comparing the value to the history of the firm’s return of investment over a number of
years
Comparing the return to the return on invested capital obtained by other firms in the industry will
help determine if Modern Furniture LLC has a competitive advantage. Competitive advantage is
always relative, not absolute.
References
Multiple Choice Difficulty: 3 Hard Learning Objective: 01-02 Define
competitive advantage, sustainable
competitive advantage, competitive
disadvantage, and competitive parity.
63.
Award: 1.00 point
Underperformance relative to other firms in the same industry or the industry average results in a(n)
________ for a firm.
sustainable competitive advantage
increased power distance
diseconomies of scope
competitive disadvantage
If a firm underperforms relative to its rivals or the industry average, it has a competitive
disadvantage.
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-02 Define
competitive advantage, sustainable
competitive advantage, competitive
disadvantage, and competitive parity.
64.
Award: 1.00 point
HardLine Ltd. is a landline telephone manufacturer whose average return on invested capital is
approximately 2 percent. Because demand for landline telephones has declined significantly, the
industry average return on invested capital has been negative (–5 percent) for the last few years. In
this scenario, HardLine Ltd. has a
competitive advantage.
balanced scorecard.
competitive disadvantage.
power position.
If a firm’s return on invested capital is 2 percent in a declining industry such as telephone
manufacturing, where the industry average has been negative (–5 percent) for the last few years,
then the firm has a competitive advantage.
References
Multiple Choice Difficulty: 3 Hard Learning Objective: 01-02 Define
competitive advantage, sustainable
competitive advantage, competitive
disadvantage, and competitive parity.
65.
Award: 1.00 point
Writer Button Inc. and Horner Inc. are two companies that have been manufacturing typewriters for
almost 30 years. Due to the reduced demand for typewriters today, both companies’ average return
on invested capital is approximately –5 percent. The current industry average is 2 percent. In this
scenario, Writer Button Inc. and Horner Inc. most likely have
competitive advantage over other firms in their industry.
competitive parity with each other.
strategic alliance with each other.
economies of scope instead of economies of scale.
In this scenario, Writer Button Inc. and Horner Inc. most likely have competitive parity with each
other. Competitive parity refers to the performance of two or more firms at the same level.
References
Multiple Choice Difficulty: 3 Hard Learning Objective: 01-02 Define
competitive advantage, sustainable
competitive advantage, competitive
disadvantage, and competitive parity.
66.
Award: 1.00 point
The average cost of production for a bottle of vitamin water in the industry is $5 while its average
price is $8. Facuet H20 Inc. manufactures the same product for $3 per bottle and sells it for $8 per
bottle. Which of the following statements is most likely true of Facuet H20 Inc. in this scenario?
It has a competitive advantage in the industry.
It has a competitive disadvantage in the industry.
It has competitive parity with other firms in the industry.
It has formed a strategic alliance with other firms in the industry.
Facuet H20 Inc. most likely has a competitive advantage in the industry. A firm that achieves
superior performance relative to other competitors in the same industry or the industry average has
a competitive advantage.
References
Multiple Choice Difficulty: 3 Hard Learning Objective: 01-02 Define
competitive advantage, sustainable
competitive advantage, competitive
disadvantage, and competitive parity.
67.
Award: 1.00 point
A firm is said to gain a competitive advantage when it can
exceed its own previous performances.
provide products similar to its competitors, but at lower prices.
perform at the same level as that of its competitors.
minimize the difference between value creation and cost.
To gain a competitive advantage, a firm needs to provide either goods or services consumers value
more highly than those of its competitors, or goods or services similar to the competitors’ at a lower
price.