Chapter 3 MC

An investor is considering buying a restaurant that has been in operation for a number of years. The restaurant has a highly-reputed 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. a. 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 will find that the restaurant's financial statements will undervalue the true value of its resources. c. The investor should be aware that intangible assets are difficult to leverage into additional business. d. The investor should search for a firm which has competitive advantages based on tangible resources.

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

Which of the following is NOT a factor affecting sustainability of a competitive advantage? a. The availability of substitutes for a firm's core competence. b. The rate at which obsolescence of the core competence occurs because of environmental changes. c. The imitability of a core competence. d. The length of time the core competence has existed.

d. The length of time the core competence has existed.

____ is measured by a product's performance characteristics and its attributes for which customers are willing to pay. a. Competitive advantage b. Profit potential c. Contribution d. Value

d. Value

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.

d. allows for learning.

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vulnerable to obsolescence than other intangible capabilities because of the tendency for employee knowledge to become outdated.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.

a. 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

a. Effective use of logistics management techniques

____ is/are the source of a firm's ____, which is/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

a. Resources, capabilities, core competencies

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 levels, 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 criteria 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 the these are met.

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

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. gains the loyalty of shareholders. c. increases human intellectual capacity. d. allows for superior bundling of resources.

a. allows a firm to build a strong reputation.

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

a. be technologically innovative.

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

a. can do.

Capabilities that other firms cannot develop easily are classified as a. costly to imitate. b. rare. c. valuable. d. nonsubstitutable.

a. costly to imitate.

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.

a. 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.

a. less visible; more difficult to copy.

The most numerous of the following organizational characteristics are a. resources. b. capacities. c. capabilities. d. core competencies.

a. resources.

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 U.S. 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.

a. the rapid development of the Internet's capabilities.

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

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

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.

b. Analysis of supplier power.

Which of the following is NOT a reputational resource? a. Customer opinion that the firm's product are high quality. b. Employees viewing the firm as a terrible place to work. c. Suppliers' opinion that the firm pays its bills in a timely manner. d. Customer opinion that using the firm's product makes them attractive.

b. Employees viewing the firm as a terrible place to work.

Which of the following is TRUE about outsourcing? a. Outsourcing allows firms to be more flexible, 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 only effective when it includes all support activities.

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

Value chain activities are a. the activities 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. the core competencies of the organization. d. the activities most crucial to implementing the firm's business strategy.

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.

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.

b. assets that can be observed and quantified.

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. impregnable. b. causally ambiguous. c. rationally obscure. d. elusive.

b. causally ambiguous.

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.

b. earn average returns.

A major reason outsourcing is effective is that a. it increases the innovative potential of the firm. b. few firms possess superior capability in all primary and support activities. c. it permits unlimited access to capital resources. d. competitors do not have access to the same external sources.

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

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 a. concentrate on maintaining Acme's present core competencies. b. focus on developing Acme'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.

b. focus on developing Acme's future competitive advantages.

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.

b. judgment.

The critical executive skill of the current business age is the ability to a. manage technological innovation. b. manage human intellect. c. initiate change and overcome inertia. d. coordinate tangible and intangible resources.

b. manage human intellect.

Judgment is the capacity for making a successful decision when a. there are multiple decision criteria. b. no obviously correct model or rule is available. c. cognitive biases create barriers to rationality. d. there are contradictions between the firm's vision and its implemented strategy.

b. no obviously correct model or rule is available.

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.

b. not easily imitable.

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.

b. parity.

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.

b. research and development.

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

b. social capital

Knowledge transfer and access to resources 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

b. social capital

Because the firm combines tangible and intangible resources to create capabilities, a. these capabilities are fragile and subject to sudden loss of value. b. they are often based on developing, carrying, and exchanging information and knowledge through the firm's human capital. c. they 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.

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

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.

b. uncertainty, complexity, and intraorganizational conflicts.

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.

b. 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

b. 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

b. 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.

b. while simultaneously developing new ones.

Which of the following is NOT an external event that reveals the "dark side" of 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.

c. A firm changes its focus to a new core competence.

____ of organizational decisions fail. a. Few b. About one-quarter c. About half d. Most

c. About half

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

c. Core competencies

Which of the following is NOT required for a firm to achieve strategic competitiveness and earn above-average returns from its core competencies? a. Core competencies must be acquired. b. Core competencies must be bundled. c. Core competencies must be internationalized. d. Core competencies must be leveraged.

c. Core competencies must be internationalized.

Examples of support activities include all of the following EXCEPT a. Finance. b. Human Resources. c. Follow-up Service. d. Management Information Systems.

c. Follow-up Service.

Value chain activities include all of the following EXCEPT a. Supply-Chain Management b. Operations c. Management Information Systems d. Distribution

c. Management Information Systems

According to the Chapter 3 Opening Case, all of the following are core competencies of Subway EXCEPT a. Providing continuous training for its franchisees and those working within those units. b. Offering healthy and nutritious products to consumers. c. The challenging economic environment in which even affluent consumers are choosing to dine at quick-service restaurants such as Subway. d. Use of nontraditional locations such as appliance stores, automobile showrooms, and zoos.

c. The challenging economic environment in which even affluent consumers are choosing

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 solution instead of circuit boards. ACME's technology leadership fails which capability test? a. The value test b. The rareness test c. The substitutability test d. It fails all three of these tests

c. The substitutability test

It is possible that Borders' core competencies of store locations and a desirable physical environment for customers became core rigidities eventually leading to the filing of bankruptcy as a result o f a. changing political events. b. changing social events. c. a new technology emerging and changing customer shopping patterns . d. failure to accurately analyze the value chain.

c. a new technology emerging and changing customer shopping patterns .

Compared to tangible resources, intangible resources are a. of less strategic value to the firm. b. not the focus of strategic analysis. c. a superior source of capabilities. d. more likely to be reflected on the firm's balance sheet.

c. a superior source of capabilities.

Valuable capabilities a. allow the firm to exploit opportunities in its external environment. b. allow the firm to neutralize threats in its internal environment. c. allow the firm to exploit opportunities or neutralize threats in its external environment. d. none of the these are correct.

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

Innovation, consumer understanding, brand-building, go-to-market, and scale are activities that P&G (Chapter 3 Strategic Focus) performs well and are examples of the company's __________ . a. tangible resources b. intangible resources c. core competencies d. capabilities

c. 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.

c. 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.

c. costly to imitate.

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 replace.

c. eroding the organization's knowledge resources.

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

c. firm's reputation.

By emphasizing core competencies when formulating 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.

c. firm-specific differences.

If a firm has 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.

c. have a temporary competitive advantage.

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.

c. imitable.

The overall lesson from the Chapter 3 Strategic Focus about decision-making at several companies was the importance of _________ a. CEO compensation. b. the effect of unattractive industries on firm performance. c. making decisions about use of the firm's resources under conditions of uncertainty. d. competing against innovative rivals.

c. making decisions about use of the firm's resources under conditions of uncertainty.

Complete the following about the difference between tangible and intangible resources. Tangible resources are ____ constrained because they are _____ to leverage. a. less; easier b. less; easier c. more; harder d. more; harder

c. more; harder

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.

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

A financial management firm has existed for over 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 a. access to large amounts of financial capital. b. possession of causally ambiguous core competencies. c. social complexity. d. unique historical conditions.

c. social complexity.

A local restaurant, Farm Fresh Ingredients, has become highly successful through its menu based solely on organically-raised chicken, 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.

c. temporary.

Today, a substantially slimmed-down Polaroid is introducing a number of new products including GL20 Camera Glasses which have a built-in camera and LCDs. This wave of new product development is explained by a. the funds provided by a patent infringement lawsuit won by Poloroid. b. weaker competitors in its industry. c. the learning that occured from making earlier mistakes. d. an easing of regulations governing Intellectual Propery Protection.

c. the learning that occured from making earlier mistakes.

The Chapter 3 Strategic Focus on P&G illustrates that the company uses its capabilities and core competencies to grow a. through mergers. b. organically. c. through cooperative relationships. d. through acquisitions.

c. through cooperative relationships.

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.

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

As discussed in the Chapter 3 Strategic Focus, CEOs of companies such as Viacom, the Oprah Winfrey Network, the Gap, and Cisco frequently had to make decisions about __________________ and the success of those decisions affected the tenure of those CEOs. a. how to please customers b. how to best rivals c. use of the firm's resources d. their method of compensation

c. use of the firm's resources

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.

c. yields insights the firm requires to select its strategy.

Capabilities a. tend to be developed through firm-wide interactions and reside in the firm as a whole. b. tend to be concentrated in the support activities of the value chain. c. tend to be concentrated in the primary activities of the value chain. d. are often developed in specific functional areas.

d. are often developed in specific functional areas.

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

d. combining resources.

The owner of a store retailing fine quality fabrics for home-sewers bewails 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 available 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.

d. core competencies that have become core rigidities.

To build social capital whereby resources such as knowledge are transferred across organizations requires _________between the parties. a. a contract b. determination c. confidence d. trust

d. trust