4700-Chapter 4

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

D. using its internal strengths to exploit external opportunities.

In knowledge-intensive industries, the marginal costs after initial invention are

A. low.

Due to path dependence

A. strategic decisions have long-term consequences.

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

B. reputation for quality

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

B. valuable and costly to imitate.

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

C. assets such as land and buildings owned by a firm

Amazon.com's ability to provide the largest selection of items online, combined with superior IT systems and customer service, can be referred to as its

C. core competency.

According to the VRIO framework, a firm can gain a competitive advantage if it has resources that are _____ and captured by an organized firm.

C. valuable, rare, costly to imitate

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?

D. brand name

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?

D. high costs involved in imitation

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

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

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

D. marketing and sales

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

D. scan a firm's internal and external environments.

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?

D. the company's machinery

The "diagonal assembly system" was a production system pioneered by the automobile company Gogo. Recently, Gogo was able to sue a competitor and won the suit, thereby receiving $100 million in damages. Which of the following would most likely enable Gogo to win such a lawsuit?

C. The competitor infringed on Gogo's patent of the "diagonal assembly system."

Superlative Productions spent 10 million dollars to buy the rights to a best-selling novel. The company then prepared for production by hiring a screenwriter to adapt the novel, casting the main roles, renting cameras and other equipment, and scouting locations in southern Arizona. Which of the following pairs of resources are both intangible?

D. best-selling novel; screenwriter's experience adapting novels

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

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

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

A. Dynamic capability

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?

A. Groupon's competency was not hard to imitate.

Which of the following best explains why IBM has been able to maintain its competitive advantage?

A. IBM successfully transformed itself multiple times in the data information industry over a period of more than 100 years.

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

A. 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?

A. 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?

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

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 3-D televisions. According to the dynamic capabilities perspective, what should Onyxo Inc. do?

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

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

A. all firms have access to the same resources.

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

A. better expectations of future resource value

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

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

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 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.?

A. direct imitation

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

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

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

A. increase in a firm's customer loyalty

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

A. path dependence.

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

A. primary activity

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.

A. resource immobility

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?

A. 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

A. socially complex.

Path dependence rests on the notion that

A. time cannot be compressed at will.

Crystal 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 Crystal Tech Inc. to increase its profitability by lowering its production costs. Thus, Crystal's competency in designing and manufacturing microprocessors will be considered a(n) _____ resource in the VRIO framework.

A. valuable

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

D. decline in the firm's market share

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

B. Bass Automobiles Inc. faced resource leakage.

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

B. 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.

B. Core competencies

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?

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

EasyOpen Inc. gained a patent for an electronic corkscrew. Soon the company made a huge profit on this device. Recently, however, other firms have produced electronic corkscrews. As a result, EasyOpen lost its competitive advantage. Which of the following would most likely be the reason for this development?

B. EasyOpen's patent expired after 20 years

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

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

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

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

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?

B. It created a perception that owning its products was cool.

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

B. Path dependence

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

B. 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.

B. The SWOT analysis

Which of the following provides an example of how a firm's valuable resource can be imitated?

B. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the Leaning Tower of Pisa.

Rice Dazzle Inc. has been making the same breakfast cereal for 50 years. Recently, sales have plummeted. To counteract this, the company created a new package that included an endorsement by a celebrity. As a result, sales increased close to previous highs. However, the cereal itself remained the same. According the VRIO framework, is the new packaging a valuable resource for Rice Dazzle?

B. Yes, because the new packaging made the product more attractive in the eyes of consumers.

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

B. core competencies.

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

B. 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

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

The value chain describes the

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

If a resource is common

B. it will result in perfect competition.

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

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

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

B. perfect competition exists.

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 long time. 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.

B. rare

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. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?

B. resource heterogeneity

Value Autos Inc. has been trying to directly copy the strategies of Honk Autos Inc. Even though it is evident that Honk Autos Inc.'s success comes from its just-in-time inventory system, Value Autos 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?

B. social complexity

Chat Zone Inc., a telecommunication company, had been drastically losing its market share due to tough competition in the industry. The management hired a reputed consulting firm to advice the company. The experts from the consulting firm pointed out that the company primarily lost out on its competitive advantage due to its tedious internal policies and procedures. These ineffective policies and procedures made the company operations, marketing, and after-sales service inefficient. Chat Zone Inc. can best solve its problem by working on its

B. support activities.

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?

C. A firm must be effectively organized to capture value.

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

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

Which of the following statements correctly describes resource heterogeneity?

C. Bundles of resources, capabilities, and competencies differ across firms.

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?

C. 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.

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

C. Isolating mechanisms

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

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

Which of the following accurately summarizes the difference between the resources and capabilities of a firm?

C. Resources are tangible and intangible; capabilities are intangible.

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

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

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?

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

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

C. VRIO framework

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

C. an increase in its customers' disposable income

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

C. 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

C. 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

C. causal ambiguity.

The resource-based view of a firm assumes that the

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

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

C. resource differences between firms last for a long time.

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?

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

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?

C. the expertise acquired by the employees in the company

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

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

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

C. the firm's organizational culture

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

C. time compression diseconomies.

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

C. when past decisions act as constraints for the current dynamic capabilities

GreenHarvest 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 GreenHarvest Inc.'s resource flows be?

D. $350,000

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?

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

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?

D. SWOT analysis

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

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

Ambrosia 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, Ambrosia Inc. decided to purchase cocoa plantations in Ghana. As predicted, the prices of cocoa increased twofold. Because of the company-owned cocoa plantations, Ambrosia Inc. was able to sustain its competitive advantage in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate?

D. better expectations of future resource value

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

D. capabilities.

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

D. 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.

D. dynamic capabilities perspective

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

D. helps the firm to gain and sustain a competitive advantage.

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?

D. 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?

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

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

D. rare

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

D. resource immobility

During market testing, Sensation Cosmetics (SC) 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 SC would require a different business model to be successful. Thus, SC started selling its products through direct marketing. In this scenario, Sensation Cosmetics accomplished substitution primarily through

D. strategic equivalence.

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 of Gene Craft Inc. is most likely to be considered a rare resource that is best contributing to its competitive advantage?

D. the company's chemical patents

Riya has recently started a restaurant in a commercial area where there are many other established restaurants and popular fast-food chains. Riya 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. Riya 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 Riya's business?

D. the land owned by Riya, which reduces cost of operations