E2: Business models and value creation

Question 1 · Syllabus ref A1a · Ecosystems vs traditional markets

Which of the following best distinguishes a business ecosystem from a traditional market?

1. A loosely connected network of organisations that co-create value together, rather than competing solely on price
2. Simply a market with a larger number of competing suppliers
3. A market structure that only exists in heavily regulated industries, such as banking and utilities
4. Another term for a single firm's internal supply chain and its direct suppliers

Question 2 · Syllabus ref A1a · Fundamental components of an ecosystem

Which of the following is a fundamental component of a business ecosystem?

1. A single dominant supplier that sets prices for all participants
2. A network of participants, the products or services exchanged, and the rules governing how participants interact
3. A fixed annual contract between two parties
4. A government licence permitting market entry

Question 3 · Syllabus ref A1b · Participants and roles within an ecosystem

Within a business ecosystem, why is it important to understand the role each participant plays?

1. Every participant must perform an identical role, or the ecosystem stops functioning entirely
2. Only the largest participant's role matters, since smaller participants have negligible influence
3. Different participants, such as platform owners, complementors and customers, play distinct roles that together shape value
4. Participant roles are fixed permanently from the moment the ecosystem is first established

Question 4 · Syllabus ref A1b · Technology driving ecosystem emergence

Technology is described as driving the emergence of ecosystems that are 'connected, open, simple and intelligent, and fast and scalable'. Which of the following best illustrates this?

1. A retailer continuing to use paper-based stock records across all of its branches
2. A bank that only offers its services through physical branches, with no app
3. A manufacturer signing one ten-year exclusive supply contract with a single component supplier
4. A logistics platform using real-time data sharing and APIs to connect carriers and onboard partners fast

Question 5 · Syllabus ref A1b · Costs and risks of shifting to an ecosystem model

A traditional manufacturer is considering shifting from a conventional supply chain to participating in a digital ecosystem. Which of the following is a genuine risk of this shift?

1. Losing control over parts of the value chain as outcomes depend on independent partners
2. Automatically gaining full control over every other participant's pricing decisions in the ecosystem
3. Ecosystems eliminate all forms of competitive pressure on the organisation entirely
4. Ecosystems remove any need for the organisation to invest in technology or data

Question 6 · Syllabus ref A2a · Concept of a business model

Which statement best describes what a business model shows?

1. Solely a financial forecast of the organisation's revenue for the coming year
2. How an organisation defines, creates, delivers and captures value for its stakeholders
3. A fixed legal document that is required when a company is first incorporated
4. A concept that only applies to organisations operating in purely digital industries

Question 7 · Syllabus ref A2b · Steps in defining value

A finance manager is helping a business work through the steps of defining value for its stakeholders. Which sequence of steps reflects the correct approach?

1. Set the selling price first, then decide afterwards who the customers will be
2. Formulate the value proposition first, before identifying who the stakeholders even are
3. Identify stakeholders, rank them, determine the most important needs, then formulate value propositions
4. Skip stakeholder identification entirely and rely solely on competitor pricing benchmarks

Question 8 · Syllabus ref A2b · Ranking stakeholders in value definition

Why does the process of defining value include a step to rank stakeholders, rather than treating all stakeholders identically?

1. Regulation requires every organisation to rank its stakeholders in alphabetical order
2. Only shareholders are ever considered legitimate stakeholders worth ranking at all
3. Ranking stakeholders removes any further need to consider their underlying needs
4. Finite resources mean ranking helps focus the value proposition on what matters most

Question 9 · Syllabus ref A2c · Features that connect and align to create value

Creating value within a business model requires several features to connect and align. Which of the following best reflects this idea?

1. Value creation requires resources, capabilities, processes and partner relationships to work together coherently in support of the intended value proposition
2. Value is created automatically once a product is manufactured, regardless of how resources, processes and partners are organised
3. Value creation depends only on having the lowest-cost raw materials
4. Value is created purely through advertising spend

Question 10 · Syllabus ref A2d · Main features of delivering value

Which of the following best describes the main features involved in delivering value to customers?

