order to enable _______________.

- Comparative analysis of firms

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 standard dimensions for measuring competitive advantage?

- Economic value - Shareholder value - Accounting profitability

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

Some of the economic value


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