Deck 7: Value Creation and Strategic Information Systems

Question 1

Why is an analysis of added value useful?

A) It helps managers in making decision of whether they should go ahead with the initiative or not
B) It helps managers in evaluating how to respond to a competitor who took the leadership position
C) It helps managers in computing a number for the value added by an initiative envisioned
D) It helps managers in measure how much benefit their competitor is drawing from an innovation, and what benefits are likely to accrue to them if they choose to replicate the initiative.
E) All of the above

Answer 1

It helps managers in making decision of whether they should go ahead with the initiative or not

Question 2

Which of the following is "the minimum amount of money the suppliers are willing to accept to provide the firm with the needed resources"?

A) Total Value Created
B) Customer Willingness to Pay
C) Firm Cost
D) Supplier Opportunity Cost
E) (e) None of the above

Answer 2

Supplier Opportunity Cost

Question 3

Giving the following information, how much is the total value created?

A) $10
B) $15
C) $25
D) $40
E) None of the above is correct

Answer 3

$25

Question 4

Consider the following information, how much value does the customers appropriate?

A) $4
B) $10
C) $15
D) $25
E) $40

Question 5

The firm's added value is measured as that portion of the value created in the transaction involving the firm minus the total value that could be created if the firm did not exist. When will the added value be zero even if the firm did not take part in the exchange?

A) When the suppliers do not want to negotiate
B) When the competitors offer perfect substitutes of your products with the same supplier opportunity cost
C) When the firm cost is equal to supplier opportunity cost
D) When customer willingness to pay is equal to price
E) Added value will never be zero

Question 6

Given the following information, how much is your firm's added value?

A) $2
B) $3
C) $4
D) $5
E) $6

Question 7

Which of the following statement(s) about strategic information systems is(are) not true?

A) Strategic information systems are used to support or shape the competitive strategy of a firm
B) Strategic information systems critical to business operations but that do not generate added value
C) Strategic information systems enable the creation and appropriation of value
D) Strategic information systems are defined in terms of the purpose they serve
E) All of the above are true

Question 8

Which of the following statement(s) about strategic information systems is (are) not true?

A) Strategic information systems are used to support or shape the competitive strategy of a firm
B) Strategic information systems critical to business operations but that do not generate added value
C) Strategic information systems enable the creation and appropriation of value
D) Strategic information systems are defined in terms of the purpose they serve
E) All of the above

Question 9

Which of the following is "the minimum amount of money the suppliers are willing to accept to provide the firm with the needed resources"?

A) Total value created
B) Customer willingness to pay
C) Firm cost
D) Supplier opportunity cost
E) None of the above

Question 10

Which of the following is (are) ways to create value?

A) Increase customer willingness to pay
B) Decrease supplier opportunity cost
C) Decrease firm costs
D) Price discounting
E) Only A and B

Question 11

We can confidently conclude that a firm has added value when:

A) It creates value for its customers
B) It has low supplier opportunity cost
C) It manages its firm cost aggressively
D) It does something unique and valuable
E) It appropriates less than its fair share

Question 12

With the terminology introduced in Chapter 7, a firm has a competitive advantage when:

A) It creates significant value for its customers by providing outstanding service
B) It has created added value
C) It manages its firm cost aggressively
D) It is able to negotiate harder than competitors
E) It appropriates

Question 13

Which of the following is "the maximum amount of money the firm's customers are willing to spend in order to obtain the firm's product"?

A) Total value created
B) Customer willingness to pay
C) Firm cost
D) Supplier opportunity cost
E) None of the above

Question 14

Given your understanding of the definition of Added Value, when will your firm's added value be zero?

A) When the suppliers do not want to negotiate.
B) When the competitors offer a perfect substitute of your products and have the same supplier opportunity cost
C) When the firm cost is equal to supplier opportunity cost
D) When customer willingness to pay is equal to price
E) Added value can never be zero

Question 15

Given your understanding of the definition of value creation, who benefits?

A) The entire supply chain (except customers)
B) Tier-1 Suppliers only
C) The Firm only
D) Customers Only
E) Any or all of the suppliers and customers, or the firm itself

Question 16

The analysis of added value is a formal mechanism that managers and analysts use to evaluate how much of the value created in a transaction the firm can appropriate in the form of profits.

Question 17

Value appropriation is the process by which the total value created in the transaction is split amongst all the entities who contributed to creating it. Therefore, the total value created is the value appropriated by the firm.

Question 18

Supplier opportunity cost is the maximum amount of money the suppliers are willing to accept to provide the firm with the needed resources.

Question 19

The total value created in the transaction is computed as the difference between customer willingness to pay and supplier opportunity cost.

Question 20

A brand new, well-built, and technologically advanced cell phone costs $125 to manufacture. However, it has a value of $0 unless someone is willing to buy it.

Question 21

What are the two ways to create new value?

Question 22

What makes an initiative strategic and IT-dependent?

Question 23

Consider the following information:
Compute the following:

-Total value created

Question 24

Consider the following information:
Compute the following:

-Supplier share (i.e., amount of value appropriated by the supplier)

Question 25

Consider the following information:
Compute the following:

-Your firm's share (i.e., amount of value appropriated by your firm)

Question 26

Consider the following information:
Compute the following:

-Customer share (i.e., amount of value appropriated by the customer)

Question 27

Consider the following information, how much value does the customers appropriate? Please clearly explain your calculation process.

Question 28

Consider the following information, how much value does your firm appropriate? Please clearly explain your calculation process.

Question 29

Offer an example, real or imagined, of firms in each of the following situations (do not use the Wiztech case as the basis of your response). Thoroughly explain your examples.
- The firm created Added Value by increasing Customer Willingness to Pay
- The firm created Added Value by reducing Supplier Opportunity Cost
- The firm increased Customer Willingness to Pay, but failed to create Added Value.

Question 30

Offer an example of a firm that has increased Customer Willingness to Pay for its products but failed to create Added Value. Thoroughly justify your examples