1. Only the final act of processing a customer's payment for the product
2. The channels, relationships and infrastructure used to make the value proposition accessible
3. Something that happens automatically the moment a product has been designed
4. Something that becomes irrelevant once a customer has made their first purchase

Question 11 · Syllabus ref A2e · Capturing and sharing value — cost model

Capturing and sharing value involves three main features: a cost model, a revenue model, and distribution of surplus. What does the 'cost model' element refer to?

1. The price customers are willing to pay for a product
2. The legal structure used to distribute profits to shareholders
3. How the costs of creating and delivering value are structured and incurred across the business model
4. The marketing budget allocated to a new product launch

Question 12 · Syllabus ref A2e · Capturing and sharing value — revenue and surplus

In the context of capturing and sharing value, what does 'distribution of surplus' primarily address?

1. How raw materials are physically moved to the organisation's warehouses
2. The geographic spread of the organisation's customer base across regions
3. How frequently the organisation publishes its annual financial statements
4. How the surplus generated is shared among the organisation and its stakeholders

Question 13 · Syllabus ref A3a · Strategies to survive digital disruption

Which of the following represents one of the recognised strategies businesses can use to build disruptive and resilient business models in response to digital disruption?

1. Partnering with a digitally capable organisation to combine existing assets with new digital capabilities
2. Ignoring new digital entrants until they exit the market on their own
3. Reducing all investment in technology to preserve short-term profit margins
4. Relying exclusively on patent litigation to prevent any competitor innovation

Question 14 · Syllabus ref A3a · Build, buy, partner, invest and incubate models

A large established company decides to set up a separate, semi-autonomous unit to develop new digital products outside the constraints of its existing corporate structure. Which digital response strategy does this best illustrate?

1. Build
2. Incubate/accelerate
3. Buy
4. Partner

Question 15 · Syllabus ref A3a · Digital operating models

Which of the following best describes a key feature of a digital operating model, as distinct from a traditional operating model?

1. A digital operating model relies entirely on manual, paper-based processes for consistency
2. A digital operating model removes the need for any organisational structure
3. A digital operating model uses integrated digital technology, data and automation to enable faster, more flexible and more data-driven ways of operating
4. A digital operating model is identical to a traditional operating model but with a different name

Question 16 · Syllabus ref A3a · Building a digital workforce

Which of the following is one of the steps identified for building a digital workforce, alongside attracting and retaining digital talent?

1. Avoiding any change at all to the organisation's existing leadership styles
2. Eliminating every role that involves any direct contact with customers
3. Restricting employees' access to digital tools so as to reduce training costs
4. Fostering a digital culture where humans and automated systems work well together

Question 17 · Syllabus ref A3a · Bringing leadership into the digital age

As part of building a digital workforce, organisations are encouraged to 'bring leadership into the digital age'. What does this primarily involve?

1. Developing leaders who understand digital technology and can guide their teams through digital transformation and new ways of working
2. Replacing all human leaders with automated decision-making systems
3. Removing leadership roles entirely in favour of self-managing teams in every case
4. Ensuring leaders avoid any engagement with technology to focus purely on people management

Question 18 · Syllabus ref A3a · Integrating on-demand workforce

What does 'integrating an on-demand workforce' refer to, as part of building digital workforce capability?

1. Permanently employing every worker on a full-time, indefinite contract regardless of need
2. Incorporating flexible workers, such as freelancers or contractors, to meet fluctuating demand
3. Refusing to use any external or contracted workers under any circumstances at all
4. Outsourcing the entire workforce to a single third-party provider, regardless of cost

Question 19 · Syllabus ref A3a · Analysing digital workforce strategy

A company's leadership wants to evaluate whether their digital workforce strategy is comprehensive. Which combination below reflects the full set of steps typically identified for building a digital workforce?

