WPC 480 Exam 1 UPDATED ACTUAL
Questions and CORRECT 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? - CORRECT ANSWER - Competitive advantage cannot
be assessed
Firms that outperform their competitors have a high quality planned strategy. - CORRECT
ANSWER - 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? - CORRECT ANSWER - 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 - CORRECT ANSWER - 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? - CORRECT ANSWER - -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 - CORRECT ANSWER - 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? - CORRECT ANSWER - 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? -
CORRECT ANSWER - 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. - CORRECT ANSWER - True.
What is the main reason to do an industry analysis? - CORRECT ANSWER - 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.) -
CORRECT ANSWER - Identify relevant competitors that define your industry or industry
group.
What is the first, critical step in doing an industry analysis? - CORRECT ANSWER - 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.
Questions and CORRECT 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? - CORRECT ANSWER - Competitive advantage cannot
be assessed
Firms that outperform their competitors have a high quality planned strategy. - CORRECT
ANSWER - 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? - CORRECT ANSWER - 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 - CORRECT ANSWER - 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? - CORRECT ANSWER - -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 - CORRECT ANSWER - 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? - CORRECT ANSWER - 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? -
CORRECT ANSWER - 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. - CORRECT ANSWER - True.
What is the main reason to do an industry analysis? - CORRECT ANSWER - 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.) -
CORRECT ANSWER - Identify relevant competitors that define your industry or industry
group.
What is the first, critical step in doing an industry analysis? - CORRECT ANSWER - 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.
