CH. 3

__________ is the ability to analyze, understand, and manage an internal organization in ways that are not dependent on the assumptions of a single country, culture, or context. a. Strategic thinking b. A global mind-set c. Profit-pooling d. Competency-discovering

A global mind-set

Which of the following is NOT a component of internal analysis leading to competitive advantage? a. Tangible and intangible resources b. Analysis of supplier power c. Capabilities d. Core competencies

Analysis of supplier power

Which of the following is a true statement about capabilities? a. Capabilities are often developed in specific functional areas such as manufacturing, R&D, and marketing. b. Valuable capabilities are based almost entirely on tangible resources. c. Capabilities based on human capital are more vulnerable to obsolescence than other intangible capabilities because of the tendency for employee knowledge to become outdated. d. The link between firm financial performance and capabilities is dependent on whether the capabilities are based on tangible or intangible resources.

Capabilities are often developed in specific functional areas such as manufacturing, R&D, and marketing.

__________ is an example of a capability that is based in the functional area of distribution. a. Effective use of logistics management techniques b. Effective control of inventories through point-of-purchase data collection c. Effective organizational structure d. Product and design quality

Effective use of logistics management techniques

Which of the following is NOT a reputational resource? a. Customers' opinions that the firm's products are high quality b. Employees' opinions of their supervisors' fairness c. Suppliers' opinions that the firm pays its bills in a timely manner d. Customers' opinions that using the firm's products makes them attractive

Employees' opinions of their supervisors' fairness

Which of the following is NOT a factor affecting sustainability of a competitive advantage? a. Availability of substitutes for a firm's core competence b. Rate at which obsolescence of the core competence occurs because of environmental changes c. Imitability of a core competence d. Length of time the core competence has existed

Length of time the core competence has existed

ACME Corp. is a leading provider of radios to the commercial market. Its products all rely on printed circuit-board technology. ACME has protected its market leadership with continued advancements in this technology, which it patents. A competitor has developed a radio for this market with equal performance but that uses a software-based technology instead of circuit boards. ACME's technology leadership fails which of the following capability tests? a. Value test b. Rareness test c. Substitutability test d. Costly-to-imitate test

Substitutability test

At a manufacturing facility, which of the following would be categorized as an intangible resource? a. The forklift b. The quality control process c. The forklift driver d. The financial investment into building the warehouse

The quality control process

Value chain activities are the: a. activities or tasks most likely to be imitated by competitors. b. activities or tasks the firm completes in order to produce products and then sell, distribute, and service those products in ways that create value for customers. c. activities or tasks the firm completes to support the work being done to produce, sell, distribute, and service the products the firm is producing. d. activities or tasks most crucial to implementing the firm's business strategy.

activities or tasks the firm completes in order to produce products and then sell, distribute, and service those products in ways that create value for customers.

One reason executive judgment can be a particularly important source of competitive advantage is that judgment: a. allows a firm to build a strong reputation. b. compensates for lower returns during harsh market conditions. c. increases human intellectual capacity. d. allows for superior bundling of resources

allows a firm to build a strong reputation.

A decision that results in failure: a. is a career-ending event because it is so unusual. b. often results from lack of accountability. c. fosters organizational inertia. d. allows for learning.

allows for learning.

The challenge and difficulty of making effective decisions are implied by preliminary evidence suggesting that __________ of organizational decisions fail. a. one-fourth b. one-fifth c. one-tenth d. one-half

d. one-half

Firms that achieve competitive parity can expect to: a. earn below-average returns. b. earn average returns. c. earn above-average returns. d. initially earn above-average returns, declining to average returns

earn average returns.

When firms lay off employees, they are: a. treating employees as an intangible resource. b. recognizing the reduced value of labor in the value chain. c. eroding the organization's knowledge resources. d. temporarily sacrificing a tangible asset that is easily replaced.

eroding the organization's knowledge resources.