1. Attract and retain digital talent only, with no further supporting steps required
2. Reduce headcount as the organisation's sole strategy for digital transformation
3. Attract and retain talent, build digital skills, evolve leadership and culture, and use flexible labour
4. Focus exclusively on recruiting senior executives who already have digital backgrounds

Question 20 · Syllabus ref A1a · Ecosystem participants and connections

A software company allows third-party developers to build add-on applications on top of its core platform, which it then makes available to its customers. Which ecosystem characteristic does this best demonstrate?

1. A closed market with one single supplier and no external participants at all
2. A purely internal supply chain with no interaction with any outside party
3. A regulated monopoly structure with no scope for outside competition
4. An open ecosystem where complementary participants extend the core offering to jointly create value

Question 21 · Syllabus ref A2a · Business model vs strategy

How does a business model differ from a business strategy?

1. A business model describes how value is created and captured; strategy is the choice of competitive position
2. They are identical concepts, and the two terms can always be used interchangeably
3. A business model only applies to start-ups, while strategy only applies to established firms
4. A business model is, in essence, purely a marketing document for customers

Question 22 · Syllabus ref A2e · Sharing value with ecosystem partners

In a business ecosystem where value is co-created by multiple partner organisations, why is the 'distribution of surplus' element of capturing value particularly important?

1. Because in a single-firm model there is no need to consider how value is shared with anyone else, and the same logic applies unchanged to ecosystems
2. Because how the jointly created surplus is shared between ecosystem partners directly affects whether partners remain willing to continue collaborating
3. Because surplus distribution is determined entirely by government regulation in every ecosystem
4. Because ecosystem partners never expect to share in any value created

Question 23 · Syllabus ref A1b · Risks of remaining outside an ecosystem

A traditional retailer chooses not to participate in any digital ecosystem, continuing to operate solely through its own physical stores and supply chain. Which of the following is the most likely consequence, based on how ecosystems are understood to reshape competition?

1. The retailer will be entirely unaffected by ecosystem-based competitors, since ecosystems only affect digital-only businesses
2. The retailer will automatically gain a cost advantage purely by avoiding ecosystem participation
3. The retailer risks losing customers and market relevance to ecosystem-based competitors that can offer broader, more integrated, and more convenient value propositions
4. Remaining outside an ecosystem guarantees stronger customer loyalty in every case

Question 24 · Syllabus ref A2c · Alignment of resources and capabilities

A company has strong technical capabilities to manufacture a high-quality product, but its sales process and distribution partners are poorly coordinated with this capability. What is the most likely consequence for value creation?

1. Value creation is unaffected, since product quality alone determines the value created
2. The company will automatically capture more value as a direct result of this misalignment
3. Sales and distribution coordination is irrelevant to how a company's business model performs
4. The misalignment is likely to undermine value creation, despite the strong product capability

Question 25 · Syllabus ref A3a · Choosing between build, buy and partner

A company needs a new digital capability quickly but lacks the in-house expertise to develop it and does not wish to take on the cost and risk of a full acquisition. Which digital response strategy is most appropriate in this situation?

1. Partner, since an alliance gives quicker access without the cost and risk of acquiring a company
2. Build, since developing the capability internally is always the fastest route available
3. Buy, since acquiring another company outright is always the lowest-risk option
4. Ignore the capability gap, since digital capability gaps tend to resolve themselves over time

Question 26 · Syllabus ref A1a · Traditional market structure

In a traditional market structure, how do organisations primarily relate to one another, compared with a business ecosystem?

1. They jointly design products with every competitor before any of them goes to market
2. They operate within a defined industry, mainly competing on price and product features against similar rivals
3. They merge into a single combined entity to remove all competitive pressure
4. They are legally required to share all customer data with rivals

Question 27 · Syllabus ref A1a · Ecosystem rules and interactions

Why do business ecosystems typically need agreed rules governing how participants interact, such as data-sharing standards or platform terms of use?

1. Rules exist purely to satisfy a legal requirement with no practical operating purpose
2. Rules are needed only when the ecosystem has a single participant
3. Rules coordinate independent participants so the products, services and connections within the ecosystem function coherently together
4. Rules eliminate the need for any participant to add value to the ecosystem

Question 28 · Syllabus ref A1b · Regulation in ecosystems

How does the emergence of business ecosystems typically affect the role of regulation, compared with traditional, single-industry markets?

