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

In their annual filing with the Securities and Exchange Commission, public companies in the United States must report which of the following?

Benchmarks and the total return to shareholders

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

When a firm goes bankrupt, shareholders (?)

Cannot recover their risk capital

The financial metric ROIC stands for return on invested (?).

Capital

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 expense/revenue, R&D expense/revenue, and COGS/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

Which of the following are among the standard dimensions for measuring competitive advantage?

Shareholder and economic value, and accounting profitability.

Managers implement the blueprint of their business model through which of the following?

Structures, processes, and culture.

Which of the following would provide the best benchmark of a computer firm's performance relative to other high-tech firms?

The NASDAQ index

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

Which of the following are among the most commonly used metrics for comparing the performance of different companies?

Return in equity, assets, and revenue.

Which of the following dimensions make up the triple bottom line?

Economic, ecological, and social.

When a user values two products equally, they are negatively correlated.

False

The acronym BHAG stands for (?)

Big Hairy Audacious Goals

Economic value creation is calculated as (?)

The sum of consumer and producer surplus.

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

According to the efficient-market hypothesis, information about which of the following is embedded in a stock price?

A firm's past, current state, and expectations of future performance.

Which of the following statements about the disadvantages of the accounting profitability perspective are correct?

According data are historical and therefore backward looking. It is also primarily focused on tangible assets.

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, and implement feedback and organizational learning.

When implementing the razor-razorblade strategy, companies make their profit from (?)

Complementary goods

The firm's accounting profitability, ability to create shareholder value, and ability to generate economic value tend to be (?).

Correlated

Achieving competitive advantage means maximizing the difference between which of the following?

Cost to produce the good or service and consumers willingness to pay

A firm's actual (?) minus deprivation is called the book value.

Costs of assets

The money a firm spends to set up a sales website can be considered a (?) cost.

Fixed

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

Wholesaling is considered a (?) business model.

Traditional

To measure firm-level competitive advantage, a company must (?).

estimate the economic value created for all products and services offered by the firm

Fixed costs are (?) consumer demand

Independent of

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 placed on a good can vary according to how the consumer feels at a particular moment.

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

Which of the following statements are true about the rival businesses Apple and Microsoft?

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

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.

Which of the following are offered by a balanced scorecard?

Common financial metrics, measures of internal processes, and operational measures on customer satisfaction.

Premium services cost money with complimentary basic services, is a description of which type of business model?

Freemium

The balanced scorecard framework draws from which of the following?

From multiple internal and external performance metrics.

The pay as you go model is (?)

Gaining momentum

A company's stock price increases if the company

Grows faster than expected

Which of the following are standard performance dimensions for a company?

How much shareholder and economic value a firm creates? What is the firms accounting profitability?

A balanced scorecard is a tool for strategy (?)

Implementation

Answered the balanced scorecard question of "how we create value" challenges managers to develop strategic objectives that ensure future (?).

Innovation, competitiveness, and organizational learning.

Which of the following correctly describe the information used for comparing the performance of public companies based on accounting profitability?

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

Which of the following is true about shareholders of a public company?

They can be individuals or organizations.

In order to determine market capitalization, one multiples which of the following together?

Number of outstanding shares x share price

If a firm has a successful (?) strategy, it's 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

Another name for producer surplus is (?).

Profit

In a subscription based model, customers pay for (?)

Access to a product or service

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

When the high marketing valuation of internet-based firms, such as Facebook or Google, is analyzed, the importance of (?) becomes clear.

Intangibles

Which of the following are true of a firm's book value?

It captures the historical cost of a firm's asset, its importance has declined over time, and it is calculated as costs of assets minus accumulated deprivation.

Which of the following statements are true concerning a firm's business model?

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

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

Translate their strategy into measurable objectives, formulate an effective strategy for achieving competitive advantage, and manage objectives according to the balanced-scorecard approach.

Which of the following performance dimensions matter in judging the effectiveness of a firm's strategy?

Qualitative and quantitative