Valuable capabilities allow the firm to: a. exploit threats in its external environment. b. neutralize opportunities in its internal environment. c. exploit opportunities or neutralize threats in its external environment. d. exploit opportunities and threats in its internal environment.

exploit opportunities or neutralize threats in its external environment.

By emphasizing core competencies when selecting and implementing strategies, companies learn to compete primarily on the basis of: a. intangible resources. b. their primary activities. c. firm-specific differences. d. efficiency of production.

firm-specific differences.

A major department store chain has a strict policy of banning photographs or videos of its sales floor or back-room operations. It also does not allow academics to conduct studies of it for publication in research journals. In fact, some of its own top managers refer to the management's policies on secrecy as "verging on paranoid." These policies indicate that the top management of the firm believes the organization's core competencies are: a. causally ambiguous. b. unobservable. c. imitable. d. common.

imitable

Compared to intangible resources, in terms of their value, tangible resources are __________ constrained because they are __________ to leverage. a. less; easier b. less; harder c. more; harder d. more; easier

more; harder

Organizational culture is: a. amorphous and changeable. b. not easily imitable. c. so difficult to analyze that most firms should choose to ignore it. d. typically fragile in the face of changes in the external environment.

not easily imitable.

Government agencies are known for having so many layers and rules that decisions are made slowly and inefficiently. In this case, the __________ resource is a detriment to taxpayers using and paying for the bureaucracy. a. financial b. organizational c. physical d. technological

organizational

Tools such as __________ help the firm focus on its core competencies as the source of its competitive advantages. a. marketing b. manufacturin g c. outsourcing d. imitation

outsourcing

A veterinary practice has added a pet boarding and grooming facility. Most of the practice's competitors also provide these services. The veterinary practice is gaining competitive: a. advantage. b. parity. c. disadvantage. d. neutrality.

parity

Value consists of a product's: a. proprietary characteristics and attributes for which customers are willing to pay. b. performance characteristics and attributes for which customers are willing to pay. c. proprietary characteristics and attributes for which customers consider paying. d. performance characteristics and attributes for which customers consider paying

performance characteristics and attributes for which customers are willing to pay.

Amazon built a new distribution facility in Robbinsville, New Jersey. It is immediately off the exit of a major road. This is an example of a(n) __________ resource. a. financial b. organizational c. physical d. technological

physical

All core competencies have the potential to become core: a. rigidities. b. stagnations. c. inefficiencies. d. weaknesses.

rigidities.

Many firms outsource the payroll function of paying employees to firms such as ADP. Payroll is a(n): a. value-chain activity. b. operation function. c. support function. d. supply-chain function

support function.

The corporate research division of Siemens files, on average, 25 patents a day. The patents are a(n) __________ resource. a. financial b. organizational c. physical d. technological

technological

A local restaurant, Farm Fresh Ingredients, has become highly successful through its menu, based solely on organically raised chicken and beef, and organic seasonal produce. It has opened new locations in other cities, and these new locations are becoming highly profitable. Farm Fresh can expect that, at best, its competitive advantage will be: a. permanent. b. sustainable. c. temporary. d. defensible

temporary.

It is increasingly difficult for a firm to develop and sustain a competitive advantage because of the effects of globalization and: a. the rapid development of the Internet's capabilities. b. extensive use of outsourcing within the borders of the United States. c. the declining number of inventions and patents developed by U.S. citizens. d. the simultaneous erosion of the U.S. work ethic and the U.S. education system

the rapid development of the Internet's capabilities.

A firm seeking resources with the potential to be formed into core competencies as the foundation for creating value for customers should focus on assembling _________ resources. a. the most b. rigid c. the right d. dark side

the right

Subscriptions to the New York Times have been decreasing as more customers receive their news through other media. At the same time, advertisers have shifted portions of their spending to other media. The newspaper's managers are making decisions under: a. certainty. b. uncertainty. c. intraorganizational conflict. d. interorganizational conflict.

uncertainty

The three conditions that characterize difficult managerial decisions concerning resources, capabilities, and core competencies are: a. complexity, rarity, and human intellectual capital. b. uncertainty, complexity, and intraorganizational conflicts. c. imitability, complexity, and interorganizational conflicts. d. imitability, comparability, and human intellectual capital.

uncertainty, complexity, and intraorganizational conflicts.

