cap 2
Efficient Market Hypothesis
The idea that all available information about a firm's past, current state, and expected future performance is embedded in the market price of the firm's stock is
razor-razor blades
The initial product is often sold at a loss or given away to drive demand for complementary goods.
business level strategy
A ________ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.
Market Capitalization
A firm performance metric that captures the total dollar market value of a company's total outstanding shares at any given point in time.
the presentation of an idea as findings derived from basic research.
The typical four-step innovation process begins with
Which of the following statements is true of accounting data?
Accounting data are historical data and thus backward-looking.
cost-leadership
Bargain Styles Inc. is an apparel company that caters to the highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Bargain Styles applying?
Differentiation
Beach Grub is a chain of "fast casual" restaurants that sells its menu items at higher prices than its competitors. Yet, the restaurant has a large customer base due to its wide product portfolio and superior customer service. Which of the following generic business strategies has Beach Grub adopted in this scenario?
shareholders
ndividuals or organizations that own one or more shares of stock in a public company—are the legal owners of public companies.
product innovation
new or recombined knowledge embodied in new products
process innovation
new ways to produce existing products or deliver existing services
10K
public traded firms are required to fill out
focused cost leadership strategy
same as the cost-leadership strategy except with a narrow focus on a niche market
economies of scope
savings that come from producing two or more outputs at less cost than producing each output individually, despite using the same resources and technology.
how a company uses its total invested capital
shareholders' equity through the selling of shares to the public, and (2) interest-bearing debt through borrowing from financial institutions and bondholders.
Securities and Exchange Commission (SEC)
All public companies in the United States are required to report total return to shareholders annually in the statements they file with the
Blue Ocean Strategy
Business-level strategy that successfully combines differentiation and cost-leadership activities using value innovation to reconcile the inherent trade-offs.
strategic trade-offs
Choices between a cost or value position. Such choices are necessary because higher value creation tends to generate higher cost.
largest economic value created.
Competitive advantage goes to the firm that achieves the
early majority
Customers coming into the market in the shakeout stage of the industry life cycle.
incremental innovation
Foot Friendly is a manufacturer of athletic shoes. It has released an improved version of its premier running shoe in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate?
diseconomies of scale
increases in cost per unit when output increases
return on revenue
indicates how much of the firm's sales is converted into profits.
Which of the following scenarios best illustrates bundling?
Fresh Seeds Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually.
False
Innovation and strategic entrepreneurship can only occur within new businesses
Which of the following statements is true of the balanced-scorecard?
It attempts to provide a holistic perspective on firm performance
How does a sustainable strategy typically help a firm?
It helps the firm achieve positive results along the social and ecological dimensions
False
Once a firm chooses a business model, it must stick with it for the life of the firm.
cost of input factors
One of the most basic advantages a firm can have over its rivals is access to lower-cost input factors such as raw materials, capital, labor, and IT services
return on invested capital. = net profits/ invested capital
One of the most commonly used metrics in assessing firm financial performance is
value drives
Product features, customer service, and complements are all examples of important
subscription-based
Shark Fin Golf Club requires its members to pay a quarterly or an annual fee to use its services. Irrespective of whether they frequently use the services during the payment period or not, members have to pay in advance. Which of the following business models does this best illustrate?
Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.
Silver Screen Cinemas Inc. and Digi Now Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Silver Screen Cinemas Inc. pursues a cost-leadership strategy, Digi Now Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario?
narrow the scope of competition and focus on unique features such as the use of organic materials
Thomas is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly-qualified team members, Thomas is unable to shift to a cost leadership strategy. Which strategy is most likely to achieve a competitive advantage?
functional
Strategies developed at the departmental level, such as the accounting, human resources, production, and marketing departments, within a strategic business unit are referred to as ________ strategies.
disruptive innovation
Streaming video services replacing brick-and-mortar video rental stores would be an example of a(n
architectural innovations.
When firms innovate by leveraging existing technologies into new markets, they are said to be involved in
customer experience
Which of the following competitively important assets is typically excluded from a firm's balance sheet?
The first mover will be able to reduce costs through economies of scale.
Which of the following is a competitive benefit experienced by the first mover firm in an industry?
cleaned as well as other cleaners and used environment friendly ingredients.
Which of the following is an example of social entrepreneurship? The committee approved the new formula for an all-purpose cleaner because it
introduction, growth, shakeout, maturity, and decline
Which of the following lists the stages of the industry life cycle in the correct order?
Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base.
Which of the following most accurately describes a difference between incremental innovation and radical innovation?
The weaker firms are forced out of the industry in this stage.
Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage?
standard
an agreed-upon solution about a common set of engineering features and design choices
long tail
business model in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choices
first-mover advantage
competitive benefits that accrue to the successful innovator
crossing-the-chasm framework
conceptual model that shows how each stage of the industry life cycle is dominated by a different customer group
cost driver
cost of input factors, enonomies of scale, learning-curve effects, and experience-curve effects
Accounting Profitability and economic value
creation tend to be reflected in the firm's stock price, which in part determines the stock's market valuation.
dellivers low-cost products and services to a specific, narrow part of the market
if a focused cost-leadership strategy, a firm
differentiation strategy
generic business strategy that seeks to create higher value for customers than the value that competitors create
economies of scale
is best described as decreases in cost per unit as output increases.
Economic value created
is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it
minimum effect scale
output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale
total return to shareholders
return on risk capital that includes stock price appreciation plus dividends received over a specific period
Freemium
provides the basic features of a product or service free of charge, but charges the user for premium services such as advanced features or add-ons.
the 10-K
reports are the primary source of companies' accounting data available to the public.
cost of capital
represents a firm's cost of financing operations from both equity through issuing stock and debt through issuing bonds
Entrepreneur
the agents that introduce change into the competitive system
risk capital
the money provided by shareholders in exchange for an equity share in a company; it cannot be recovered if the firm goes bankrupt
network effects
the positive effect (externality) that one user of a product or service has on the value of that product for other users
value innovation
the simultaneous pursuit of differentiation and low cost in a way that creates a leap in value for both the firm and the consumers; considered a cornerstone of blue ocean strategy
scope of competition
the size - narrow or broad - of the market in which a firm chooses to compete
Total return to shareholders
which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period.
