chapter 3

Which of the following examples demonstrates how successful organizations manage their primary activities? A. By employing JIT inventory systems, Hewlett Packard has been able to cut lead time from five days to one. B. Motorola has revised its compensation system to reward employees who learn a variety of skills. C. National Steel improved its efficiency by consolidating, reducing the number of job classifications, and broadening worker responsibilities. D. Walmart implemented a sophisticated information system that resulted in reduced inventory carrying costs and shortened customer response time.

A. By employing JIT inventory systems, Hewlett Packard has been able to cut lead time from five days to one. just-in-time (JIT) inventory systems were designed to achieve efficient inbound logistics, which is one of the five primary activities in value-chain analysis. With JIT inventory systems, parts deliveries arrive at the assembly plants only hours before they are needed.

The best measure of a company's ability to meet imminent financial obligations is known as the A. current ratio. B. total asset turnover. C. debt ratio. D. profit margin.

A. current ratio. According to Exhibit 3.9, short-term solvency ratios are also known as liquidity ratios. The best measure of a company's ability to meet imminent financial obligations is the current ratio, the ratio of current assets to current liabilities.Refer to Exhibit 3.9

A marketing department that promises delivery faster than the production department's ability to produce is an example of a lack of understanding of the A. interrelationships among functional areas and firm strategies. B. need to maintain the reputation of the company. C. organizational culture and leadership. D. synergy of the business units.

A. interrelationships among functional areas and firm strategies. Important to value-chain analysis are interrelationships, the collaborative and strategic exchange relationships between value-chain activities either (a) within firms or (b) between firms. Strategic exchange relationships involve exchange of resources such as information, people, technology, or money that contribute to the success of the firm.

Internet business models A. outline methods that online businesses use to create value. B. cannot be used by traditional businesses. C. outline specific actions a firm needs to take to be profitable. D. cannot be combined to create additional competitive advantages.

A. outline methods that online businesses use to create value. A business model is a method and a set of assumptions that explain how a business creates value and earns profits in a competitive environment. The text discusses seven Internet business models that account for the vast majority of business conducted online.

A competitive advantage based on inimitability can be sustained for at least some time if it has the following characteristics: A. physical uniqueness, path dependency, causal ambiguity, and social complexity. B. psychographic uniqueness, path dependency, causal ambiguity, and substitutability. C. rarity, path dependency, causal ambiguity, and social substitutability. D. geographic uniqueness, cause dependency, social ambiguity, and path complexity.

A. physical uniqueness, path dependency, causal ambiguity, and social complexity. An advantage based on inimitability won't last forever. Competitors will eventually discover a way to copy most valuable resources. However, managers can forestall them and sustain profits for a while by developing strategies around resources that have at least one of the following four characteristics: physical uniqueness, path dependency, causal ambiguity, and social complexity.

Advertising is a __________ activity. Supply of replacement parts is a __________ activity. A. primary; primary B. support; primary C. support; secondary D. primary; support

A. primary; primary Five primary activities (inbound logistics, operations, outbound logistics, marketing and sales, and service) contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after the sale. Inbound logistics is primarily associated with receiving, storing, and distributing inputs to the product. Marketing and sales activities include advertising.

A variety of firm's resources include interpersonal relations among managers in the firm, its culture, and its reputation with its suppliers and customers. Such competitive advantages are based upon A. social complexity. B. path dependency. C. physical uniqueness. D. tangible resources.

A. social complexity. A firm's resources may be imperfectly inimitable because they reflect a high level of social complexity. A wide variety of firm's resources may be considered socially complex. Examples include interpersonal relations among the managers in a firm, its culture, and its reputation with its suppliers and customers.

Ratios that reflect whether or not a firm is efficiently using its resources are known as A. turnover ratios. B. leverage ratios. C. liquidity ratios. D. profitability ratios.

A. turnover ratios. profitability ratios. Exhibit 3.9 shows that asset utilization, or turnover, ratios are one measure of whether a firm is efficiently using its resources.Refer to Exhibit 3.9

For a resource to provide a firm with the potential for a sustainable competitive advantage, it must have four attributes. Which of the following is not one of these attributes? A. Rare. B. Easy for competitors to substitute. C. Valuable. D. Difficult for competitors to imitate.