All of the following are tangible resources EXCEPT: a. production equipment. b. distribution centers c. a firm's reputation. d. formal reporting structures.

a firm's reputation

Which of the following is NOT an external event that reveals the danger of relying on existing core capabilities? a. A new competitor figures out a better way to serve the firm's customers. b. New technologies emerge and replace those used by the firm. c. A firm changes its focus to a new core competence. d. Political or social events shift the foundation of current core capabilities.

A firm changes its focus to a new core competence.

One of the managers at RDK has a successful track record that goes back several years. As a result, he has become extremely confident in his judgment, and has begun to make decisions without taking the time to evaluate contingencies that he feels are not relevant. This has led to some mistakes recently. The over-confidence exhibited by this manager is an example of what? a. Cognitive bias b. Intelligent risk-taking c. Executive judgment d. Value capability

Cognitive bias

Which of the following would be categorized as a value chain activity? a. Hiring new employees b. Securing financial capital c. Investing in organizational functions d. Conducting customer feedback surveys

Conducting customer feedback surveys

Marin Industries is a U.S. company. It is exploring the possibility of offshoring in order to create value. Which of the following activities would be an example of offshoring? a. Building a manufacturing plant in South America b. Contracting with an Asian company to provide technical support c. Purchasing a competitor in the UK d. Selling its products in Europe

Contracting with an Asian company to provide technical support

__________ can be viewed as the capacity to take action. a. Strategic assets b. Human capital c. Core competencies d. Functional capabilities

Core competencies

McDonald's culture, with an emphasis on cleanliness, consistency, service, and the training that reinforces the value of these characteristics, illustrates which of the following criteria for sustainable competitive advantage? a. Valuable b. Rare c. Costly to imitate d. Nonsubstitutable

Costly to imitate

Southwest Airlines has a complex interrelationship between its culture and staff that adds value in ways that other airlines cannot, such as jokes on flights or the cooperation between gate personnel and pilots. These examples illustrate which of the following criteria for sustainable competitive advantage? a. Valuable b. Rare c. Costly to imitate d. Nonsubstitutable

Costly to imitate

A marketing manager at GTA Technology wants the next generation of a particular application to include certain features. The product manager of that app insists that the feature would be costly to implement and could not be achieved by the desired release date unless additional resources, both financial and human, were directed to the app. The marketing manager insists that this is necessary, while the product manager feels that the inclusion of these features would not validate the extra investment. It is now up to the project manager to decide how to proceed. Which of the following conditions is most affecting the project manager's decision? a. Uncertainty b. Complexity c. Intraorganizational conflict d. Sustainability

Intraorganizational conflict

The PRQ chain of retail stores has achieved a high level of efficiency in its inventory control by collecting data at the point of purchase. This is an example of a capability in which specific functional area? a. Research and development b. Distribution c. Management d. Management information systems

Management information systems

Which of the following is true about outsourcing? a. Outsourcing limits a firm's flexibility and requires minimal coordination. b. Outsourcing allows firms to concentrate on those areas in which they can create value. c. Outsourcing strengthens the creative and innovative functions within the firm. d. Outsourcing is effective only when it includes all support activities.

Outsourcing allows firms to concentrate on those areas in which they can create value.

