475 Chapter 4

Ironhorse Tools has used $700,000 from its total annual earnings of $1,650,000 to invest in upgrading its manufacturing facilities. Its accounts receivable from customers is estimated to be $130,000 and accounts payable $75,000. In monetary terms, what would Ironhorse's resource flows be?

700K

Which of the following statements accurately describes a firm's resource stock?

Resource stocks are a firm's current level of intangible resources.

To help a firm achieve a competitive advantage, each distinct activity performed in the value chain needs to

contribute to the firm's strategic position as either low-cost leader or differentiator.

A firm will fail to create a sustained competitive advantage when the

fit between its internal strengths and the external environment is static.

According to the value chain analysis, which of the following is a primary activity?

marketing and sales

Due to resource immobility, a critical assumption in the resource-based model of a firm, the

resource differences between firms last for a long time.

Several senior managers recently left Bass Automobile Inc. and went to work at Unicorn Autos Inc., a rival company. What does this imply?

Bass Automobiles Inc. faced resource leakage.

Threadbare Industries is a new high-end textile company that has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Threadbare Industries to acquire using its capital?

Brand name

Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as

Capabilities

________ are barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy.

Isolating mechanisms

Which of the following is an implication of high employee turnover in a company?

It results in a reduction in the company's intangible-resource stocks.

Juanita, a manager at a multinational organization, is trying to carefully scan and link the firm's internal environment to its external environment. The insights from this analysis will allow her to effectively leverage the company's internal strengths to exploit external opportunities, while mitigating internal weaknesses and external threats. In this scenario, which of the following managerial tools is Juanita employing?

SWOT

Assume a firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by

causal ambiguity. Causal ambiguity describes a situation in which the cause and effect of a phenomenon are not readily apparent. In the given scenario, the firm's competitive advantage is protected against imitation by causal ambiguity.

As manager of a relatively new company, you are tasked with analyzing company resources to identify core competencies capable of supporting a competitive advantage. Which of the following resources is most likely to generate a competitive advantage?

enthusiastic company culture Competitive advantage is more likely to spring from intangible resources, such as an energetic and enthusiastic company culture, than from tangible resources, such as buildings, capital, or supplies.

Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will be successful today only if its

internal strengths change with its external environment in a dynamic fashion.

________ describes a process in which the options one faces in a current situation are limited by decisions made in the past.

path dependence

Iceberg Storage, a leading hard drive manufacturer, recently filed for bankruptcy. While most of Iceberg's competitors were shifting away from physical data storage devices toward online cloud storage services, Iceberg invested most of its retained earnings in the effort to improve its hard drives. Once the hard-drive market drastically declined, Iceberg Storage was unable to capitalize on the new technology. Which of the following does this scenario best illustrate?

path dependence The scenario best illustrates path dependence. Path dependence is a situation in which the options one faces in the current situation are limited by decisions made in the past.

The competitive advantage that one firm has will be short-lived in an industry in which

perfect competition exists In perfect competition, all firms have access to the same resources and capabilities, ensuring that any advantage that one firm has will be short-lived.

Amazon.com's network of distribution centers allow it to drastically reduce its delivery times compared to other online retailers. These distribution centers are examples of Amazon's

tangible resources the centers physically are tangible

Riya has recently started a restaurant in a commercial area that already has many other established restaurants and popular fast-food chains. Riya owns the building in which her restaurant is located, rather than leasing premises as her competitors do. This factor allows her to offer her products at a more competitive price. Riya has also invested a huge amount in designing the restaurant's interior and in equipping the kitchen with the appliances that are most widely used in her industry. In this scenario, which of the following is the most valuable resource for Riya's business?

the building owned by Riya, which reduces cost of operations cuz it lets her lower her costs

Smooth Fusion Inc. is a software company that has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of Smooth Fusion Inc. will best enable it to gain and sustain a competitive advantage?

the expertise acquired by the employees in the company

When the laptop market overtook the desktop market, Blue Tech Inc., a leader in desktop technology, was left at a competitive disadvantage. Later, Blue Tech Inc.'s management channeled all of the company's efforts and revenue to develop an efficient laptop from scratch in less than a year. However, the company failed because Blue Tech Inc.'s models were inferior to the third- and fourth-generation models its competitors were selling. In this scenario, Blue Tech Inc.'s failure can be best attributed to

time compression diseconomies. In this scenario, Blue Tech Inc.'s failure can be attributed to time compression diseconomies. When attempting to compress lots of effort and resources such as R&D into a short time period, it will not be as effective as when a firm spreads out its effort and investments over a longer period. Trying to achieve the same outcome in a short time period, even with higher investments, tends to lead to inferior results.

