Ch 3 mgmt

Analyzing the internal environment enables a firm to determine what it "might do" by identifying what opportunities and threats exist.

False

By themselves, resources can allow firms to create value for customers as the foundation for earning above-average returns.

False

Compared to tangible resources, intangible resources are an inferior source of core competencies.

False

Costly-to-imitate capabilities are those which other firms cannot easily develop as they have no strategic equivalent.

False

Firms should never outsource a primary activity because of the danger of the activity being imitated by rivals.

False

Firms should seek to continually develop new core competencies because all core competencies guarantee above-average profit.

False

Interpersonal relationships, trust, friendships, and a firm's reputation are all examples of complex social phenomena that make capabilities easy to imitate.

False

Older employees are less valuable resources to firms than younger employees, because older employees have lower levels of knowledge. Consequently, employee layoffs should begin with early-retirement inducements.

False

The firm with the most capabilities wins

False

The need to meet quarterly earnings results causes managers to accurately examine the firm's internal organization.

False

The value of tangible assets, such as the firm's borrowing capacity and its physical plant, is high because these assets can be easily leveraged to derive additional value.

False

Valuable capabilities allow the firm to exploit strengths or neutralize weaknesses in the internal environment.

False

Value chain activities in the value chain create value, whereas support functions generate costs.

False

______ are the source of a firm's ______, which are the source of the firm's ______.

Resources; capabilities; core competencies

Any core competency has the potential to lose its value-creating ability.

True

Resources must be combined to form capabilities, as illustrated by Chipotle, which linked fresh ingredients with several other resources, including the marketing and training of employees, as the foundation for customer service as a capability.

True

Technology has made it more difficult for companies to find ways to develop competitive advantages.

True

The foundation of many capabilities lies in the unique skills and knowledge of a firm's employees.

True

Value chain activities are:

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.

Valuable capabilities:

allow the firm to exploit opportunities or neutralize threats in its external environment.

A decision that results in failure:

allows for learning

Tangible resources include

assets that can be observed and quantified.

Because firms combine tangible and intangible resources to create capabilities:

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

When firms lay off employees, they are:

eroding the organization's knowledge resources.

A major reason outsourcing is effective is that:

few firms possess superior capability in all primary and support activities.

By emphasizing core competencies when formulating strategies, companies learn to compete primarily on the basis of:

firm specific differences

Acme Auto Repair has a thriving business based on its reputation for high-quality work, honesty, and skilled employees. For continued long-term success, Acme's owner should:

focus on developing Acme's future competitive advantages.

Examples of support activities include all of the following EXCEPT:

follow-up service.

If a firm offers a service that is valuable, rare, and costly to imitate, but a substitute exists for the service, the firm will:

have a temporary competitive advantage.

A product's value is created by each of the following EXCEPT:

high cost and highly differentiated features.

Organizational culture is:

not easily imitable.

The challenge and difficulty of making effective decisions are implied by preliminary evidence that ______ of organizational decisions fail.

one-half

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.

organizational

Tools such as ______ help the firm focus on its core competencies as the source of its competitive advantages.

outsourcing

Amazon is building 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.

physical

Outsourcing is the:

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

One capability that can be learned from failure is when to:

quit

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:

research and development.

The most numerous of the following organizational characteristics are:

resources

Knowledge transfer and access to resources within the value chain are enhanced by:

social capital.

The key to achieving competitiveness, earning above-average returns, and remaining ahead of competitors in the long run is to manage current core competencies:

while simultaneously developing new ones.

The ______ are those with the potential to be formed into core competencies as the foundation for creating value.

"right" resources

Which of the following is NOT an external event that reveals the "dark side" of core capabilities?

A firm changes its focus to a new core competence.

______ 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 global mind-set

______ can be viewed as the capacity to take action.

Core competencies

Which of the following is TRUE about outsourcing?

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

All core competencies have the potential to 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 core competency.

All of the following are tangible resources EXCEPT:

a firm's reputation

All of the following were traditional sources of competitive advantage EXCEPT:

a highly educated labor market.

All competitive advantages have:

a limited life

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

causally ambiguous.

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:

core competencies that have become core rigidities.

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:

distribution

A firm's core competencies, integrated with an understanding of the results of studying the conditions in the external environment, should:

drive the selection of strategies.

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:

imitable.

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:

judgement

Many firms outsource the payroll function of paying employees to firms such as ADP. Payroll is a(n):

support function.

The corporate research division of Siemens files, on average, 25 patents a day. The patents are a(n) ______ resource.

technological

Which of the following is NOT a factor affecting sustainability of a competitive advantage?

the length of time the core competence has existed

All of the following are true about the strategic decisions managers make about their firm's internal organization EXCEPT that:

they are directly correlated to executive compensation.

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 NYT's managers are making decisions under:

uncertainty

Which of the following is NOT a component of internal analysis leading to competitive advantage?

Analysis of supplier power

Which of the following is a true statement about capabilities?

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

Which of the following is NOT required for a firm to achieve strategic competitiveness and earn above-average returns from its core competencies?

Core competencies must be internationalized.

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?

