Chapter 3

Which of the following might be a definition for a value-generating activity? a. The core competencies that a company holds that make it possible for it to serve customers in a different way from its competitors b. A new machine that reduces energy costs within a company c. A customer promotion or sale d. A service the company provides to customers that they pay for

a. The core competencies that a company holds that make it possible for it to serve customers in a different way from its competitors

An internal analysis is important because: a. not all strategies will work for all firms; successful strategies must be aligned with a company's strengths. b. company leaders typically do not have a good understanding of how their firms operate internally. c. the business environment is always changing, and the analysis provides insights about the future. d. it compares companies against their competitors so that they can copy competitors' successful strategies.

a. not all strategies will work for all firms; successful strategies must be aligned with a company's strengths.

Which of the following would be considered an example of a tangible resource? a. A pharmaceutical company's team of research and development (R&D) scientists b. A network of distribution centers in strategic locations around the world c. A secret recipe for a dish d. A process for moving raw materials more quickly through the plant

b. A network of distribution centers in strategic locations around the world

A resource or capability can be classified as a core competency that can be a source for a sustainable competitive advantage if: a. it is the same as the capabilities offered by competitors. b. it is different and better than the way a competitor is executing the same capability. c. other companies use a different capability to accomplish the same goal. d. it can be purchased through outsourcing.

b. it is different and better than the way a competitor is executing the same capability.

A company owns a patent, with six more years of protection, on a prescription medication that is used by people around the world. This resource is: a. costly to imitate and nonsubstitutable. b. nonsubstitutable and valuable. c. rare and valuable. d. an example of outsourcing.

c. rare and valuable.

If a start-up U.S.-based automobile parts supplier were to apply a global mind-set to its internal analysis, it would: a. find information about the transportation infrastructure in emerging automobile markets around the world, including Asia and Africa. b. review sales data of its North American dealerships to determine its most popular vehicles. c. study all of its internal resources with an understanding of which capabilities offer value to meet the needs of U.S., Japanese, European, and Korean automakers. d. research the history of the invention of the car and the evolution of the automobile industry.

c. study all of its internal resources with an understanding of which capabilities offer value to meet the needs of U.S., Japanese, European, and Korean automakers.

Which of the following capabilities meets the criteria for being a core competency, in that it is rare, valuable, costly to imitate, and nonsubstitutable? a. The CEO b. The human resources function c. A manufacturing facility d. A company history and brand

d. A company history and brand

Apple, a leader in mobile technology products, wasn't always focused on mobile technology. In 2007, the company changed its name from Apple Computers to Apple Inc. This change was indicative of a shift in the industry. Apple began introducing iPods, iPhones, iPads, iTunes, and the App Store. Apple recognized its core competencies in hardware design and software engineering should serve as the foundation of its future strategy. Which of the following tools did Apple use to determine its competitive advantage? a. External environmental analysis b. Industry analysis c. Competitor analysis d. Internal analysis

d. Internal analysis

Value is measured by: a. the inputs required to produce a product, including human, physical, and financial capital. b. the price of a product set by the manufacturer to be sold in a retail environment. c. the amount of investment required to achieve a competitive advantage. d. a product's performance characteristics and by its attributes for which customers are willing to pay.

d. a product's performance characteristics and by its attributes for which customers are willing to pay.

A CEO is in an argument with his board of directors over the direction of the software company he is leading. The CEO wants to branch out and take advantage of its competencies and capabilities to pursue opportunities enabled by new technology that are forecasted to be very profitable. However, these activities are not what the company is used to, and it would have to develop hardware alongside its specialty in software. The board is arguing that the company is a software company and should remain a software company. Which of the following concepts must the CEO overcome? a. Core rigidity b. Strategic flexibility c. Core capabilities d. Resources

a. Core rigidity

A sporting goods company developed an innovative material for the manufacture of baseball bats. For many years, the material and its process for manufacturing served as a rare and valuable capability, distinguishing it from competitors. Unfortunately, many of the baseball leagues have been changing their regulations to outlaw bats made of this material because they constitute an unfair advantage for players. As part of its internal analysis, its leaders might: a. determine if the company's core competency is in research and development of different materials or only in working with this material specifically. b. lobby the sports leagues to ask them not to outlaw the bat material. c. examine the trends in the industry to see what materials competitors are using in their bat manufacturing. d. research other kinds of materials to find one that is not outlawed but that could be produced at a lower cost.

a. determine if the company's core competency is in research and development of different materials or only in working with this material specifically.

