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?

Question

Quizplus · Accepted Answer

When assessing and evaluating competitive advantage, a comparison of rival firms' share price development or market capitalization provides a helpful yardstick when used over the long term. In order for this comparison of market capitalization to yield useful information, you must consider how it has changed over time. If your competitor has seen significant growth in market cap over the preceding year while your firm has seen its valuation decline slightly, for example, you would have evidence that your firm has begun to lose its competitive advantage.

You Are the CEO of a Home Appliance Manufacturing Company