CBA 469 - Chapter 5 - Competitive Advantage

CBA 469 - JSU - Chapter 5 - Competitive Advantage

a firm's accounting metrics

how much economic value a firm generates

how much shareholder value a firm creates

Which of the following are standard performance dimensions for a company? (More than one answer may be correct.)

Multiple select question.

a firm's accounting metrics

how much economic value a firm generates

how a firm's mission statement relates to its strategic intent

the fixed and variable costs

how much shareholder value a firm creates

comparative analysis of firms

Public companies are required by law to release detailed accounting data, which enables ______.

Multiple choice question.

economic value creation

a balanced scorecard system

comparative analysis of firms

shareholder value creation

profitability ratios

Return on invested capital, return on assets, and return on revenue are examples of the ______ most commonly used in strategic management to conduct direct performance comparisons between different companies.

debts

profitability ratios

overhead costs

competition metrics

pension obligations

operating leases

Which of the following are considered off-balance sheet items? (More than one answer may be correct.)

owned assets

cash

pension obligations

operating leases

It captures the historical cost of a firm's assets.

Its importance has declined over time.

It is calculated as costs of assets minus accumulated depreciation.

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

It captures the historical cost of a firm's assets.

It is based on future valuations of a firm.

Its importance has declined over time.

It is calculated as costs of assets minus accumulated depreciation.

correlated

The firm's accounting metrics, ability to create shareholder value, and ability to generate economic value tend to be ______.

unrealistically bound

correlated

perpendicularly related

unrelated

shareholders

The legal owners of publicly traded companies are called ______.

stock brokers

shareholders

business holders

executives

accounting profitability

When competitive advantage is assessed from an analysis of publicly available data, a firm measures its ______.

accounting profitability

triple bottom line

economic value created

balanced scorecard

risk capital 

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

risk capital

assets

invested capital

revenue

return on invested capital

return on equity

return on assets

return on revenue

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

Multiple select question.

return on invested capital

return on strategic intent

return on equity

return on assets

return on revenue

Accounting data focus primarily on tangible assets.

Accounting data are historical and therefore backward-looking.

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

Multiple select question.

Accounting data are highly volatile and thus difficult to use.

Accounting data focus mostly on intangible assets.

Accounting data focus primarily on tangible assets.

Accounting data are historical and therefore backward-looking.

stock price appreciation

dividends received

A company's total return to shareholders consists of which of the following?

Multiple select question.

capital depreciation

dividends received

stock price appreciation

wages

decreased

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

increased

stayed the same

ceased to matter

own at least one share of the company's stock

In order to be considered a legal owner of a public company, a person or organization must Blank______.

Multiple choice question.

own at least two products manufactured by the company

own a majority of the company's stock

be a member of the company's board of executives

own at least one share of the company's stock

1,000,000

$100,000,000 / $100 =

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?

Multiple choice question.

1,000

10,000,000

1,000,000

50,000,000

cannot recover their risk capital

When a firm goes bankrupt, shareholders ______.

Multiple choice question.

can sue for loses

are entitled to help pay off debtors owed money by the firm

are entitled only to a fraction of their investment

cannot recover their risk capital

the NASDAQ computer index

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

the value of the yen

the S&P 500

the Dow Jones Industrial Average

the NASDAQ computer index

profitability ratios

Return on invested capital, return on assets, and return on revenue are examples of the ______ most commonly used in strategic management to conduct direct performance comparisons between different companies.

Multiple choice question.

overhead costs

competition metrics

profitability ratios

debts

expectations of the firm's future performance

a firm's past

a firm's current state

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

Multiple select question.

expectations of the firm's future performance

a firm's past

a firm's current state

a firm's political views

False

Stock market valuations are often unreliable due to market fluctuations and are therefore not used to assess competitive advantage.

True false question.

True

False

Its importance has declined over time.

It captures the historical cost of a firm's assets.

It is calculated as costs of assets minus accumulated depreciation.

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

Multiple select question.

Its importance has declined over time.

It is based on future valuations of a firm.

It captures the historical cost of a firm's assets.

It is calculated as costs of assets minus accumulated depreciation.

difference between

Economic value created is the ______ the cost to produce a product/service and the amount the buyer is willing to pay for it.

