The relationship between economic value creation and competitive advantage is fundamental to strategic management. It provides the foundation on which to formulate a firm$$s competitive strategy for cost leadership or differentiation. A company has a competitive advantage when it creates more economic value than rival firms do$.$ The balanced scorecard approach attempts to provide a more integrative view of competitive advantage and how the company is performing. Its purpose is to assess multiple internal and external performance dimensions to balance financial and strategic goals.

This activity is important because as a manager, you need to understand how creating economic value for your business can lead to a competitive advantage over your rivals. It is also important to understand how to use metrics both internally and externally to balance both strategic and financial goals.

The goal of this exercise is for you to understand the multiple internal and external performance metrics that can be used to create value and balance strategic and financial goals.

Review the relevant content in Chapter $5$ and then answer the questions that follow.

What are the three components in evaluating the economic value of a good or service?

Multiple Choice

value, price, and cost

demand, price, and cost

value, demand, and price

value creation, profitability, and differentiation

value, profitability, and cost