WPC 480 EXAM 1 QUESTIONS AND ANSWERS
Ackbar, Inc. has had 40% growth in accounting profits for several years, and each new
year has been the highest profits Ackbar has ever had. What can you conclude from
this information about Ackbar's competitive advantage? - Answers - Competitive
advantage cannot be assessed
Firms that outperform their competitors have a high quality planned strategy. - Answers
- False
A firm may have negative profits for several years in a row and still decide to give a big
performance bonus to the CEO or other top executives. What is the best explanation for
getting a bonus when you aren't making a profit? - Answers - The firm has been growing
rapidly, along with the price of the stock.
For each of the ways to measure firm performance match it with the major source of
inaccuracy as an estimate of the value and or performance of the firm.
1. Accounting value
2. Shareholder value
3. Balanced scorecard - Answers - 1. Based on historical data
2. Based on predictions of future growth
3. Based on perception of value by customers
Which of the following are problems with asking successful firms to explain how they
achieved their success AFTER they become successful? - Answers - -People tend to
reverse the causality and forget that success came unexpectedly before the strategy.
- People tend to attribute their success to their own efforts.
-People tend to forget all the mistakes made along the way
Match the way of measuring firm performance with the situation or condition where the
metric will be most useful to a strategic analyst.
1. Accounting value
2. Shareholder value
3. Balanced scorecard - Answers - 1. Firm's value is mostly in tangible assets.
2. Firm is rapidly growing in several markets.
3. Firms sells a product where brand and status are important.
What is the halo effect? - Answers - It is attributing performance of a firm to the skill of
the top manager.
Why is the halo effect an irrational bias of perception - that is, why is the halo effect
wrong? - Answers - The top manager has authority over the firm, but doesn't control the
entire firm.
, Theories about firm performance ought to be constructed by studying both firms that
succeed and firms that fail. - Answers - True.
What is the main reason to do an industry analysis? - Answers - Identify all firms that
can take profits generated by your firm.
What is the second, critical step in doing an industry analysis? (NOTE: you may have to
iterate on this step as your analysis leads you to refine this step and you do the analysis
again.) - Answers - Identify relevant competitors that define your industry or industry
group.
What is the first, critical step in doing an industry analysis? - Answers - Set a goal or
specific question to answer from doing the industry analysis
Identify the underling forces that generally improve the industry structure for members
of the industry.
1. Rivalry between competitors
2. Supplier and buyer power
3. Supplier and buyer power
4. Threat of entrants
5. Substitutes
6. Complements - Answers - 1. Concentration in the industry is high.
2. Bargaining power of industry firms based on options available.
3. Price sensitivity based on limited differentiation of products.
4. Time necessary to learn how to use industry's technology.
5. Relative performance of price/output is lower than industry offerings.
6. Many firms offer complements that are very similar.
When not all competitors within an industry are substantive competitors, an analyst
should split the industry into groups of close competitors and then analyze the industry
groups separately. - Answers - True
In the PESTEL framework, the first "E" stands for "economic" and refers to the macro-
economic conditions of nations or across nations. - Answers - True
What is the primary reason for a strategic analyst focused on the competitive advantage
of a single firm to do a PESTEL analysis? - Answers - Specifically identify how very big
forces in the world affect a firm's performance.
The internal capacities of a firm (e.g. capabilities, core competences, resources) are
more likely to be a source of competitive advantage than the external situation of the
firm (e.g. the industry structure where the firm resides.) - Answers - True
Match dimension with best definition of what the dimension is evaluating about a
capability.
1. V
Ackbar, Inc. has had 40% growth in accounting profits for several years, and each new
year has been the highest profits Ackbar has ever had. What can you conclude from
this information about Ackbar's competitive advantage? - Answers - Competitive
advantage cannot be assessed
Firms that outperform their competitors have a high quality planned strategy. - Answers
- False
A firm may have negative profits for several years in a row and still decide to give a big
performance bonus to the CEO or other top executives. What is the best explanation for
getting a bonus when you aren't making a profit? - Answers - The firm has been growing
rapidly, along with the price of the stock.
For each of the ways to measure firm performance match it with the major source of
inaccuracy as an estimate of the value and or performance of the firm.
1. Accounting value
2. Shareholder value
3. Balanced scorecard - Answers - 1. Based on historical data
2. Based on predictions of future growth
3. Based on perception of value by customers
Which of the following are problems with asking successful firms to explain how they
achieved their success AFTER they become successful? - Answers - -People tend to
reverse the causality and forget that success came unexpectedly before the strategy.
- People tend to attribute their success to their own efforts.
-People tend to forget all the mistakes made along the way
Match the way of measuring firm performance with the situation or condition where the
metric will be most useful to a strategic analyst.
1. Accounting value
2. Shareholder value
3. Balanced scorecard - Answers - 1. Firm's value is mostly in tangible assets.
2. Firm is rapidly growing in several markets.
3. Firms sells a product where brand and status are important.
What is the halo effect? - Answers - It is attributing performance of a firm to the skill of
the top manager.
Why is the halo effect an irrational bias of perception - that is, why is the halo effect
wrong? - Answers - The top manager has authority over the firm, but doesn't control the
entire firm.
, Theories about firm performance ought to be constructed by studying both firms that
succeed and firms that fail. - Answers - True.
What is the main reason to do an industry analysis? - Answers - Identify all firms that
can take profits generated by your firm.
What is the second, critical step in doing an industry analysis? (NOTE: you may have to
iterate on this step as your analysis leads you to refine this step and you do the analysis
again.) - Answers - Identify relevant competitors that define your industry or industry
group.
What is the first, critical step in doing an industry analysis? - Answers - Set a goal or
specific question to answer from doing the industry analysis
Identify the underling forces that generally improve the industry structure for members
of the industry.
1. Rivalry between competitors
2. Supplier and buyer power
3. Supplier and buyer power
4. Threat of entrants
5. Substitutes
6. Complements - Answers - 1. Concentration in the industry is high.
2. Bargaining power of industry firms based on options available.
3. Price sensitivity based on limited differentiation of products.
4. Time necessary to learn how to use industry's technology.
5. Relative performance of price/output is lower than industry offerings.
6. Many firms offer complements that are very similar.
When not all competitors within an industry are substantive competitors, an analyst
should split the industry into groups of close competitors and then analyze the industry
groups separately. - Answers - True
In the PESTEL framework, the first "E" stands for "economic" and refers to the macro-
economic conditions of nations or across nations. - Answers - True
What is the primary reason for a strategic analyst focused on the competitive advantage
of a single firm to do a PESTEL analysis? - Answers - Specifically identify how very big
forces in the world affect a firm's performance.
The internal capacities of a firm (e.g. capabilities, core competences, resources) are
more likely to be a source of competitive advantage than the external situation of the
firm (e.g. the industry structure where the firm resides.) - Answers - True
Match dimension with best definition of what the dimension is evaluating about a
capability.
1. V