Multiple choice question.

lesser of either

difference between

greater of either

total sum of

number of outstanding shares

share price

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

Multiple select question.

total market value

value of the dollar

number of outstanding shares

share price

total perceived consumer benefits

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

Multiple choice question.

price relative to all costs, including overhead

traceable asset value on the stock exchange

total perceived consumer benefits

economic value created

outperform

When a firm does favorably compared to similar firms, it is said to ______.

set a benchmark

go out of business

outperform

file for bankruptcy

product differentiation

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.

Multiple choice question.

freemium

stock

invested capital

product differentiation

return on equity

return on invested capital

return on assets

return on revenue

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

Multiple select question.

return on equity

return on invested capital

return on assets

return on strategic intent

return on revenue

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 statements about stock market valuations are true?

Multiple select question.

Stock market valuation is the estimated increase in a stock's value during the next fiscal year.

Stock market valuation is equal to the number of outstanding shares multiplied by the share price.

Investors generally take a poor view of stock market valuation because it includes all shares in its calculation.

Viewed over the long term, stock market valuation is a useful metric for assessing competitive advantage.

price charged

total cost of production

To determine a product's producer surplus, which of the following must be compared?

Multiple select question.

price charged

sunk costs

the overhead costs

total cost of production

economic value created

The difference between the cost of producing a product and the price consumers are willing to pay for that product is known as _____.

overhead derivative pricing

economic value created

a profit margin

stock price appreciation

reservation 

The subjectively determined maximum amount a customer would pay for a product is its ______ price.

unfair

exploitative

overwhelming

reservation

some of the economic value

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

Multiple choice question.

some cost reduction surplus

some of the economic value

various strategic intent factors

opportunity credit

Firm B:

The reservation price is the absolute maximum one would be willing to pay for the laptop. In this case, people are willing to pay a higher maximum price for Firm B's laptop while it doesn't cost Firm B more to produce it. Hence, Firm B is able to create more economic value and therefore has the competitive advantage.

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?

Multiple choice question.

no one

the consumer

Firm B

Firm A

consumers' willingness to pay

the cost to produce the good or service

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

the number of rival firms

advertising costs

consumers' willingness to pay

the cost to produce the good or service

profitability ratios

Return on invested capital, return on assets, and return on revenue are examples of the ______ most commonly used in strategic management to conduct direct performance comparisons between different companies.

competition metrics

profitability ratios

debts

overhead costs

hard drives

display screens

Which of the following would be labeled variable costs by a computer manufacturer? More than one answer may be correct.

Multiple select question.

hard drives

display screens

manufacturing facilities

the administrative assistant

profit

Another name for producer surplus is _______. 

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.

Which statements about the disadvantages of the value creation perspective are true?

Multiple select question.

The meaning of value creation differs between services and products.

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.

difference between 

Economic value created is the _______ the cost to produce a product/service and the amount the buyer is willing to pay for it.

Multiple choice question.

greater of either

difference between

total sum of

lesser of either

financial and strategic

The balanced scorecard approach helps managers balance ______ goals.

advantaged and disadvantaged

financial and strategic

fixed and variable

opportunity and transitional

the sum of consumer and producer surplus

Economic value creation is calculated as ______.

the sum of opportunity costs

the sum of consumer and producer surplus

the sum of economic contextual factors

consumer surplus minus the firm's profit

gain market share

For a product that has a large economic value, a firm can choose to charge the same price as competitors in order to ______.

maximize profit

cover opportunity costs

gain market share

increase return on invested capital

How do we create value?

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?

How do customers view us?

How do shareholders view us?

What core competencies do we need?

independent of

Fixed costs are ______ consumer demand.

reduced by

directly proportional to

independent of

inversely proportional to

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

To measure firm-level competitive advantage, a company must ______.

offer hundreds of products within individual strategic business units

diversify conglomerate offerings and assessment

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

differentiate products in more diversified markets

social

ecological

economic

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

international

social

ecological

economic

from multiple internal and external performance metrics

The balanced scorecard framework draws from which of the following?

from multiple internal and external performance metrics

from the same metrics applied to internal resources and the external environment

from external metrics only

from internal metrics only

False

Recall that criteria reflecting overall business unit performance provide the best measure of competitive advantage.