B. Easy for competitors to substitute. For a resource to provide a firm with the potential for a sustainable competitive advantage, it must have four attributes. First, the resource must be valuable in the sense that it exploits opportunities and/or neutralizes threats in the firm's environment. Second, it must be rare among the firm's current and potential competitors. Third, the resource must be difficult for competitors to imitate. Fourth, the resource must have no strategically equivalent substitutes.

According to value-chain analysis, which of the following would be considered part of a firm's general administration? A. Human resource management. B. Information systems. C. Technology development. D. Procurement.

B. Information systems. General administration consists of a number of activities, including general management, planning, finance, accounting, legal and government affairs, quality management, and information systems. Administration typically supports the entire value chain and not individual activities.

__________ are typically embedded in unique routines and practices that have evolved and accumulated over time - such as trust and effective work teams. A. Tangible resources B. Intangible resources C. Reputational resources D. Organizational capabilities

B. Intangible resources Intangible resources are typically embedded in unique routines and practices that have evolved and accumulated over time. These include human resources (e.g., experience and capability of employees, trust, and effectiveness of work teams).

XYZ Corp. is focusing on the objective of low-cost, high quality, on-time production by minimizing idle productive facilities and workers. The XYZ Corp. is taking advantage of a __________ system. A. Last In, First Out (LIFO) B. Just-in-time (JIT) C. First In, First Out (FIFO) D. Highly mechanized

B. Just-in-time (JIT) Just-in-time (JIT) inventory systems were designed to achieve efficient inbound logistics, which is one of the five primary activities in value-chain analysis. With JIT inventory systems, parts deliveries arrive at the assembly plants only hours before they are needed, which reduces idle production capacity

Which of the following is NOT a limitation of SWOT (Strengths, Weaknesses, Opportunity, Threats) analysis? A. Organizational strengths may not lead to competitive advantage. B. SWOT's focus on the external environment is too broad and integrative. C. SWOT gives a one-shot view of a moving target. D. SWOT overemphasizes a single dimension of strategy.

B. SWOT's focus on the external environment is too broad and integrative. Among the limitations of SWOT are that organizational strengths may not lead to competitive advantage, SWOT's focus on the external environment is too narrow, it gives a one-shot view of a moving target, and it overemphasizes a single dimension of strategy.

Which of the following would be most difficult to assess? A. The liquidity position of a firm. B. The legitimacy and reputation of a firm. C. Market share growth. D. The efficiency with which a firm utilizes its assets.

B. The legitimacy and reputation of a firm. The legitimacy and reputation of a firm are harder to assess because there is no simple mathematical formula to compute them.

Examples of value-adding content often found on websites include all of the following except A. customer feedback. B. advertising. C. expertise. D. entertainment programming.

B. advertising. Three types of content can improve the value proposition of a website: customer feedback, expertise, and entertainment programming.

In assessing its primary activities, an airline would examine A. employee training programs. B. baggage handling. C. criteria for lease versus purchase decisions. D. the effectiveness of its lobbying activities.

B. baggage handling. Five primary activities (inbound logistics, operations (which would include baggage handling for an airline), outbound logistics, marketing and sales, and service) contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after the sale.

The "balanced scorecard" provides top managers with a __________ view of the business. A. detailed and complex B. fast but comprehensive C. simple and routine D. long-term financial

B. fast but comprehensive A "balanced scorecard" provides top managers with a fast but comprehensive view of the business. In a nutshell, it includes financial measures that reflect the results of actions already taken, but it complements these indicators with measures of customer satisfaction, internal processes, and the organization's innovation and improvement activities, the operational measures that drive future financial performance.

Historical comparisons provide information to managers about changes in a firm's competitive position. Historical comparisons are often misleading A. if the overall strategy of the firm is the same. B. in periods of recession or economic boom. C. if the firm shows constant growth. D. if the firm's stock is publicly traded.

B. in periods of recession or economic boom. Exhibit 3.10 illustrates a 10-year period of return on sales (ROS) for a hypothetical company. As indicated by the dotted trend lines, the rate of growth (or decline) differs substantially over time periods, and periods of recession and economic boom may make the trends unreliable.Refer to Exhibit 3.10

The value-adding activity known as problem-solving A. involves streamlining operations. B. is typically used in the context of providing unique services. C. refers to comparing the costs and benefits of various options. D. creates access to products ratings and price comparisons.

