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c12 Key
1. The actions that managers take to attain the goals of the firm are referred to as a firm's strategy.
2. Profit growth is measured by the percentage increase in net profits over time.
3. 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.
4. Consumer surplus captures some of the value of a product thereby reducing the price a firm can charge for it.
5. The higher the firm's profit per unit sold is, the greater its profitability will be, all else being equal.
6. A strategy that focuses primarily on increasing the attractiveness of a product is referred to as a low-cost
strategy.
7. Diminishing returns imply that when a firm already has significant value built into its product offering,
increasing value by a relatively small amount requires only minimal additional costs.
8. According to Michael Porter, all positions on the efficiency frontier are viable.
9. The various value creation activities that a firm undertakes are referred to as operations.
10. In terms of attaining a competitive advantage, support activities can be as important as the primary activities
of the firm.
11. Maintaining the company infrastructure is a support activity.
12. The term organizational structure refers to the totality of a firm's organization, including organization
architecture, control systems and incentives, organizational culture, processes, and people.
13. Firms that operate internationally are able to realize location economies by dispersing individual value
creation activities to locations where they are performed most efficiently and effectively.
14. Successful global expansion requires the transfer of core competencies to foreign markets where indigenous
competitors lack them.
15. Location economies are the economies that arise from performing a value creation activity in the optimal
location for that activity, wherever in the world that might be.
16. The experience curve refers to systematic increases in production costs that have been observed to occur
over the life of a product.
17. Learning effects will be more significant in an assembly process which involves 100 simple steps than in an
assembly process which involves 1,000 complex steps.
18. The ability to spread fixed costs over a large volume is one of the sources of economies of scale.
19. The firm that moves up the experience curve most rapidly will have a cost advantage vis-à-vis its
competitors.
20. Strategies that increase profitability can also expand a firm's business and thus enable it to attain a higher
rate of profit growth.
21. Universal needs exist when the tastes and preferences of consumers in different nations are different.
22. Pressures for local responsiveness imply that it may not be possible to leverage skills and products
associated with a firm's core competencies wholesale from one nation to another.
23. Firms that pursue an international strategy focus on increasing profitability by reaping the cost reductions
that come from economies of scale, learning effects, and location economies.
24. A global standardization strategy makes most sense when there are strong pressures for cost reductions and
demands for local responsiveness are minimal.
25. A localization strategy involves some duplication of functions and smaller production runs.
26. According to researchers, firms facing strong pressures for local responsiveness should pursue a global
standardization strategy.
27. An international strategy involves taking products first produced for their domestic market and selling them
internationally with only minimal local customization.
28. Strategic alliances allow firms to share the fixed costs of developing new products or processes.
29. The rate of return that a firm makes on its invested capital is referred to as:
30. Profit growth is measured by:
31. The amount of value a firm creates is measured by:
32. In general, the more value customers place on a firm's products:
33. Typically, the price a firm charges for a good or service is:
34. As a result of consumer surplus, a firm typically charges a lower price for a good or service than the value
placed on it by customers because:
35. One of the reasons why a firm typically charges for a good or service less than the value placed on that good
or service by the customer is because:
36. The price that reflects an individual's assessment of the value of a product is referred to as:
37. The value of a product to an average consumer is V, the average price that the firm can charge a consumer
for that product is P, and the average unit cost of producing that product is C. For this scenario, which of the
38. Which of the following of a firm is measured by the difference between the value of a product to an average
consumer and the average unit cost of producing that product?
39. Focusing primarily on increasing the attractiveness of a product is referred to as a:
40. According to Michael Porter, what are the two basic strategies for creating value and attaining a competitive
advantage in an industry?
41. According to Michael Porter, superior profitability goes to a firm that:
42. Superior value creation relative to rivals requires that the firm:
43. Which of the following shows all of the different positions that a firm can adopt with regard to value
creation and low cost assuming that its internal operations are configured adequately to support a particular
position?
44. The efficiency frontier has a convex shape because of:
45. For a firm to maximize its profitability, it is necessary that it:
46. A firm maximizes its profitability when it:
47. A firm's profitability is maximized when it:
48. The value creation activities of a firm are categorized as:
49. Which of the following is a primary activity in the operations of a firm?
50. For services such as banking or health care, "production" typically occurs when the:
