GEB 4890 Study Guide Questions with Verified
Correct Answers
What is strategy?
The set of coordinated actions that managers take to outperform competitors and achieve
superior profitability.
What is a business model?
The logic for how a company's strategy will create value for customers while generating
sufficient revenues to cover costs and realize a profit.
What are the two elements of a business model?
The customer value proposition and the profit formula.
What is a competitive advantage?
When a company provides buyers with superior value compared with rival sellers or
produces its products or services more efficiently than rivals.
When is a competitive advantage sustainable?
When it persists despite competitors' efforts to match or surpass it.
What is the relationship between strategy and competitive advantage?
A company's strategy is successful when it helps the company compete differently from
rivals and gain a competitive advantage.
How does strategy help a company achieve competitive advantage?
By helping the company provide superior value to customers or produce products/services
more efficiently than competitors.
,What is the customer value proposition?
A plan for satisfying customer wants and needs at a price customers will consider a good
value.
What is the profit formula?
A plan for a cost structure that enables the company to deliver the customer value proposition
profitably.
What is the value-price-cost framework?
A framework showing how customer value, price, and company costs relate to the company's
value proposition and profitability.
What is the customer value proposition expressed as?
V − P.
What does V represent in V − P?
The value customers perceive they are receiving.
What does P represent in V − P?
The price customers pay.
What does C represent in the profit formula P − C?
The company's cost.
What is the profit formula expressed as?
P − C.
What does P − C represent?
, Profit on a per-unit basis.
What makes a customer value proposition more attractive?
Greater customer value and/or a lower price.
What increases a company's ability to make money, given the customer value
proposition?
Lower costs.
What is the difference between a strategy and a business model?
A strategy is the set of actions managers take to compete and achieve superior profitability,
while a business model explains how the strategy creates customer value and generates
sufficient revenue to cover costs and earn a profit.
What is a key question surrounding a company's business model?
Whether the company can execute its customer value proposition profitably.
What are the three tests of a winning strategy?
The fit test, the competitive advantage test, and the performance test.
What is the fit test?
Whether the strategy is well matched to the company's external and internal situation.
What are the three dimensions of strategic fit?
External fit, internal fit, and dynamic fit.
What is external fit?
How well the strategy matches industry and competitive conditions, market opportunities,
and other aspects of the external business environment.
Correct Answers
What is strategy?
The set of coordinated actions that managers take to outperform competitors and achieve
superior profitability.
What is a business model?
The logic for how a company's strategy will create value for customers while generating
sufficient revenues to cover costs and realize a profit.
What are the two elements of a business model?
The customer value proposition and the profit formula.
What is a competitive advantage?
When a company provides buyers with superior value compared with rival sellers or
produces its products or services more efficiently than rivals.
When is a competitive advantage sustainable?
When it persists despite competitors' efforts to match or surpass it.
What is the relationship between strategy and competitive advantage?
A company's strategy is successful when it helps the company compete differently from
rivals and gain a competitive advantage.
How does strategy help a company achieve competitive advantage?
By helping the company provide superior value to customers or produce products/services
more efficiently than competitors.
,What is the customer value proposition?
A plan for satisfying customer wants and needs at a price customers will consider a good
value.
What is the profit formula?
A plan for a cost structure that enables the company to deliver the customer value proposition
profitably.
What is the value-price-cost framework?
A framework showing how customer value, price, and company costs relate to the company's
value proposition and profitability.
What is the customer value proposition expressed as?
V − P.
What does V represent in V − P?
The value customers perceive they are receiving.
What does P represent in V − P?
The price customers pay.
What does C represent in the profit formula P − C?
The company's cost.
What is the profit formula expressed as?
P − C.
What does P − C represent?
, Profit on a per-unit basis.
What makes a customer value proposition more attractive?
Greater customer value and/or a lower price.
What increases a company's ability to make money, given the customer value
proposition?
Lower costs.
What is the difference between a strategy and a business model?
A strategy is the set of actions managers take to compete and achieve superior profitability,
while a business model explains how the strategy creates customer value and generates
sufficient revenue to cover costs and earn a profit.
What is a key question surrounding a company's business model?
Whether the company can execute its customer value proposition profitably.
What are the three tests of a winning strategy?
The fit test, the competitive advantage test, and the performance test.
What is the fit test?
Whether the strategy is well matched to the company's external and internal situation.
What are the three dimensions of strategic fit?
External fit, internal fit, and dynamic fit.
What is external fit?
How well the strategy matches industry and competitive conditions, market opportunities,
and other aspects of the external business environment.