True or False:
The best measure of competitive advantage can be found in the performance of specific departments.

How do we create value?

What core competencies do we need?

How do shareholders view us?

How do customers view us?

Which of the following are the key questions for understanding the balanced scorecard?

Multiple select question.

How do we create value?

What core competencies do we need?

How do shareholders view us?

How do customers view us?

What are the optimal prices of our products and services?

hard drives

display screens

Which of the following would be labeled variable costs by a computer manufacturer? More than one answer may be correct.

Multiple select question.

hard drives

the administrative assistant

manufacturing facilities

display screens

profits, people, planet

The three P’s to the triple bottom line are:

quantitative

qualitative

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

Multiple select question.

quantitative

natural

international

qualitative

consumer surplus

When Frank sells a pie to Jean instead of Sarah, the economic value created in society is lower because of the difference in

Multiple Choice

consumer surplus.

purchase price.

reservation price.

production costs.

producer surplus.

producer surplus and consumer surplus

Frank the baker has been growing the number of pies he has been selling so much that he is now able to negotiate more favorable terms from his suppliers. This change is likely to impact

Multiple Choice

production costs and producer surplus

consumer surplus and economic value

production costs and consumer surplus

producer surplus and consumer surplus

reservation price and production costs

reservation price

Frank the baker has imported some specialty baking flour from Italy that is especially prized by Sarah. Frank’s use of this flour, in his transaction with Sarah, should impact the

Multiple Choice

producer surplus.

production costs.

purchase price.

consumer surplus.

reservation price.

expands the pie to increase total value created.

Stakeholder capitalism could actually create more value for shareholders than shareholder capitalism because stakeholder capitalism

Multiple Choice

reduces the CEO’s decision-making power.

uses all stakeholders to serve the shareholder.

expands the pie to increase total value created.

ensures that shareholders retain all the value created.

focusing on non-consumers.

Creating different, often less-expensive, versions of their products is one way that firms can create shared value by

Multiple Choice

partnering with NGOs.

creating regional clusters.

focusing on non-consumers.

expanding the value chain.

sharing people and ideas across businesses in a specific geographic area.

Creating regional clusters develops shared value creation by:

sharing people and ideas across businesses in a specific geographic area.

bringing new consumers into the potential pool of customers.

increasing the taxes paid by businesses in a locality.

offering more value to other businesses in different industries within the same region.

expanding the value chain 

Non-governmental organizations (NGOs) typically help create shared value through:

creating regional clusters.

expanding the value chain.

reducing tax burdens.

focusing on non-consumers.

$2

Reference the following costs as you complete the exercise that follows:

cost to produce a pizza - $7

price charged to customer for the pizza - $10

maximum price the consumer would be willing to pay for the pizza - $12

How much is the consumer surplus?

$3

Reference the following costs as you complete the exercise that follows:

cost to produce a pizza - $7

price charged to customer for the pizza - $10

maximum price the consumer would be willing to pay for the pizza - $12

How much is the producer surplus or profit?

$5

Reference the following costs as you complete the exercise that follows:

cost to produce a pizza - $7

price charged to customer for the pizza - $10

maximum price the consumer would be willing to pay for the pizza - $12

How much is the economic value created?

$7

Reference the following costs as you complete the exercise that follows:

cost to produce a pizza - $7

price charged to customer for the pizza - $10

maximum price the consumer would be willing to pay for the pizza - $12

How much is the cost to produce the product or service?

$12

Reference the following costs as you complete the exercise that follows:

cost to produce a pizza - $7

price charged to customer for the pizza - $10

maximum price the consumer would be willing to pay for the pizza - $12

What is the amount of the reservation price?

Value

________ denotes the dollar amount a consumer would attach to a good or service (that is, willingness to pay).

Price

Value

Profit

Cost

Economic value created

Fixed; variable

Total costs include fixed and variable costs. ________ costs are independent of consumer demand, whereas ________ costs change with the level of consumer demand.

Solid; variable

Fixed; stable

Variable; fixed

Fixed; variable

Varying; stable

Opportunity; best

________ costs capture the value of the ________ alternative use of the resources employed.

Threat; worst

Opportunity; average

Opportunity; best

Threat; best

Opportunity; worst