MGT 449 Chapter 4

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

Pulse Mobiles Inc. is a cell phone manufacturing company. Its latest range of smartphones bears a straight resemblance to the Y-series range of smartphones fromTalkie 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

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

Path dependence

Vior 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.

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.

The share price of Groupon, a daily-deal website, fell by 90 percent just a year after its successful initial public offering. The firm was not able to sustain its competitive advantage because of the emergence of other daily-deal sites that were able to better serve the needs of local markets and specific population groups. Which of the following is the most accurate inference from this example?

Groupon's competency was not hard to imitate

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.

Mova Electronics, a leading pager manufacturer, recently declared itself bankrupt. This was attributed to a decision the company made in the past. While most of Mova's competitors were shifting their research focus toward cell phones, Mova invested most of its retained earnings on improvising its pagers. Once the pager market drastically declined, Mova Electronics was unable to capitalize on the new technology. Which of the following does this scenario best illustrate?

Path dependence

Otion Inc. is a relatively new firm in the consumer electronics industry. The company's primary objective is to become the market leader in less than 5 years, for which it has to gain and sustain a competitive advantage. In the context of the VRIO framework, which of the following resources should Otion Inc. primarily focus on to achieve its objective?

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

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 IonInc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area where One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?

Resource heterogeneity

Which of the following statements accurately brings out the difference between tangible and intangible resources?

Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased.

Trust Machines Inc. is a company that manufactures and markets consumer electronics. The unique microprocessors developed by the company contribute to its high resource immobility. According to the resource-based view of competitive advantage, which ofthe following is an implication of this situation?

The resources of Trust Machine Inc. are difficult to replicate or imitate.

In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility?

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

True Home Inc., Super Cart Inc., and Daily Things 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

________ are best described as unique strengths, embedded deep within a firm, that 2) allow a firm to differentiate its products and services from those of its rivals, creating-higher value for the customer or offering products and services of comparable value at-lower cost.

Core competencies

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

Isolating mechanisms

GN Corp. and BC Inc. are two competing firms in the same industry. GN Corp.'s tangible assets are valued at $15 billion and its intangible assets are valued at $35billion. BC Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information?

It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage.

Nike has come a long way from its humble beginnings. It has been able to outperform adidas in sales and become the undisputed leader in the athletic shoe and apparel-industry. Which of the following statements accurately explains one of the main-reasons for Nike's success?

It made the unorthodox move to spend basically its entire budget for a specific sport on a single star athlete.

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.

Onyx Tech Inc.'s competency in designing and manufacturing efficient microprocessors has made its laptops the most advanced computers in the market. This competency, along with the just-in-time manufacturing system, has enabled Onyx Tech Inc. to-increase its profitability by lowering its production costs. Thus, Onyx's competency in designing and manufacturing microprocessors will be considered a(n) ________ resource in the VRIO framework

valuable

Dandelions Max is a consumer electronics company. It has acquired an edge over its competitors through its ability to provide breakthrough technology at the lowest price in the market. This advantage of Dandelions Max best exemplifies a ________.

core competency

With regard to the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were:

easy to imitate.

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the:

firm will have a sustained competitive advantage because of its unique resources.

When the knowledge of a valuable and rare resource diffuses throughout an industry, the:

firms in the industry will be better positioned to achieve competitive parity.

Creating resources that meet the VRIO criteria is strategically important to a firm because it:

helps the firm to gain and sustain a competitive advantage

Intangible assets add great value to a firm primarily because the firm's:

knowledge and culture take time to develop and are generally difficult to imitate.

TrueCandy Inc., a confectionery manufacturing company, lost its competitive advantage when its strategy of placing kiosks at prominent locations throughout thestate was followed by most of its competitors. In this scenario, TrueCandy Inc.'s loss of competitive advantage can be primarily attributed to ________.

knowledge diffusion

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

perfect competition exists.

Connect Plus Cellular is a leading mobile network operator. Since most of the resources used by Connect Plus Cellular is easily available, the company's brand name is the only resource that distinguishes it from the other operators. No other competitor in theindustry has a strong brand name like that of Connect Plus Cellular. This unique asset that has helped the company gain a competitive advantage will be considered as a(n) ________ resource in the VRIO framework.

rare

The "Gold Crisps" potato wafers manufactured by True Foods Inc. have been the highest selling wafers in the market. Though the market for wafers is flooded with competitors, True Foods Inc. has been able to maintain its market position for a longtime. This is mainly attributed to the unique taste of the wafers that comes from the unique natural flavoring used by the company. This competency of True Foods Inc. will be considered as a(n) ________ resource in the VRIO framework

rare

The resource-based view of a firm assumes that the:

resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another.

As a result of ________, a critical assumption in the resource-based model of a firm, the resource differences that exist between firms are difficult to replicate.

resource immobility

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

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.

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.

What is an example of a firm's resources?

Assets such as land and building owned by a firm

Brown Foods Inc., a leading chocolate producer, anticipated that the prices of cocoa beans would double in less than three years. This would disrupt the availability of cocoa in the industry. Thus, Brown Foods Inc. decided to purchase cocoa plantations in Ghana. As predicted, the prices of cocoa increased twofold. Because of the company-owned cocoa plantations, Brown Foods Inc. was able to sustain its competitive advantage in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate?

Better expectations of future resource value

Maroon Inc. is a leading international apparel company. Competitors across the globe have failed to imitate Maroon Inc.'s production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Maroon 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

True Autos Inc. has been trying to directly copy the strategies of Red Autos Inc. Even though it is evident that Red Auto's Inc.'s success comes from its just-in-time inventory system, True Auto's Inc. has not been able to effectively apply the system in the same way. This is because the organizational structures, employees, cultures, and the overall business systems of both the companies vary from each other. Which of the following barriers to imitation does this scenario best illustrate?

Social complexity

Gene Craft Inc. is the market leader in the pharmaceutical 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 ofGene Craft Inc. is most likely to be considered a rare resource that is best contributing to its competitive advantage?

The company's chemical patents

The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment?

The company's machinery

True Sync 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 True Sync Inc. will best enable it to gain and sustain a competitive advantage?

The expertise acquired by the employees in the company

Which of the following is an example of a firm's intangible resources?

The firm's organizational culture

Sarah has recently started a restaurant in a commercial area where there are many other established restaurants and popular fast food chains. Sarah owns the plot on which her restaurant is located and this makes her cost of operations lower than the competitors.This factor allows her to offer her products at a competitive price. Sarah has also invested a huge amount on the interiors of the restaurant and in equipping the kitchen with the latest appliances used by her competitors. In this scenario, which of the following is the most valuable resource for Sarah's business?

The land owned by Sarah, which reduces cost of operations

The perfectly competitive industry structure differs from the resource-based model in its view that:

all firms have access to the same resources.

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. This is primarily because the source for the company's success has been unclear. The competitors are uncertain if Gene Electronics Inc.'s success is due to its strong leadership, the skills of its research and development team, or the timing of the company' s product introductions. Gene Electronics Inc. has been protected from losing its competitive advantage as a result of ________.

causal ambiguity

It is difficult even for Apple's managers to pinpoint the underlying cause of the company's phenomenal success. The term that best applies to this difficulty is known as ________.

causal ambiguity