Strategic MGT Ch.4

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

capabilities

BioTree Inc. has used $350,000, from its total annual earnings of $1,250,000, to invest in the research and development of a multi-purpose vaccine. Its account receivable from customers is estimated to be $150,000 and accounts payable $80,000. In monetary terms, what would BioTree Inc.'s resource flows be?

$350,000

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 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.

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.

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

Assets such as land and building owned by a firm

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.

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

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

How did McDonald's leverage internal strengths in brand name and consistency to minimize the external threat of easy-to-prepare grocery items?

By launching a McDonald's line of frozen foods in grocery stores

_____ 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 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

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.

True Moto Corp. (TMC) is a leading automobile company. The company has been able to sustain its competitive advantage primarily due to its high quality and efficient electric motors. Most of its competitors have failed to develop similar electric motors at a reasonable price. Which of the following resource attributes listed in the VRIO framework has helped TMC sustain its competitive advantage?

High costs involved in imitation

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.

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

Increase in a firm's customer loyalty

_____ 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 $35 billion. 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.

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.

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

Marketing and sales

Onyxo Inc., a consumer electronics company, is the leading manufacturer of LCD televisions. LCD technology has been its core competency and the company holds 80 percent shares in that market. However, Onyxo Inc.'s competitors have now moved on to advance technologies like LED and 3D televisions. According to the dynamic capabilities perspective, what should Onyxo Inc. do?

Onyxo Inc. should start working on LED and 3D television technologies to adapt its core competency to suit the external environment.

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

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

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

Reputation for quality

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 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 describes a firm's resource stock?

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

Jeremy 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 him 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 Jeremy employing?

SWOT analysis

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

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.

_____ allows managers to synthesize insights obtained from an internal analysis of a company's strengths and weaknesses with those from an analysis of external opportunities and threats.

The SWOT analysis

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

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

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 of the following is an implication of this situation?

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

Which of the following factors is most likely to lead to a loss of competitive advantage for Nike?

Too many public relations disasters combined with severe shortcomings of some of Nike's heroes

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

VRIO framework

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

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

all firms have access to the same resources.

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

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.

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

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

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

easy to imitate

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

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

The value chain describes the:

internal activities a firm engages in when transforming inputs into outputs.

If a resource is common:

it will result in perfect competition.

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

knowledge diffusion

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

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

perfect competition exists.

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

primary activity

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

Due to path dependence:

strategic decisions have long-term consequences.

During market testing, Elixir Cosmetics (EC) realized that the cosmetics industry was dominated with multiple, well-established brands. These brands mostly sold their products in exclusive outlets and departmental stores. A new entrant like EC would require a different business model to be successful. Thus, EC started selling its products through direct marketing. In this scenario, Elixir Cosmetics accomplished substitution primarily through _____.

strategic equivalence

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.

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 most of its competitors had already been in the laptop market for five years. Blue Tech Inc's models were inferior to the ones in the market. In this scenario, Blue Tech Inc.'s failure can be best attributed to:

time compression diseconomies

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

using its internal strengths to exploit external opportunities.

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

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.