B. is typically used in the context of providing unique services. Problem solving refers to the process of identifying problems or needs and generating ideas and action plans to address those needs. Whereas evaluation is primarily product-related, problem solving is typically used in the context of services. Customers usually have unique problems that are handled one at a time.

A crash R&D program by one firm cannot replicate a successful technology developed by another firm when research findings cumulate. This is an example of A. social complexity. B. path dependency. C. physical uniqueness. D. causal ambiguity.

B. path dependency. Path dependency means that resources are unique and therefore scarce because of all that has happened along the path followed in their development and/or accumulation. A crash R&D program generally cannot replicate a successful technology when research findings cumulate. These path-dependent conditions build protection for the original resource. The benefits from experience and learning through trial and error cannot be duplicated overnight.

Employees will be able to obtain a proportionately high level of profits they generate (relative to the firm) if A. suppliers are loyal to the firm. B. the cost to the firm of replacing them is high. C. their expertise is firm-specific. D. the firm's resources are path dependent.

B. the cost to the firm of replacing them is high. Several factors help explain the extent to which employees and managers will be able to obtain a proportionately high level of the profits, including if they generate high employee replacement costs. If employees' skills are idiosyncratic and rare (a source of resource-based advantages), they should have high bargaining power based on the high cost required by the firm to replace them.

Inbound logistics include A. machining and packaging. B. warehousing and inventory control. C. repair and parts supply. D. promotion and packaging.

B. warehousing and inventory control. Inbound logistics is primarily associated with receiving, storing, and distributing inputs to the product. It includes material handling, warehousing, inventory control, vehicle scheduling, and returns to suppliers.

Which of the following lists consists of support activities? A. Human resource management, technology development, customer service, and procurement. B. Human resource management, customer service, marketing and sales, and operations. C. Human resource management, technology development, procurement, and firm infrastructure. D. Customer service, information systems, technology development, and procurement.

C. Human resource management, technology development, procurement, and firm infrastructure. Support activities in the value chain can be divided into four generic categories (general administration, human resource management, technology development, and procurement), as shown in Exhibit 3.3.Refer to Exhibit 3.3

___________ is/are associated with collecting, storing, and distributing the product or service to buyers. They consist of warehousing, material handling, delivery operation, order processing, and scheduling. A. Services B. Inbound logistics C. Outbound logistics D. Operations

C. Outbound logistics Outbound logistics is associated with collecting, storing, and distributing the product or service to buyers. These activities include finished goods, warehousing, material handling, delivery vehicle operation, order processing, and scheduling.

In value-chain analysis, the activities of an organization are divided into two major categories of value activities: primary and support. Which of the following is a primary activity? A. Purchasing key inputs. B. Recruiting and training employees. C. Repairing the product for the consumer. D. Monitoring the cost of producing the product through a cost accounting system.

C. Repairing the product for the consumer. Five primary activities (inbound logistics, operations, outbound logistics, marketing and sales, and service (which includes repairs)) contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after the sale.Refer to Exhibit 3.2

Which of the following is a support activity? A. Inbound logistics. B. Operations. C. Technology development. D. Customer service.

C. Technology development. Support activities in the value chain can be divided into four generic categories (general administration, human resource management, technology development, and procurement), as shown in Exhibit 3.3.Refer to Exhibit 3.3

A resource is valuable and rare but neither difficult to imitate nor without substitutes. This should enable the firm to attain A. no competitive advantage. B. competitive parity. C. a temporary competitive advantage. D. a sustainable competitive advantage.

C. a temporary competitive advantage. Resources and capabilities must be rare and valuable as well as difficult to imitate or substitute in order for a firm to attain competitive advantages that are sustainable over time. Exhibit 3.7 illustrates the relationship among the four criteria of sustainability and shows the competitive implications. When a resource is valuable and rare but neither difficult to imitate nor without substitutes it is likely to result in a temporary competitive advantage.

The following are examples of socially complex organizational phenomena EXCEPT A. a firm's culture. B. interpersonal relations among a firm's managers. C. complex physical technology. D. leadership and trust.

C. complex physical technology. Social complexity is a characteristic of a firm's resources that is costly to imitate because the social engineering required is beyond the capability of competitors, including interpersonal relations among managers, organizational culture, and reputation with suppliers and customers.