A core rigidity arises when a: a. resource becomes an obstacle, generating inertia and stifling innovation, often because of conditions in the external environment. b. company puts all of its strategic decisions up for a vote by the company employees. c. corporation refuses to change its strategies without an action by the board of directors. d. firm is led by a CEO with a rigid sense of mission that cannot be swayed.

a. resource becomes an obstacle, generating inertia and stifling innovation, often because of conditions in the external environment.

Myspace, the social networking site, was a leader and innovator for modern social networking. However, not long after Myspace's peak, a new social networking site, Facebook, began quickly gaining ground. Myspace quickly became obsolete because of Facebook's superior functionality, design, and features. Which of the following was Myspace lacking that resulted in the company losing its competitive advantage? a. Intangible resources b. Costly-to-imitate capabilities because it became inexpensive to start a social networking site c. Valuable capabilities because Myspace didn't exploit the opportunity of people's need to connect d. A mission statement because the company lacked a clear understanding of where it was operating and who it was serving

b. Costly-to-imitate capabilities because it became inexpensive to start a social networking site

Capabilities are the: a. human capital, through knowledge and experience, applied to producing products. b. combination of tangible and intangible resources to complete the organizational tasks required to produce, distribute, and service the goods or services for customers. c. physical attributes of the company, including its buildings, machinery, and other assets. d. advanced degrees that are held by members of the senior leadership team.

b. combination of tangible and intangible resources to complete the organizational tasks required to produce, distribute, and service the goods or services for customers.

A company has identified a core competency in providing telecommunications services for mid-sized businesses through a combination of simple technology and software, excellent customer service, and low-cost hardware. As competitors gain ground in competing for mid-sized companies, this core competency might become a core rigidity if the: a. cost of hardware rises, thereby increasing the company's costs of production. b. company doesn't keep up with advances in technology and customers begin to expect greater value from the technology. c. company chooses to shift its focus to large-scale enterprises to offer its products and services. d. company starts to target smaller businesses with its bundle of capabilities.

b. company doesn't keep up with advances in technology and customers begin to expect greater value from the technology.

A nonprofit organization is focused on providing mental health services to the homeless in its geographic area. It serves people by ensuring they receive the public assistance they are eligible for and then connects them with care providers that have expertise working with transient patients. The company's primary expenses are the salary and benefits for its staff of social workers, and it receives government funding to cover those. However, the organization does not have enough people to fill its open positions and has a waiting list of homeless people in need of case workers. Which of the following represents a weakness for the nonprofit organization? a. Fundraising b. Distribution c. Human resources d. Customer service

c. Human resources

A hospital system operates 22 physicians' offices, five skilled nursing facilities, and two hospitals. The system employs more than 500 people directly and is affiliated with more than 100 additional physicians. The system offers a wide breadth of medical services, including all of the major specialties. The system was recently recognized as the top cardiac hospital in the state. Which of the following represents the company's capabilities? a. The staff of 500 people b. The hospital buildings and facilities c. Its complete list of medical services d. Its cardiac services

c. Its complete list of medical services

A software company that is seeking a sustained competitive advantage will constantly be facing obsolescence because of environmental change. To generate a sustained competitive advantage, this company must: a. capture as much revenue as it can quickly, and then close the business when technology surpasses it. b. develop strategies to push competitors out of the business early so it is not faced with technological pressures. c. be continually building its technological capabilities to develop new skills as technology advances so that it can offer constant upgrades to meet customers' needs. d. always hire new people to bring new experience and knowledge into the firm.

c. be continually building its technological capabilities to develop new skills as technology advances so that it can offer constant upgrades to meet customers' needs.

A company is analyzing its value chain to discover its value-creating activities. While formulating its strategy, the firm will: a. prioritize only its support activities as a source of competitive advantage. b. create functional departments to manage these activities. c. consider the operational functions and support functions to determine which activities contribute the greatest value in the product or service being sold to customers. d. expand into multiple markets to serve as many customers as possible with its value-creating activities.

c. consider the operational functions and support functions to determine which activities contribute the greatest value in the product or service being sold to customers.

A capability is nonsubstitutable when: a. rival firms do not have the same capability. b. competitors can't clearly understand how a firm uses it as the foundation for competitive advantage. c. it does not have strategic equivalents. d. it allows firms to exploit opportunities.

c. it does not have strategic equivalents.

