9) The best-designed strategies are valuable whether or not they are effectively implemented. Answer: FALSE
Explanation: Implementation is essential or the strategy is useless.
Diff: 1 Objective: 2
AACSB: Analytical thinking
10) The key to a company's success is creating value for customers while differentiating itself from its competitors. Answer: TRUE
Diff: 1 Objective: 2
AACSB: Analytical thinking
11) The key to a company's success is always to be the low cost producer in a particular industry. Answer: FALSE
Explanation: The low cost producer in a particular industry will not necessarily be successful.
Diff: 2 Objective: 2
AACSB: Analytical thinking
12) Management accountants work closely with managers in various departments to formulate strategies by providing information about the sources of competitive advantage. Answer: TRUE
Diff: 2 Objective: 2
AACSB: Analytical thinking
13) Management accountants should have little or no role in deciding on a company's strategy. Answer: FALSE
Explanation: Management accountants should play a significant role in deciding on a company's strategy.
Diff: 1 Objective: 2
AACSB: Analytical thinking
14) Companies can decide on an appropriate strategy based strictly on internally available information. Answer: FALSE
Explanation: Companies must obtain external information as well as internal information to
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decide on an appropriate strategy.
Diff: 2 Objective: 2
AACSB: Analytical thinking
15) Strategic financial management describes cost management that specifically focuses on strategic issues. Answer: FALSE
Explanation: Strategic cost management describes cost management that specifically focuses on strategic issues.
Diff: 2 Objective: 2
AACSB: Analytical thinking
16) Identifying a company's most important customers helps to formulate a strategy. Answer: TRUE
Diff: 1 Objective: 2
AACSB: Analytical thinking
17) The best-designed strategies and the best-developed capabilities are useless unless they are effectively executed. Answer: TRUE
Diff: 1 Objective: 2
AACSB: Analytical thinking
18) Describe the major differences between management accounting and financial accounting for the following: 1. Primary users 2. Focus and emphasis
3. Rules of measurement and reporting Answer:
1. The primary users of management accounting information are managers of the
organization. The primary users of financial accounting are external users such as investors, banks, regulators, and suppliers.
2. Management accounting is future oriented. Financial accounting is past oriented. 3. Management accounting measurement and reporting does not have to follow GAAP but are based on cost-benefit analysis. Financial accounting measurement and reporting must be prepared in accordance with GAAP and be certified by external, independent auditors.
Diff: 3 Objective: 2
AACSB: Analytical thinking
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19) What is strategy? Briefly describe the two broad types of strategies that companies may choose to pursue.
Answer: Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. In other words, strategy describes how a company will compete.
Companies follow one of two broad strategies. One is provide a quality product or service at low prices. The other is to compete on their ability to offer a unique product or service that is generally offered at a higher price.
Diff: 2 Objective: 2
AACSB: Analytical thinking
20) Briefly describe the list of items that managers undertake to formulate strategies. Answer: ONE: Identifying the most important customers, and how the company can be competitive and deliver value to them.
TWO: Identifying the substitute products existing in the marketplace, and how do they differ from our product in terms of features, price, cost, and quality.
THREE: Identifying most critical capability-whether it is technology, production or marketing.
FOUR: Checking the adequacy of cash available to fund the strategy, or will additional funds need to be raised-through issue of debt or equity.
Diff: 3 Objective: 2
AACSB: Analytical thinking
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21) Generally, companies follow one of two broad strategies: offering a quality product at a low price, or offering a unique product or service priced higher than the competition. Assume you are opening a small food outlet across the street from your campus. How might that business be operated under each of the two broad strategies? Consider the following specific operational areas:
a. target customers b. products offered c. product pricing d. location choice e. advertising content f. advertising media
Answer: The purpose of this question is to explore some of the differences in business operations as a result of a broad strategic choice. Answers will differ from student to student, but you should see some specific themes. Operational Area Low Price Strategy Target customers Target customers might be students on a tight budget. Differential Strategy Target customers might be more wealthy students, faculty, or perhaps neighbors who live nearby. Products offered Few products, heavy probably set up as a high volume operation. Product pricing Location choice Priced at or lower than the competition in the area. Convenient to the target customers. Not as convenient, perhaps in a higher-end shopping or entertainment area. Customers might seek out the high quality and be willing to travel a bit for it. Advertising content Advertising would emphasize Advertising would emphasize the low price of the products quality or ambience. offered. Advertising media Media that would be looked at Media that would be looked by the target customers, such at by the target customer, as student newspapers. Diff: 3 Objective: 2
AACSB: Application of knowledge
High quality products, restaurant might have a lot of ambience. Higher priced products. emphasis on tight cost control, probably a reasonable choice, local magazines and newspapers. 19
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22) Generally, companies follow one of two broad strategies: offering a quality product at a low price, or offering a unique product or service priced higher than the competition. Is it possible to follow a strategy that is \
Answer: There is some dispute about the correct answer to this question. Some will argue that it is not good for companies to get \confused as to whether or not the company is competing on price or is trying to make some other appeal. If the customer is confused about how the company is giving them value, they might perceive they are getting no value and abandon the product to a competitor with a clearer customer value proposition. The other side of the argument is that cost management is a necessary part of any strategy and even if the company chooses to pursue a differential strategy, management of the company should always be seeking ways to manage costs and increase customer value simultaneously regardless of their strategy. The student should be able to articulate one or the other arguments coherently.
Diff: 3 Objective: 2
AACSB: Application of knowledge
Objective 1.3
1) Place the four business functions in the order they appear along the value chain:
A) Customer Service, Design, Production, Marketing B) Customer Service, Marketing, Production, Design C) Design, Production, Marketing, Customer Service D) Design, Customer Service, Production, Marketing Answer: C
Diff: 2 Objective: 3
AACSB: Analytical thinking
Customer service Design Marketing Production
2) R&D, production, and customer service are business functions that are all included as part of ________. A) the value chain B) benchmarking
C) customer relationship management D) the supply chain Answer: A
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