The "balanced scorecard" developed by Kaplan and Norton helps to integrate A. financial analysis and a firm's reputation. B. intangible resources and operational measures. C. financial analysis and stakeholder perspectives. D. short-term perspectives and strategic positioning.

C. financial analysis and stakeholder perspectives. The balanced scorecard enables managers to consider their business from four key perspectives: customer, internal, innovation and learning, and financial. These are briefly described in Exhibit 3.12.Refer to Exhibit 3.12

Examples of tangible resources (in the resource-based view of the firm) include: A. financial resources, human resources, and firm competencies. B. financial resources, physical resources, and the capacity to combine intangible resources. C. financial resources, physical resources, and technological resources. D. outstanding customer service, innovativeness of products, and reputation.

C. financial resources, physical resources, and technological resources. Examples of tangible resources are financial resources (e.g., a firm's cash, accounts receivables, and its ability to borrow funds); physical resources (e.g., the company's plant, equipment, and machinery as well as its proximity to customers and suppliers); organizational resources (e.g., the company's strategic planning process and its employee development, evaluation, and reward systems); and technological resources (e.g., trade secrets, patents, and copyrights).

Internet search activities include A. generating action plans. B. considering alternatives. C. gathering information. D. making payments and taking delivery.

C. gathering information. Search refers to the process of gathering information and identifying purchase options. The Internet has enhanced both the speed of information gathering and the breadth of information that can be accessed.

An important implication of the "balanced scorecard" approach is that A. managers need to recognize tradeoffs in stakeholder demands and realize that such demands represent a "zero-sum" game in which one stakeholder will gain only at another's loss. B. the key emphasis on customer satisfaction and financial goals are only a means to that end. C. managers should not look at their job as primarily balancing stakeholder demands; increasing satisfaction among multiple stakeholders can be achieved simultaneously. D. gains in financial performance and customer satisfaction must often come at a cost of employee satisfaction.

C. managers should not look at their job as primarily balancing stakeholder demands; increasing satisfaction among multiple stakeholders can be achieved simultaneously. A key implication is that managers do not need to look at their job as balancing stakeholder demands. The balanced scorecard provides a win-win approach, increasing satisfaction among a wide variety of organizational stakeholders, including employees (at all levels), customers, and stockholders.

Although general administration is often viewed only as overhead expense, it can become a source of competitive advantage. Examples include all of the following EXCEPT A. negotiating and maintaining ongoing relations with regulatory bodies. B. effective information systems contributing significantly to a firm's overall cost leadership strategy. C. marketing expertise increasing a firm's revenues and enabling it to enter new markets. D. top management providing a key role in collaborating with important customers.

C. marketing expertise increasing a firm's revenues and enabling it to enter new markets. General administration consists of a number of activities, including general management, planning, finance, accounting, legal and government affairs, quality management, and information systems. Marketing is a primary activity.

Gillette combines several technologies (e.g., metallurgy, physiology, physics) to attain unparalleled success in the wet shaving industry. This is an example of their A. tangible resources. B. intangible resources. C. organizational capabilities. D. strong primary activities.

C. organizational capabilities. Organizational capabilities are the competencies or skills that a firm employs to transform inputs into outputs. Examples of organizational capabilities are outstanding customer service, excellent product development capabilities, superb innovation processes, and flexibility in manufacturing processes.

Customer service would include A. product promotion. B. product distribution. C. parts supply. D. procurement of critical supplies.

C. parts supply. Service activity includes all actions associated with providing service to enhance or maintain the value of the product, such as installation, repair, training, parts supply, and product adjustment.

All of the following are examples of Internet business models EXCEPT A. referral-based model. B. subscription-based model. C. prescription-based model. D. production-based model.

C. prescription-based model. The text discusses seven Internet business models that account for the vast majority of business conducted online: commission-based models, advertising-based models, markup-based models, production-based models, referral-based models, subscription-based models, and fee-for-service-based models.

Human resource management consists of activities involved in recruiting, hiring, training, development, and compensation of all types of personnel. It A. supports only individual primary activities. B. supports only individual support activities. C. supports both individual primary and support activities and the entire value chain. D. supports mostly support activities but does have some impact on primary activities.

