Competitive Advantage, Firm Performance, And Business Models

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Questions Bank

What Is Strategy
Strategic Leadership: Managing the Strategy Process
External Analysis: Industry Structure, Competitive Forces, and Strategic Groups
Internal Analysis: Resources, Capabilities, and Core Competencies
Competitive Advantage, Firm Performance, and Business Models
Business Strategy: Differentiation, Cost Leadership, and Blue Oceans
Business Strategy: Innovation, Entrepreneurship, and Platforms
Corporate Strategy: Vertical Integration and Diversification
Corporate Strategy: Strategic Alliances, Mergers, and Acquisitions
Global Strategy: Competing Around the World
Organizational Design: Structure, Culture, and Control
Corporate Governance and Business Ethics

All Questions

Question 21

Multiple Choice

Elena is the CEO of Geode Technologies, a consumer electronics manufacturer. Last year, Geode's return on invested capital (ROIC) was 11.6 percent, while Geode's closest competitor, NorthWest Tech, had an ROIC of 17 percent. Which of the following factors might Elena use to convince investors to invest in Geode rather than NorthWest Tech?

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Geode had a Research & development (R&D) expense / Revenue ratio of 16 percent, while NorthWest Tech had an R&D / Revenue ratio of 12 percent.

Geode's working capital to revenue ratio was 75 percent, while NorthWest Tech's was 68 percent.

Geode's intangible intensity was 6 percent, while NorthWest Tech's was 3 percent.

Geode's plant, property, and equipment (PPE) over revenue ratio was 19 percent, while NorthWest Tech's was 10 percent.

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Question 22

Multiple Choice

________ are the legal owners of public companies.

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Employees

Shareholders

Category captains

Creditors

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Question 23

Multiple Choice

Which of the following is an external performance metric?

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return on revenue

fixed assets turnover

inventory turnover

total return to shareholders

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Question 24

Multiple Choice

From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the

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return on risk capital.

economic value created.

consumer surplus.

inventory turnover.

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Question 25

Multiple Choice

Return on risk capital primarily includes

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stock price appreciation plus dividends received over a specific period.

consumer surplus plus firm profit.

account receivables plus account payables.

economic value created by a firm plus reservation price.

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Question 26

Multiple Choice

________ , which is the return on risk capital, includes stock price appreciation plus dividends received over a specific period.

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Total return to shareholders

Earnings per share

Receivables turnover

Dividend yield

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Question 27

Multiple Choice

A firm has 30 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2,000 annually. In this case, the market capitalization is

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30,000 shares, that is, 30 million shares/$100.

$200,000, that is, $2,000 × $100.

$3 billion, that is, 30 million shares × $100.

20:1, that is, $2,000/$100.

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Question 28

Multiple Choice

The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data?

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The firm's number of outstanding shares is 25 million.

The firm pays an annual dividend of 10 percent.

The firm's total return to shareholder is $5 billion.

The firm's economic value created is $5 billion.

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Question 29

Multiple Choice

Which of the following expressions accurately describes market cap?

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It is the product of the number of outstanding shares and the share price.

It is the difference between the book value and the market value of a firm's assets.

It is the ratio of a firm's equity finance and its debt finance.

It is the difference between a firm's account receivables and account payables.

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Question 30

Multiple Choice

Unlike the financial ratios based on accounting data, total return to shareholders is

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backward-looking and historic in nature.

an external performance metric.

an absolute measure of competitive advantage.

unaffected by market volatility or macroeconomic factors.

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Question 31

Multiple Choice

You are the CEO of a home appliance manufacturing company and have recently undertaken a review of your company's strategy. In comparing your stock market valuation to that of your closest competitor, you note that your firm is currently valued at $50 billion, while your competitor is valued at $40 billion. How should you proceed?

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Consider this evidence of a sustainable competitive advantage and maintain your current strategy.

Compare the current valuations with past valuations to determine a trend.

Assume your current strategy has failed and begin to formulate a new one.

Compare your valuation to firms in another industry.

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Question 32

Multiple Choice

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?

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

These tools fail to indicate how the stock market views all available public information about a firm's expected future performance.

These tools measure competitive advantage in absolute terms rather than relative terms.

Only the book value of the share prices is taken into account when applying these measures, and not the market value.

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Question 33

Multiple Choice

________ 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.

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Economic value created

Break-even point

Consumer surplus

Cost of capital

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Question 34

Multiple Choice

A firm incurs $400 to manufacture a television. In the market, customers are willing to pay a maximum of $600 for the television priced at $500. The difference of $200 ($600 minus $400) is the

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consumer surplus.

total return to shareholders.

customer lifetime value.

economic value created.

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Question 35

Multiple Choice

Both Saturn Technologies and Granite Inc. incur a cost of $200 to manufacture a single unit of a cell phone. However, Saturn Technologies charges a higher price than Granite Inc. does, but it still sells a higher number of phones. What does this imply?

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Saturn Technologies and Granite have achieved a competitive parity.

Granite Inc. has a competitive advantage over Saturn Technologies.

Saturn Technologies creates more economic value than Granite Inc. does.

Granite Inc. is not charging enough for its product.

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Question 36

Multiple Choice

A watchmaking company has priced one of its wristwatches at $210. Most of its competitors sell similar watches at $180. Selling anything less than $150 would result in a loss for the company. However, the absolute maximum a customer is willing to pay for it is $170. In this scenario, what is the reservation price of the wristwatch?

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$150

$180

$170

$210

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Question 37

Multiple Choice

A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario?

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$250

$200

$180

$100

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Question 38

Multiple Choice

The difference between the price charged for a product and the cost to manufacture it is referred to as the

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consumer surplus.

break-even price.

producer surplus.

reservation price.

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Question 39

Multiple Choice

________ denotes the dollar amount a consumer would attach to a good or service.

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Utility

Value

Consumer surplus

Economic contribution

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Question 40

Multiple Choice

The value a consumer attaches to a product or service is captured in the

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least price a consumer is willing to pay for it.

consumer's maximum willingness to pay for it.

expenses incurred by the firm in manufacturing it.

difference between the price charged for it and the cost to produce it.

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