Test 2, ch 5-8

Question 1

what is the defining goal of strategic management

Answer 1

gaining and sustaining competitive advantage

Question 2

what does competitive advantage lead to

Answer 2

superior firm performance

Question 3

three traditional frameworks to measure an assess firm performace

Answer 3

accounting profitability, shareholder value creation, economic value creation

Question 4

two frameworks that combine quantitative data with qualitative assessments

Answer 4

balanced scoreboard and the triple bottom line

Question 5

competitive advantage is always

Answer 5

relative to other firms

Question 6

accounting profitability

Answer 6

when using accounting profitability to assess competitive advantage, we use financial data and ratios derived from publicly available accounting data such as income statements and balance sheets

Question 7

what must we be able to do to measure competitive advantage

Answer 7

1. accurately assess firm performance and 2. compare and benchmark the focal firm’s performance to other competitors in the same industry of against the industry average

Question 8

profitability ratios commonly used in strategic management

Answer 8

return on invested capital, return on equity, return on assets, and return on revenue

Question 9

limitations of accounting data

Answer 9

all accounting data are historical and thus backward looking, accounting data do not consider off balance sheet items, accounting data focus mostly on tangible assets, which are no longer the most important

Question 10

all accounting data are historical data and thus backward looking

Answer 10

profitability ratios show us only the outcomes from past decisions, and the past is no guarantee of future performance. there is also a delay before the data is publicly available

Question 11

accounting data do not consider off balance sheet items

Answer 11

off balance sheet items such as pension obligations, or operating leases can be significant factors. address this by adjusting accounting data to obtain an equivalent economic capital base so we can compare companies with different capital structures

Question 12

accounting data focus mostly on tangible assets, which are no longer the most important

Answer 12

innovation, quality, and customer experience are the most competitively important assets and are not on the balance sheet