A capability can be considered costly to imitate when: a. other companies possess the same capability. b. it requires an investment of half of the company's financial assets. c. it is developed because of unique historical conditions. d. there are costs associated with purchasing it, as in outsourcing.

c. it is developed because of unique historical conditions.

A firm should study its internal organization as part of the strategic management process because: a. without this study, strategic leaders do not have a working understanding of how their business operates. b. it is the only method for identifying threats and opportunities to the business. c. it provides the insights the firm requires to match what the firm can do with what the firm might do when formulating strategies. d. the firm is required to report its results to the government.

c. it provides the insights the firm requires to match what the firm can do with what the firm might do when formulating strategies.

An intangible resource is one that is: a. based on optimism and planning, a resource that a company is in the process of establishing. b. created to fill a void in a company so that it might more easily compete with its rivals. c. rooted deeply in the company history, is gathered over time, and is difficult for competitors to analyze or imitate. d. a service that a company provides to satisfy customers' needs.

c. rooted deeply in the company history, is gathered over time, and is difficult for

Identifying internal strengths and weaknesses is important because: a. company boards of directors are required to submit documentation to the SEC for publicly-traded companies. b. it is impossible to select strategies to implement without first having completed an internal analysis. c. strategies are more successful when they are aligned with a company's resources, capabilities, and core competencies. d. these are more important than understanding external threats and opportunities.

c. strategies are more successful when they are aligned with a company's resources, capabilities, and core competencies.

TaylorTech, a high-quality metals finishing company, is struggling with its margins. TaylorTech has raw materials delivered to its foundry in Pittsburgh, where the company melts the metals into castings. The firm then polishes them as a value-added process before selling the custom castings to customers. Its unique process is rare in the United States, is very secretive, and results in a more efficient cast that commands a premium price. Unfortunately, the casting process is becoming more expensive due to increased wage pressure from the workers specializing in casting. With these issues, TaylorTech has to make a decision. Which of the following is the most viable option for TaylorTech to increase its margins? a. Hire less-skilled workers b. Lay off team members across the company c. Stop offering the polishing process d. Outsource the casting process

d. Outsource the casting process

BlackBerry, a one-time leader in secure cell phones, has lost its edge. Without significant upgrades or innovation, the company quickly lost market share to iPhones and Android devices. The company attempted to imitate these advances with the Blackberry Storm product, which flopped. Blackberry was criticized as trying to leverage capabilities beyond its core competencies. Which of the following tools should Blackberry use to regain a scope of their core competencies and determine potential sources of competitive advantage? a. Strategy analysis b. External environmental analysis c. Competitor analysis d. Value chain analysis

d. Value chain analysis

Capabilities develop into core competencies that can serve as the source of competitive advantage when: a. the leadership team chooses to highlight them as part of the company's core values. b. a firm copies the way other firms perform them. c. a company invests a lot of financial capital into them. d. employees, or human capital, integrate them and deploy them to deliver value to customers.

d. employees, or human capital, integrate them and deploy them to deliver value to customers.

An industrial fabrication firm has purchased a facility capable of housing large-scale projects—as long as 120 feet. The firm could develop this tangible resource into a capability by: a. purchasing additional buildings of similar size across the country. b. buying raw metals and shipping them to the facility. c. selling the building to its customers for them to use for their projects. d. employing engineers who can design large projects and welders who have expertise in these projects.

d. employing engineers who can design large projects and welders who have expertise in these projects.

An attorney has grown his law firm, gaining new clients in two diverse areas—estate law and immigration law. He's not sure which specialty will become his focus in the long run. At the same time, he believes he has enough work to support hiring a paralegal. However, he is having trouble hiring a paralegal who can manage both types of clients. He was able to find a freelance paralegal referral service that connects attorneys to paralegals who have experience in a variety of specialties. He might consider outsourcing through the referral service because: a. he has a friend that works for the paralegal referral business, and she will earn a bonus if he uses the service. b. it is less expensive than hiring a full-time paralegal. c. outsourced capabilities provide greater value to customers and are superior to internal capabilities. d. it provides him with the flexibility to gain capabilities to serve both types of clients without making a long-term investment.

d. it provides him with the flexibility to gain capabilities to serve both types of clients without making a long-term investment

Outsourcing is the: a. decision by a company to purchase a supplier's company, bringing its capabilities into the company. b. decision to pay less for a value-creating activity through a supplier. c. decision to manufacture in a foreign country, at a facility owned by the company, because it offers lower wages. d. purchase of a value-creating activity or support function activity from an external supplier.

d. purchase of a value-creating activity or support function activity from an external supplier.