Question 1

The percentage increase in net profits over time measures

Accepted Answer

Profit growth is measured by the percentage increase in net profits over time. In general, higher profitability and a higher rate of profit growth will increase the value of an enterprise and thus the returns garnered by its owners, the shareholders.

Question 2

Research and development, production, marketing and sales, and customer service are all examples of

Accepted Answer

Primary activities have to do with the design, creation, and delivery of the product; its marketing; and its support and after-sale service. The primary activities include research and development, production, marketing and sales, and customer service.

Question 3

________ include the design, creation, and delivery of a product.

Accepted Answer

Primary activities have to do with the design, creation, and delivery of the product; its marketing; and its support and after-sale service.

Question 4

________ imply that when a firm already has significant value built into its product offering, increasing value by a relatively small amount requires significant additional costs.

Accepted Answer

The efficiency frontier has a convex shape because of diminishing returns. Diminishing returns imply that when a firm already has significant value built into its product offering, increasing value by a relatively small amount requires significant additional costs.

Question 5

Which of the following is an example of a primary activity in a firm's value chain?

Accepted Answer

Research and development (R&D) is concerned with the design of products and production processes. Although we think of R&D as being associated with the design of physical products and production processes in manufacturing enterprises, many service companies also undertake R&D.

Question 6

Which of the following statements is true?

Accepted Answer

The price a firm charges for a good or service is typically less than the value placed on that good or service by the customer. This is because the customer captures some of that value in the form of what economists call a consumer surplus.

Question 7

The amount of value a firm creates is measured by the

Accepted Answer

The amount of value a firm creates is measured by the difference between its costs of production and the value that consumers perceive in its products.

Question 8

The value of a product to an average consumer is V; and the average price that the firm can charge a consumer for that product is P. Here, V - P can be termed as

Accepted Answer

The value of a product to an average consumer is V; the average price that the firm can charge a consumer for that product given competitive pressures and its ability to segment the market is P; and the average unit cost of producing that product is C. The firm's profit per unit sold (?) is equal to P - C, while the consumer surplus per unit is equal to V - P.

Question 9

________ can be defined as the rate of return that the firm makes on its invested capital, which is calculated by dividing the net profits of the firm by total invested capital.

Accepted Answer

Profitability can be defined as the rate of return that the firm makes on its invested capital (ROIC), which is calculated by dividing the net profits of the firm by total invested capital. To maximize the value of a firm, managers must pursue strategies that increase the profitability of the enterprise and its rate of profit growth over time.

Question 10

The efficiency frontier has a convex shape because of

Accepted Answer

The efficiency frontier shows all of the different positions that a firm can adopt with regard to adding value to the product (V) and low cost (C) assuming that its internal operations are configured efficiently to support a particular position. The efficiency frontier has a convex shape because of diminishing returns.

Question 11

The ________ all of the different positions that a firm can adopt with regard to adding value to the product and low cost assuming that its internal operations are configured efficiently to support a particular position.

Accepted Answer

The efficiency frontier is a convex curve that shows all of the different positions that a firm can adopt with regard to adding value to the product (V) and low cost (C) assuming that its internal operations are configured efficiently to support a particular position.

Question 12

________ is measured by the percentage increase in net profits over time.

Accepted Answer

Profit growth is measured by the percentage increase in net profits over time. In general, higher profitability and a higher rate of profit growth will increase the value of an enterprise and thus the returns garnered by its owners, the shareholders.

Question 13

The price a firm charges for a good or service is typically less than the value placed on that good or service by the customer. This is because

Accepted Answer

The price a firm charges for a good or service is typically less than the value placed on that good or service by the customer. This is because the customer captures some of that value in the form of what economists call a consumer surplus.

Question 14

The basic strategy paradigm suggests that to maximize its profitability, a firm should do which of the following?

Accepted Answer

Porter emphasizes that it is very important for management to decide where the company wants to be positioned with regard to value (V) and cost (C), to configure operations accordingly, and to manage them efficiently to make sure the firm is operating on the efficiency frontier. However, not all positions on the efficiency frontier are viable.

Question 15

________ activities are basically concerned with creating the product, marketing and delivering the product to buyers, and providing support and after-sales service.

Accepted Answer

Primary activities have to do with the design, creation, and delivery of the product; its marketing; and its support and after-sale service.

Question 16

Top management should be viewed as part of the firm's

Accepted Answer

A support activity is the company infrastructure, or the context within which all the other value creation activities occur. Because top management can exert considerable influence in shaping these aspects of a firm, top management should also be viewed as part of the firm's infrastructure.

Question 17

The strategy, operations, and organization of a firm must all be consistent with each other if the firm is to ________ and achieve superior profitability.

Accepted Answer

The strategy, operations, and organization of the firm must all be consistent with each other if it is to attain a competitive advantage and garner superior profitability.

Question 18

Which of the following is an example of a support activity in a firm's value chain?

Accepted Answer

The support activities of the value chain provide inputs that allow the primary activities to occur. The human resource functions ensure that people are adequately trained, motivated, and compensated to perform their value creation tasks.

Question 19

A consumer surplus can be best described as

Accepted Answer

The value of a product to an average consumer is V; the average price that the firm can charge a consumer for that product given competitive pressures and its ability to segment the market is P. The consumer surplus per unit is equal to V - P (another way of thinking of the consumer surplus is as "value for the money"; the greater the consumer surplus, the greater the value for the money the consumer gets).

Question 20

A strategy that focuses on increasing the attractiveness of a product is referred to as

Accepted Answer

A strategy that focuses primarily on increasing the attractiveness of a product is known as a differentiation strategy. Michael Porter has argued that low cost and differentiation are two basic strategies for creating value and attaining a competitive advantage in an industry.

Quiz 13: The Strategy of International Business