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?

Costly to imitate

______ is an example of a capability that is based in the functional area of distribution.

Effective use of logistics management techniques

Which of the following is NOT a reputational resource?

Employees' opinions of the firm as a terrible place to work

A company can earn above-average returns only when the value it creates is less than the costs incurred to create that value

False

Although an organization's good reputation is a valuable resource that takes years of superior marketplace competence to achieve, it is not a good basis for building a competitive advantage because it can be destroyed almost instantly by bad publicity.

False

Capabilities are usually developed separately from specific functional areas such as manufacturing, R&D, and marketing.

False

Capabilities of an organization emerge spontaneously through the interaction of tangible and intangible resources

False

The learning generated by making and correcting mistakes is generally unimportant to efforts to create new capabilities and core competencies.

False

Value is measured by the variable and fixed costs associated with the production and marketing of a particular product compared with the revenue and profits the product generates.

False

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. What should the investor consider when making a decision?

The investor will 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 criterion for assessing capabilities/core competencies is met?

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

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 uses a software-based technology instead of circuit boards. ACME's technology leadership fails which capability test?

The substitutability test

"Motivating, empowering, and retaining employees" is an example of a capability that resides within the human resources functional area.

True

A firm should outsource only activities where it cannot create value or where it is at a substantial disadvantage compared to competitors.

True

Analyzing the internal environment enables a firm to determine what it can do by identifying resources, capabilities, and core competencies in the internal organization.

True

Apple has combined some of its tangible resources (such as financial resources and research laboratories) and intangible resources (such as scientists, engineers, and organizational routines) to create a capability in R&D that creates a core competence in innovation.

True

At IBM, human capital is critical to forming and using the firm's capabilities in customer relationships, scientific and research skills, and technical skills in hardware, software, and services.

True

At Southwest Airlines, the complex interrelationship between its culture and human capital adds value for customers in ways that other airlines cannot, such as jokes on flights by flight attendants and cooperation between gate personnel and pilots.

True

Capabilities may be costly to imitate if firms have unique and valuable organizational cultures, are causally ambiguous, and socially complex.

True

Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals.

True

Creating customer value is the source of the firm's potential to earn above-average returns.

True

Firms achieve strategic competitiveness and earn above-average returns by acquiring, bundling, and leveraging their resources for the purpose of taking advantage of opportunities in the external environment in ways that create value for customers.

True

In today's global economy, some resources that were traditionally critical to firms' efforts to sell goods are now less likely to be a source of competitive advantage.

True

One criterion for a resource or capability to be a source of competitive advantage is that it must allow the firm to perform a value-creating activity that competitors cannot perform.

True

Resources are the source of capabilities, some of which lead to the development of core competencies. In turn, some core competencies may lead to competitive advantage.

True

Two concerns about outsourcing are the potential loss of a firm's innovative ability and the loss of jobs within companies that decide to outsource some of their work.

True

Understanding how to leverage the firm's unique bundle of resources and capabilities is a key outcome decision makers seek when analyzing the internal organization.

True

Walmart uses core competencies, such as information technology and distribution channels, to create value for its customers through its "everyday low prices."

True

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

Value

Value consists of:

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

Compared to tangible resources, intangible resources are:

a superior source of capabilities

One reason executive judgment can be a particularly important source of competitive advantage is that judgment:

allows a firm to build a strong reputation

Capabilities:

are often developed in specific functional areas.

To provide a sustainable competitive advantage, a capability must satisfy all of the following criteria EXCEPT:

be technologically innovative

Internal analysis enables a firm to determine what the firm:

can do

Capabilities typically come from:

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:

core competencies

Capabilities that other firms cannot develop easily are classified as:

costly to imitate

Firms that achieve competitive parity can expect to:

earn average returns.

Costly-to-imitate capabilities can emerge for all of the following reasons EXCEPT:

lack of scientific transference.

Compared to tangible resources, intangible resources are ______ and ______.

less visible; more difficult to copy.

The critical executive skill of the current business age is the ability to:

manage human intellect

Value chain activities include all of the following EXCEPT:

management information systems.

Compared to intangible resources, tangible resources are ______ constrained because they are ______ to leverage.

more;harder

Judgment is the capacity for making a successful decision when:

no obviously correct model or rule is available.

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:

parity.

Firms that have strong positive relationships with suppliers and customers are said to have ______, an essential ingredient to creating value.

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 because of its

social complexity.

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:

temporary

It is increasingly difficult for a firm to develop and sustain a competitive advantage because of the effects of globalization and:

the rapid development of the Internet's capabilities.

To build social capital whereby resources such as knowledge are transferred across organizations requires ______ between the parties.

trust

The three conditions that characterize difficult managerial decisions concerning resources, capabilities, and core competencies are

uncertainty, complexity, and intraorganizational conflicts.

Value chain analysis is a tool used to:

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:

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 _____.

valuable; rare

The capabilities used to create the sustainability/green initiatives at Walmart and Target are ______ but less likely to be ______.

valuable; rare

The proper matching of what a firm can do with what it might do:

yields insights the firm requires to select its strategy.