Why is trust necessary to build social capital? a. Contracts between a firm and its suppliers cannot be enforced. b. Firms must be reassured that they will be reimbursed for their expenses. c. Contracts do not exist between a firm and its customers. d. Partners must be confident that neither party will take advantage of the other

Partners must be confident that neither party will take advantage of the other

__________are the source of a firm's __________, which are the source of the firm's __________. a. Resources; capabilities; core competencies b. Capabilities; resources; core competencies c. Capabilities; resources; above-average returns d. Core competencies; resources; competitive advantage

Resources; capabilities; core competencies

An investor is considering buying a restaurant that has been in operation for a number of years. The restaurant has a highly regarded chef and many long-term kitchen and wait staff who work together smoothly. It has a reputation for dishes of consistently high quality and an appealing dining atmosphere. Which of the following should the investor consider when making a decision? a. The investor should realize that the success of this restaurant is so heavily based on human resources that the business will likely be subject to inertia in the future. b. The investor may find that the restaurant's financial statements undervalue the true value of its resources. c. The investor should be aware that intangible assets are difficult to leverage into additional businesses. d. The investor should search for a firm that has competitive advantages based on tangible resources

The investor may find that the restaurant's financial statements undervalue the true value of its resources.

Several months ago, a restaurant developed a new appetizer that is a hit with customers. Many customers go to the restaurant just for the appetizer, and it was at the center of a recent highly positive review by a food critic. Preparation involves common ingredients and average culinary skills but requires a very high oven temperature, which significantly increases utility costs. Several competing restaurants have since added their own version of the appetizer to their menu. Which of the following criterion for assessing capabilities/core competencies is met? a. The restaurant has the capability to develop something that is valuable. b. The restaurant has the capability to develop something that is rare. c. The restaurant has the capability to develop something that is costly to imitate. d. All of these criteria are met.

The restaurant has the capability to develop something that is valuable.

The Obama administration expressed a desire to eliminate coal as an energy source, and introduced regulations to drive the coal industry out of business. The Trump administration eased regulations on the coal industry, but also took steps to encourage the development of other forms of energy. In light of this changing regulatory environment, decision makers in the energy industry are most affected by what condition? a. Uncertainty b. Complexity c. Intraorganizational conflict d. Interorganizational conflict

Uncertainty

Consider the criteria necessary for sustainable competitive advantage. Which of the following combinations would most likely bring about a temporary competitive advantage and the possibility for above-average returns? a. Valuable, rare, not costly to imitate, and possibly substitutable b. Valuable, rare, costly to imitate, and possibly substitutable. c. Valuable, not rare, not costly to imitate, and possibly substitutable. d. Valuable, not rare, costly to imitate, and substitutable

Valuable, rare, not costly to imitate, and possibly substitutable

One capability that can be learned from failure is when to: As live streaming and downloading of digital content increased, a manufacturer of CD and DVD players experienced a downturn. The managers felt that the firm's capability in producing these players was a core competence. They increased their investment to improve the playback quality, add more playback features, and change the design of the players to make them more appealing to the eye. Even with these investments, the firm had to lower prices, and was still unable to maintain sales volume. Clearly, mistakes were made in managing the firm's resources. What should the firm have learned from this failure? a. When to change marketing strategy b. When to add more resources c. When to outsource d. When to quit

When to quit

All of the following were traditional sources of competitive advantage EXCEPT: a. labor costs. b. access to financial resources. c. protected markets. d. a highly educated labor market.

a highly educated labor market.

All competitive advantages have: a. a limited life. b. unrestricted sustainability. c. the ability to earn above-average returns indefinitely. d. protections against imitability.

a limited life.

Compared to tangible resources, intangible resources are: a. of less strategic value to the firm. b. less likely to be the focus of strategic analysis. c. a superior source of capabilities. d. more likely to be reflected on the firm's balance sheet

a superior source of capabilities

All of the following are true about the strategic decisions managers make about their firm's internal organization EXCEPT that they: a. are directly correlated to executive compensation. b. are nonroutine. c. have ethical implications. d. significantly influence the firm's ability to earn above-average returns

are directly correlated to executive compensation.

