Chapter 4

Even though many valuable, rare, and inimitable resources were generated at Xerox's Palo Alto Research Center (PARC), the management at Xerox's headquarters failed to gain a competitive advantage by exploiting the breakthroughs in computing software and hardware. What is the most likely implication of this example?

A firm must be effectively organized to capture value

Which of the following statements fails to bring out the essence of the dynamic capabilities perspective?

A firm's competitive advantage is derived from static resource or market advantages.

Home Value Inc., Max Cart Inc., and Nice Necessities Inc. are three consumer-product retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Which of the following is an implication of the market condition indicated in this scenario?

Any advantage that one firm has will be short-lived.

____ describes a situation in which the cause and effect of a phenomenon are not readily apparent.

Causal ambiguity

Which of the following management tools will help determine whether a firm's resources, capabilities, and competencies are strengths or weaknesses?

VRIO framework

Value Autos Inc. has been trying to directly copy the strategies of Honk Autos Inc.

Which of the following barriers to imitation does this scenario best illustrate?

Mova Electronics, a leading pager manufacturer, recently declared itself bankrupt. This was attributed to a decision the company made in the past

Which of the following does this scenario best illustrate?

_____ describes a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage.

Dynamic capability

When evaluating the sustainability of a firm's competitive advantage, which of the following statements is not true?

If managed effectively, existing core competencies can help sustain the competitive advantage indefinitely.

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.

If Finolo and Ethver, companies that manufacture televisions, develop the same customer knowledge base and create products that provide the same customer appeal as Invoro, a market leader in consumer electronics, then

Invoro will have a resource that is valuable but no longer rare.

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

Isolating mechanisms

Beats Electronics has been able to outperform Audio-Technica, Bose, JBL, Skullcandy, Sennheiser, and Sony in the high-end, premium headphone market. Which of the following statements accurately explains one of the main reasons for the success of Beat?

It created a perception that owning its products was cool.

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

It is the firm's level of investments to maintain or build a resource.

How does causal ambiguity act as an isolating mechanism for organizations?

It makes it difficult for the competitors to understand why a company has been so successful

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

Which of the following best exemplifies social complexity as an isolating mechanism?

Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success.

Which of the following management tools will help determine the external opportunities and threats that affect a firm?

PESTEL analysis

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

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

Which of the following applies to the Strength-Threats quadrant of the SWOT matrix

The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition.

Ambrosia Inc., a leading chocolate producer, anticipated that the prices of cocoa beans would double in less than three years. Which of the following isolating mechanisms does this scenario best illustrate?

better expectations of future resource value

Coral Think Inc. is a new company in the publishing industry. It 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 Coral Think Inc. to acquire using its capital?

brand name

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.

Competitors have found it extremely difficult to imitate Gene Electronics Inc.'s valuable resources, capabilities, or competencies. Gene Electronics Inc. has been protected from losing its competitive advantage as a result of

causal ambiguity.

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

core competencies.

Clean Rinse Shampoo has been the leader of hair-cleaning products for about 40 years. However, this company relied too long on its competency without refining or upgrading its product. As a result, other shampoo companies that began to offer organic shampoo gained a competitive advantage over Clean Rinse. This case is an example of

core rigidity.

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

decline in the firm's market share

According to the _____, competitive advantage is the outflow of a firm's ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage in a constantly changing environment.

dynamic capabilities perspective

True Moto Corp. (TMC) is a leading automobile company. Which of the following resource attributes listed in the VRIO framework has helped TMC sustain its competitive advantage?

high costs involved in imitation

To gain a competitive advantage, Lopez Industries obtained financing and then used this extra capital to produce the same amount of gaskets in a one-month period that it normally produces in a two-month period. Which of the following is the most likely outcome of this endeavor?

inferior results

If a resource is common

it will result in perfect competition.

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

marketing and sales

VRD Systems Inc. took many decades to build its core competencies, and these competencies were based primarily on the decisions made by the company's top management in the past. This process is called

path dependence.

In a generic value chain, a firm's after-sales service will be referred to as its

primary activity

Riya has recently started a restaurant in a commercial area where there are many other established restaurants and popular fast-food chains. which of the following is the most valuable resource for Riya's business?

production systems that reduce costs by 30 percent below the current industry standards

Next Door Cellular is a leading mobile network operatorThis unique asset that has helped the company gain a competitive advantage will be considered as a(n) _____ resource in the VRIO framework.

rare

Which of the following resources is a firm's resource stock?

reputation for quality

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.

Which of the following is not a condition that can help a firm sustain its competitive advantage?

when past decisions act as constraints for the current dynamic capabilities

SWA has enjoyed a sustained competitive advantage, allowing it to outperform its competitors over several decades. Continental and Delta attempted to copy SWA with their offerings of Continental Lite and Song, respectively. Neither Continental nor Delta, however, was able to successfully imitate the resource bundles and firm capabilities that make SWA unique. Which of the following is this case an example of?

resource immobility

To make the SWOT analysis an effective management tool, a strategist must first

scan a firm's internal and external environments.

Due to path dependence

strategic decisions have long-term consequences.

During market testing, Sensation Cosmetics (SC) realized that the cosmetics industry was dominated with multiple, well-established brands. Thus, SC started selling its products through direct marketing. In this scenario, Sensation Cosmetics accomplished substitution primarily through

strategic equivalence

Chat Zone Inc., a telecommunication company, had been drastically losing its market share due to tough competition in the industry. Chat Zone Inc. can best solve its problem by working on its

support activities.

Apple paid $3 billion dollars to acquire Beats. This is the largest acquisition in Apple's history. Which of the following provides a reason for this acquisition?

the change in content delivery from ownership via downloads to streaming on demand

Gene Craft Inc. is the market leader in the pharmaceutical industry

the company's chemical patents

Smooth Fusion Inc. is a software company, which 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

If a resource is rare or unique to a particular firm, then

the firm will be able to maintain a competitive advantage for a long period.

Path dependence rests on the notion that

time cannot be compressed at will.

In the context of SWOT analysis, a firm can develop an offensive strategic option primarily by

using its internal strengths to exploit external opportunities.

A firm's resource is most likely to be an internal strength and a core competency when the resource is

valuable and costly to imitate.