1. Regulation becomes entirely unnecessary once an ecosystem has fully formed
2. Ecosystems are automatically exempt from any form of competition law
3. Regulators only need to monitor the single largest participant in the ecosystem
4. Regulators face new challenges since ecosystems often span multiple industries and jurisdictions

Question 29 · Syllabus ref A2a · Business model purpose

What is the primary purpose of articulating an organisation's business model clearly?

1. To provide a shared understanding of how the organisation creates and captures value, supporting better strategic decisions
2. To satisfy a one-off requirement at the point the company is first registered
3. To replace the need for any financial reporting whatsoever
4. To set the exact price of every product the organisation sells

Question 30 · Syllabus ref A2b · Identifying stakeholders before defining value

Why must stakeholders be identified before an organisation can meaningfully define the value it intends to create?

1. Stakeholder identification is a purely legal formality with no real bearing on value
2. Value only has meaning in relation to the specific stakeholders who receive or are affected by it
3. Every stakeholder automatically has identical needs, once they have been identified
4. Identifying stakeholders removes any further need to consider their needs afterwards

Question 31 · Syllabus ref A2c · Resources and capabilities supporting value creation

A company has well-aligned resources, capabilities, processes and partner relationships, all supporting the same value proposition. What is the most likely outcome of this alignment?

1. The organisation will automatically out-compete every rival, regardless of market conditions
2. Alignment guarantees the business model will never need to adapt again
3. The organisation is well positioned to create the value it set out to deliver
4. Alignment becomes irrelevant once a value proposition has simply been written down

Question 32 · Syllabus ref A2d · Customer relationships in value delivery

Why are ongoing customer relationships considered part of delivering value, rather than something that ends once a sale is made?

1. Because customer relationships are only relevant during the marketing stage, before any sale occurs
2. Because once a sale is completed, the organisation has no further obligation to the customer
3. Because customer relationships are managed entirely by a separate, unrelated department with no link to value delivery
4. Because sustained value delivery often depends on continued service, support and engagement with customers after the initial purchase

Question 33 · Syllabus ref A2e · Revenue model as part of capturing value

What does the 'revenue model' element of capturing and sharing value primarily describe?

1. How the organisation generates income from value, such as through pricing or subscriptions
2. How the organisation physically distributes its products to retail outlets
3. How frequently the organisation's board of directors meets each year
4. How the organisation calculates depreciation on its non-current assets

Question 34 · Syllabus ref A3a · Build strategy for digital capability

A well-resourced organisation decides to develop a new digital capability entirely using its own existing staff and infrastructure. Which digital response strategy does this represent?

1. Buy
2. Build
3. Partner
4. Incubate/accelerate

Question 35 · Syllabus ref A3a · Buy strategy risks

An organisation chooses to acquire a smaller digital-native company to quickly obtain its technology and talent. Which risk is most commonly associated with this 'buy' strategy?

1. The complete absence of any risk, since acquisitions always succeed in delivering their intended digital capability
2. The total elimination of the need for further investment in technology following the acquisition
3. Integration risk, as combining different systems, cultures and ways of working can be difficult and disrupt the value the acquisition was meant to create
4. Automatic loss of all existing customers immediately after the acquisition completes

Question 36 · Syllabus ref A3a · Investing in digital start-ups

An established organisation takes a minority equity stake in an early-stage digital start-up, without acquiring full control. Which digital response strategy does this best represent?

1. Build
2. Buy
3. Partner via a formal joint venture only
4. Invest

Question 37 · Syllabus ref A3a · Digital operating model and decision-making speed

How does adopting a digital operating model typically affect an organisation's speed of decision-making, compared with a traditional, siloed operating model?

1. It typically enables faster decision-making, since integrated data and automation reduce delays caused by manual processes and siloed information
2. It always slows decision-making, since digital tools inherently add unnecessary complexity to every decision
3. It has no effect whatsoever on decision-making speed in any organisation
4. It only affects decision-making speed for organisations with fewer than ten employees

Question 38 · Syllabus ref A3a · Becoming an employer of choice for digital talent

Why is becoming an 'employer of choice' identified as an important step in building a digital workforce?