Tangible resources include: a. assets that are people-dependent, such as know-how. b. assets that can be observed and quantified. c. organizational culture. d. a firm's reputation.

assets that can be observed and quantified

Internal analysis enables a firm to determine what it: a. can do b. should do. c. will do. d. might do.

can do

Because firms combine tangible and intangible resources to create capabilities: a. these capabilities are fragile and subject to sudden loss of value. b. capabilities are often based on developing, carrying, and exchanging information and knowledge through the firm's human capital. c. capabilities are easily transferred from one firm to another as employees change jobs. d. these types of capabilities are considered primary activities in the value chain.

capabilities are often based on developing, carrying, and exchanging information and knowledge through the firm's human capital.

Gamma, Inc., has struggled for industry dominance with Ardent, Inc., its main competitor, for years. Gamma has gathered and analyzed large amounts of competitive intelligence about Ardent. It has observed as much of the firm's internal functioning and technology as it can legally, yet Gamma cannot understand why Ardent has a competitive advantage over it. The source of Ardent's success is: a. social complexity. b. causally ambiguous. c. organizational culture. d. historical conditions

causally ambiguous.

Capabilities typically come from: a. individual resources. b. one unique resource. c. several outstanding resources used independently. d. combining resources.

combining resources

Innovation, consumer understanding, brand-building, go-to-market, and scale are activities that P&G performs well and are examples of the company's: a. tangible resources. b. intangible resources. c. core competencies. d. capabilities.

core competencies

The owner of a store that sells fine-quality fabrics for home seamstresses bemoans the fact that few young women know how to do fine tailoring, much less simple dressmaking. Many potential customers are unable to appreciate the premium quality of the fabrics and are deterred by the high prices, as well as the complexity of fine sewing. In the past, the store had a strong demand for fabrics, large classes for women learning the fine points of sewing, and a reputation for excellent service and technical advice. Now the store is earning lower-than-average returns. This case is an example of: a. the hazard of competitors being able to imitate a firm's core competency. b. the need for firms to stick to their core competencies through temporary downturns in market demand. c. the lack of intangible resources undermining the core competencies of the firm. d. core competencies that have become core rigidities.

core competencies that have become core rigidities.

Charmed by Claire is a successful retail boutique that sells women's accessories. Claire, the owner/manager, knows that women have many options when buying jewelry. When customers enter her store, they are greeted by name and given prompt, friendly attention. Customers return to the store because the service is excellent. Claire says the most important decision she makes is hiring the best staff because customer service is vital to her business. Customer service is a(n): a. human resource. b. organizational resource. c. rare resource. d. core competency

core competency

A food bank in Florida was struggling to serve its customers. It asked Walmart for help. Walmart sent a team of managers who reorganized storage and transportation. The food bank was able to increase the number of clients served by tenfold. Walmart shared its expertise in: a. distribution. b. human resources. c. marketing. d. manufacturing

distribution.

A firm's core competencies, integrated with an understanding of the results of studying the conditions in the external environment, should: a. guarantee profits. b. lead to a first-mover advantage. c. drive the selection of strategies. d. increase the firm's market share.

drive the selection of strategies.

Apex Auto Repair has a thriving business based on its reputation for high-quality work, honesty, and skilled employees. For continued long-term success, Apex's owner should: a. concentrate on maintaining Apex's current core competencies. b. focus on developing Apex's future competitive advantages. c. place more emphasis on tangible resources, which are less vulnerable to obsolescence than intangible resources. d. recognize that core competencies derived from human resources are more subject to becoming core rigidities than are core competencies based on other types of resources.

focus on developing Apex's future competitive advantages.

If a firm offers a service that is valuable, rare, and costly to imitate, but a substitute exists for the service, the firm will: a. achieve competitive parity. b. have a competitive disadvantage. c. have a temporary competitive advantage. d. gain a sustainable competitive advantage.

have a temporary competitive advantage.

A product's value is created by some combination of: a. high cost and highly differentiated features. b. high cost and less differentiated features. c. low cost and less differentiated features. d. low cost and highly differentiated features.

high cost and highly differentiated features.

A person who has made a successful decision when no obviously correct model or rule is available or when relevant data are unreliable or incomplete has exercised: a. foresight. b. judgment. c. effective strategic thinking. d. decisiveness.

judgment.

