Question 1

The simplest measure of efficiency is the quantity of inputs that it takes to produce a given output.

Accepted Answer

The statement is true. Efficiency can be measured by the input-output ratio, with lower inputs required for a given output indicating greater efficiency.

Question 2

If a company's profitability is higher than the industry average, it has a competitive advantage.

Accepted Answer

If a company is more profitable than its industry peers, it suggests that the company is operating more efficiently and effectively than its competitors, giving it a competitive advantage in the marketplace.

Question 3

The primary value chain activities create value for the customer, while the support activities play no part in creating value.

Accepted Answer

This statement is false. Both primary and support activities can contribute to creating value for the customer. Support activities such as procurement, technology development, and human resource management can help improve the efficiency and effectiveness of primary activities such as inbound logistics, operations, and marketing and sales.

Question 4

The more value a company creates for its customers, the more willing customers are to pay a higher price.

Accepted Answer

This statement is generally true. When a company creates more value for its customers, such as through better quality products or exceptional customer service, customers are often willing to pay a higher price for that value. However, this is not always the case and pricing strategies can vary based on factors such as industry competition and consumer behavior.

Question 5

The R&D function of the value chain can help to lower costs or raise the value of a product and permit a company to charge higher prices.

Accepted Answer

The research and development (R&D) function of the value chain can help a company to create new products or improve existing ones, which can result in lower production costs or higher value for the customer. This may allow the company to charge higher prices for its products and increase its profits.

Question 6

A value chain is a sequence of activities for transforming inputs into outputs that are valued by customers.

Accepted Answer

A value chain is a series of activities that add value to a product or service and produce a desired result. This process includes every activity that goes into making a product or service, from initial creation to final distribution to the consumer. The value chain concept was introduced by Michael Porter in his book Competitive Advantage, where he explains how these activities can be an important source of competitive advantage for businesses.

Question 7

In the value chain, support activities are those involved in the physical creation of the product, its marketing and delivery to buyers, and its after-sales service.

Accepted Answer

Support activities, also known as secondary activities, include infrastructure, human resource management, technology development, and procurement. These activities support the primary activities in the value chain, which are focused on the physical creation of the product, its marketing and delivery to buyers, and its after-sales service.

Question 8

Brad has developed a new, improved planting procedure for use in his apple orchard. Brad is creating a process innovation.

Accepted Answer

Brad has developed a new method for planting in his apple orchard, which is a type of process innovation.

Question 9

Efficiency, quality, innovation, and customer responsiveness are the four generic building blocks of competitive advantage.

Accepted Answer

Efficiency, quality, innovation, and customer responsiveness are widely recognized as the four key elements of achieving a competitive advantage in business strategy.

Question 10

At Adam's bicycle shop, the primary value chain activity of production occurs each time a customer's bicycle is repaired.

Accepted Answer

The primary value chain activity of production involves creating or manufacturing a product, not repairing it. However, repairing bicycles would fall under the secondary value chain activity of service.

Question 11

Michael Porter has argued that low cost and differentiation are the two basic strategies for creating value and attaining a competitive advantage in an industry.

Accepted Answer

Michael Porter, a leading expert on competitive strategy, introduced the two basic strategies for creating value and achieving a competitive advantage in an industry: cost leadership and differentiation.

Question 12

The two least important components of efficiency for many companies are employee productivity and capital productivity.

Accepted Answer

Employee productivity and capital productivity are actually considered to be very important components of efficiency for many companies, as they directly impact the company's profitability and success.

Question 13

Primary activities of the value chain relate to the design creation, and delivery of the product, its marketing, and its support and after-sale service.

Accepted Answer

Primary activities of the value chain include activities related to the creation, design, marketing, and support of a product or service.

Question 14

The attributes of many physical products include the form, features, performance, durability, reliability, style, and design of the product.

Accepted Answer

These are all common attributes used to describe physical products.

Question 15

In the value chain, research and development (R&D) is concerned with the design of products and production processes.

Accepted Answer

Research and development involves creating and improving products and processes through innovative ideas, experimentation, and testing. This stage is important in the value chain as it helps companies stay competitive by developing new products and improving existing ones.

Question 16

Employee productivity is usually measured by output per employee and capital productivity by output per unit of invested capital.

Accepted Answer

This statement is true. Employee productivity is measured by the output per employee, while capital productivity is measured by the output per unit of invested capital.

Question 17

With regard to quality as reliability, a product can be said to be reliable when it consistently does the job it was designed for, does it well, and rarely, if ever, breaks down.

Accepted Answer

This is an accurate definition of reliability when it comes to product quality.

Question 18

A company has a competitive advantage when its profitability is higher than the average for its industry.

Accepted Answer

A company with higher profitability than the average for its industry has a competitive advantage because it can earn more profits and reinvest in its business or offer better prices or quality to its customers, which can attract more customers and increase market share.

Question 19

To achieve a competitive advantage, a company must excel in all of the building blocks of competitive advantage-efficiency, quality, innovation, and responsiveness to customers.

Accepted Answer

While excelling in all of these building blocks can certainly lead to a competitive advantage, a company may not necessarily need to excel in all of them to achieve a competitive advantage. It depends on the industry and specific market factors. For example, a company in a mature industry may focus more on efficiency and quality, while a company in a rapidly changing industry may prioritize innovation and responsiveness.

Question 20

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

Accepted Answer

This is known as a consumer surplus, where the customer is willing to pay more for the good or service than the actual price charged by the company.

Quiz 4: Building Competitive Advantage