Which of the following is a drawback of the SWOT analysis?

A problem with this framework is that a strength can also be a weakness, and that an opportunity can also simultaneously be a threat.

A resource-based view of a firm provides a model that systematically aids in identifying

Core competencies

Seth's Computer Repair has maintained a competitive advantage based on its thorough and professional service, reasonable pricing, and money-back guarantee. Management at the company is so committed to doing repairs well that they often have rejected employee suggestions to expedite their processes. Recently, the company has begun to lose customers to a new local service offering same day in-home repairs and 24/7 online customer support. According to the dynamic capabilities perspective, Seth's Computer Repair has lost its competitive advantage due to

Core rigidity When a firm relies on a core competency for too long and fails to adapt to changes in the external environment, its core competency becomes a core rigidity. Seth's failure to upgrade its service model to compete with the features offered by its competitors is a core rigidity that has led to a competitive disadvantage.

In the context of SWOT analysis, which of the following best exemplifies a firm's internal weakness?

Decrease in market share

Pulse Mobiles Inc. is a cell phone manufacturing company. Its latest range of smartphones are visually similar to the Y-series range of smartphones from Talkie Gen Inc., in terms of its shape and look-and-feel. Which of the following strategies has Pulse Mobiles Inc. used to replicate the valuable and rare resource of Talkie Gen Inc.?

Direct imitation

Your company, a small software development firm, has attracted many of the top young programmers in your area. As a result, the apps you produce have been praised for their innovative features and intuitive user experience. According to the bathtub metaphor in the dynamic capabilities perspective, what is the best way for you to protect against resource leakage?

Improve the benefits package to retain key employees and reduce turnover

How are the critical assumptions of the resource-based model of a firm fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure?

In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry.

Brain Boost Inc. is a leading educational toy company. Competitors across the globe have failed to imitate Brain Boost's production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Brain Boost Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate?

Resource Immobility The scenario best illustrates resource immobility. A critical assumption of the resource-based model—resource immobility—is that resources tend to be "sticky" and don't move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and, therefore, can last for a long time.

Gladiator Apparel is the market leader in the sportswear industry. Though most of its resources are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Gladiator Apparel is most likely to be considered a rare resource that is contributing to its competitive advantage?

The companies design patents

Which of the following describes a situation in which firms acquire resources at a low cost, laying the foundation for a competitive advantage later?

better expectations of future resource value

Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which One Electro Inc. lags behind. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?

Resource heterogeneity The scenario illustrates resource heterogeneity. In the resource-based view, a firm is assumed to be a bundle of resources, capabilities, and competencies. The first critical assumption—resource heterogeneity—is that bundles of resources, capabilities, and competencies differ across firms. Resource immobility, the tendency of resources to be "sticky," is not discussed in this example. Value and imitability are aspects of the VRIO framework, not critical assumptions of the resource-based view.

Tony's Pizza has been trying to directly copy the strategies of Moonlight Pies. Even though it is evident that the success of Moonlight Pies' success comes from the freshness and variety of ingredients it uses, Tony's Pizza has not been able to introduce the same types of produce into its recipes. This is because Moonlight's network of relationships with local growers, as well as its efficient supply chain, are very difficult to emulate. Which of the following barriers to imitation does this scenario best illustrate?

Social complexity Social complexity describes situations in which different social and business systems interact with one another. It emerges when two or more individual systems are combined. Copying the emerging complex social systems is difficult for competitors because neither direct imitation nor substitution is a valid approach.

An observer may conclude that the organizational culture of Zappos, an online retailer for shoes and clothing, might be the basis for its competitive advantage. However, reverse social engineering to crack Zappos' code of success might be much more difficult for a company trying to exactly imitate its strategy. Thus, the source of Zappos competitive advantage is said to be

Socially complex

In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility? A) AP Corp. has earned a good reputation among its shareholders by investing more heavily in equipment than in building up brand equity. B) Two Triangle Inc. has lost its market share because its resources are rigid, inflexible, and static. C) Blue Elixir Corp. has been able to gain a competitive advantage because of its ability to efficiently move its resources from one manufacturing unit to another. D) True 3 Inc. has been able to outperform its competitors because the uniqueness of its employee experience is difficult for competitors to replicate.

True 3 Inc. has been able to outperform its competitors because the uniqueness of its employee experience is difficult for competitors to replicate.