1. It is a legal requirement imposed on all organisations using digital technology
2. Attracting and retaining skilled talent is easier when seen as an attractive employer
3. It removes the need for any further investment in staff training
4. It guarantees the organisation will never lose an employee to a competitor

Question 39 · Syllabus ref A1a · Society and regulation as ecosystem participants

Why are society and regulators sometimes considered participants within a business ecosystem, rather than purely external forces acting upon it?

1. Regulators always hold a controlling equity stake in every organisation in the ecosystem
2. Society and regulators have no real influence over how digital ecosystems operate
3. Societal expectations and regulation actively shape what an ecosystem can do and how value is shared
4. Only customers, never regulators or wider society, can be ecosystem participants

Question 40 · Syllabus ref A2a · Components of a business model

Which set of elements together make up the core components typically described within a business model?

1. Only the organisation's chosen legal structure and its registered office address
2. Only the names of the organisation's board members and their job titles
3. Only the colour scheme and visual branding used in the organisation's marketing
4. How value is defined, created, delivered and captured for the organisation's stakeholders

Question 41 · Syllabus ref A2e · Trade-offs in cost and revenue models

A company is deciding between a low-price, high-volume revenue model and a premium, low-volume model, while its cost model is largely fixed regardless of which it chooses. What is the key implication for the business model design?

1. The chosen revenue model must be assessed against the fixed cost base to determine which volume and price combination can actually generate a viable surplus to capture
2. The cost model is irrelevant to this decision, since revenue model choice and cost structure never interact
3. Either revenue model will produce an identical surplus, since fixed costs do not vary with the choice made
4. The company should ignore cost considerations entirely and base the decision purely on customer preference

Question 42 · Syllabus ref A3a · Comparing digital response strategies

A company wants full ownership and long-term control of a new digital capability, is willing to accept integration risk, and has the funds available. Which strategy best fits these conditions, compared with partnering or investing?

1. Partner, since alliances always provide full ownership and control equivalent to an acquisition
2. Buy, since acquiring a company outright provides full ownership and control, unlike partnering or taking a minority investment stake
3. Invest, since a minority stake automatically grants the same control as full ownership
4. Ignore all four strategies, since full ownership is never achievable through any of them

Question 43 · Syllabus ref A1b · Ecosystem participants and value exchange rules

What is the primary purpose of rules governing the connections and exchanges between ecosystem participants?

1. To guarantee every participant earns an identical share of total ecosystem profit
2. To prevent any new participant from ever joining the ecosystem once formed
3. To establish a shared basis for how participants interact and exchange value, supporting trust and coordination across the ecosystem
4. To remove the need for participants to agree on data standards or technical interfaces

Question 44 · Syllabus ref A2b · Formulating value propositions for multiple stakeholder groups

An organisation has identified two important stakeholder groups - customers and investors - with different needs. What does the process of defining value suggest the organisation should do next?

1. Create a single, generic value proposition and assume it will satisfy every stakeholder group equally
2. Prioritise investors exclusively and disregard customer needs entirely from this point onward
3. Avoid formulating any value proposition until every possible stakeholder group has been identified
4. Formulate a distinct value proposition for each important stakeholder group, reflecting their respective needs

Question 45 · Syllabus ref A3a · Risks of the incubate/accelerate strategy

A large company sets up a separate, semi-autonomous innovation unit to develop disruptive digital products outside its normal corporate processes. What is a key challenge often associated with this incubate/accelerate approach?

1. Reintegrating the innovation unit's products or culture back into the wider organisation can be difficult once they have developed separately
2. The separate unit will automatically operate at a lower cost than the parent, since it avoids corporate overheads
3. The unit’s independence guarantees its innovations will be adopted enthusiastically by the parent organisation
4. A semi-autonomous unit removes the need for senior leadership sponsorship, since it manages itself