Costly-to-imitate capabilities can emerge for all of the following reasons EXCEPT: a. lack of scientific transference. b. social complexity. c. unique historical conditions. d. causal ambiguity

lack of scientific transference.

Compared to tangible resources, intangible resources are __________ and __________. a. less visible; more difficult to copy b. less visible; less difficult to copy c. more visible; more difficult to copy d. more visible; less difficult to copy

less visible; more difficult to copy

Outsourcing is the: a. spinning off of a value-creating activity to create a new firm. b. selling of a value-creating activity to other firms. c. purchase of a value-creating activity from an external supplier. d. use of computers to obtain value-creating data from the Internet

purchase of a value-creating activity from an external supplier.

A major U.S. manufacturer of children's toys believes its main competitive advantage lies in its continuing development of innovative toys and games. The company is facing increasing competition on price, and it is strongly considering outsourcing to offshore firms as a means of reducing costs. The LAST function this firm should consider outsourcing is: a. operations. b. research and development. c. supply-chain management. d. distribution

research and development.

When considering the relationships among the various characteristics a firm possesses, it is necessary to understand that _________ are the most numerous. a. resources b. capacities c. capabilities d. core competencies

resources

Firms that have strong positive relationships with suppliers and customers are said to have __________, an essential ingredient to creating value. a. customer value b. social capital c. effective marketing d. an attractive industry

social capital

Knowledge transfer and access to resources the firm does not own but needs to complete activities within the value chain are enhanced by: a. guidelines for sharing knowledge and resources. b. social capital. c. penalties for not sharing knowledge and resources. d. training employees on how to cooperate

social capital.

A financial management firm has existed for more than 70 years. Some of its original clients' grandchildren are now clients of the firm themselves. The partners and staff of the firm have spent most or all of their careers with the firm. Many have even married into each other's families. This firm has capabilities that would be costly to imitate primarily because of its: a. access to large amounts of financial capital. b. causally ambiguous core competencies. c. social complexity. d. unique historical conditions

social complexity

To provide a sustainable competitive advantage, a capability must satisfy all of the following criteria EXCEPT be: a. technologically innovative. b. hard for competing firms to duplicate. c. without good substitutes. d. valuable to customers.

technologically innovative

Value chain analysis is a tool used to: a. analyze a firm's external environment for value-creating opportunities. b. analyze a firm's value chain activities and support functions in isolation from its competitors' value chain. c. understand the parts of the firm's operation that create value and those that do not. d. identify the firm's core competencies in each of the primary activities of the firm.

understand the parts of the firm's operation that create value and those that do not.

From a customer's point of view, for an organization's capability to be a core competence, it must be: a. inimitable and unique. b. valuable and unique. c. inimitable and nonsubstitutable. d. valuable and nonsubstitutable.

valuable and unique.

In the airline industry, frequent flyer programs, ticket kiosks, and e-ticketing are all examples of capabilities that are __________ but no longer __________. a. rare; valuable b. valuable; rare c. socially complex; rare d. valuable; causally ambiguous

valuable; rare

The capabilities used to create the sustainability/green initiatives at Walmart and Target are __________ but less likely to be __________. a. rare; valuable b. valuable; rare c. socially complex; rare d. valuable; causally ambiguous

valuable; rare

The key to achieving competitiveness, earning above-average returns, and remaining ahead of competitors in the long run is to manage current core competencies: a. in a way that uniquely bundles and leverages the firm's existing resources. b. while simultaneously developing new ones. c. and imitate the core competencies of successful competitors. d. in order to preserve and enhance them against the firm's competitors

while simultaneously developing new ones.

The proper matching of what a firm CAN DO with what it MIGHT DO: a. balances the internal characteristics of the firm with the characteristics of the external environment. b. overcomes the rigidity and inertia resulting from a history of success. c. yields insights the firm requires to select its strategy. d. develops core competencies based on human knowledge

yields insights the firm requires to select its strategy.