C. supports both individual primary and support activities and the entire value chain. Human resource management consists of activities involved in recruiting, hiring, training, development, and compensation of all types of personnel. It supports both individual primary and support activities (e.g., hiring of engineers and scientists) and the entire value chain (e.g., negotiations with labor unions).

The three key types of resources that are central to the resource-based view of the firm's are A. tangible resources, intangible resources, and organizational structure. B. culture, tangible resources, intangible resources. C. tangible resources, intangible resources, and organizational capabilities. D. tangible resources, intangible resources, and top management.

C. tangible resources, intangible resources, and organizational capabilities. Firm's resources are all assets, capabilities, organizational processes, information, knowledge, and so forth, controlled by a firm's that enable it to develop and implement value-creating strategies. The three types of resources in Exhibit 3.5 are tangible resources, intangible resources, and organizational capabilities.Refer to Exhibit 3.5

The resource-based view (RBV) of the firm combines two perspectives: A. the primary and support activities of the firm. B. the interrelationships among the primary activities of the firm and corporate management. C. the internal analysis of the firm as well as the external analysis of the industry and competitive environment. D. the industry and the competitive environment.

C. the internal analysis of the firm as well as the external analysis of the industry and competitive environment The resource-based view (RBV) of the firm combines two perspectives: (1) the internal analysis of phenomena within a company and (2) an external analysis of the industry and its competitive environment.

Which of these categories of financial ratios is used to measure a company's ability to meet its short-term financial obligations? A. Leverage ratios. B. Profitability ratios. C. Activity ratios. D. Liquidity ratios.

D. Liquidity ratios. According to Exhibit 3.9, short-term solvency ratios are also known as liquidity ratios. These ratios are used to assess company's ability to meet imminent financial obligations.Refer to Exhibit 3.9

__________ are the competencies or skills that a firm employs to transform inputs into outputs. A. Tangible resources B. Intangible resources C. Reputational resources D. Organizational capabilities

D. Organizational capabilities Organizational capabilities are the competencies or skills that a firm employs to transform inputs into outputs. Examples of organizational capabilities are outstanding customer service, excellent product development capabilities, superb innovation processes, and flexibility in manufacturing processes.

Which of the following is not an advantage of Just-In-Time inventory systems? A. Reduced raw material storage costs. B. Minimized idle production facilities and workers. C. Reduced work-in-process inventories. D. Reduced dependence on suppliers.

D. Reduced dependence on suppliers. With JIT inventory systems, parts deliveries arrive at the assembly plants only hours before they are needed. This requires greater reliance on superior performance of one's suppliers.

For firm's such as Walgreen Co. (a chain of drugstores), information systems have been a source of competitive advantage by enabling them to A. differentiate service. B. automate some operations. C. respond to consumer needs. D. all of these.

D. all of these. Information systems can also play a key role in increasing operating efficiencies and enhancing a firm's performance. Walgreen Co.'s Intercom Plus is a computer-based prescription management system. Linked by computer to both doctors' offices and third-party payment plans, the system automates telephone refills, store-to-store prescription transfers, and drug reordering. It also provides information on drug interactions and frees up pharmacists from administrative tasks to devote more time to patient counseling.

Unique content will not add value to an Internet website under the following condition(s): A. the cost of developing the content exceeds the benefits gained. B. visitors to the website do not value or use the content. C. the content is unreliable. D. all of these.

D. all of these. Unique content will not add value to an Internet website under any of these conditions.

The balanced scorecard enables managers to consider their business from all of the following perspectives EXCEPT A. customer perspective. B. internal perspective. C. innovation and learning perspective. D. ethical perspective.

D. ethical perspective. The balanced scorecard enables managers to consider their business from four key perspectives: customer, internal, innovation and learning, and financial. These are briefly described in Exhibit 3.12.Refer to Exhibit 3.12

Four Internet-based activities that are enhancing firms' capabilities to use the Internet to add value include A. outsourcing, problem-solving, bill-paying, and delivery. B. evaluating, bill-paying, customizing, and returning. C. search, rescue, repair, return. D. search, evaluation, problem-solving, and transaction.

D. search, evaluation, problem-solving, and transaction. Exhibit 3A.1 illustrates four related activities that are being revolutionized by the Internet—search, evaluation, problem solving, and transactions.Refer to Exhibit 3A.1