BUS 498 Test 1 Study Guide Chapter 4 and 6

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. B. A firm must be able to change its resource base as the external environment changes in order to sustain its competitive advantage. C. A firm should modify its core competencies to effectively compete in dynamic markets. D. A firm's external environment is rarely stable, and in many industries, change is fast and ferocious.

A. A firm's competitive advantage is derived from static resource or market advantages. The essence of the dynamic capabilities perspective is that competitive advantage is not derived from static resource or market advantages, but from a dynamic reconfiguration of a firm's resource base.

_____ 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 B. Resource immobility C. Resource heterogeneity D. Time compressed diseconomy

A. Dynamic capability Dynamic capabilities describe a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage. Dynamic capabilities are essential to move beyond a short-lived advantage and to create a sustained competitive advantage.

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. B. Groupon's competency was built more on an intangible resource than on a tangible one. C. Groupon operated in an industry where the barriers to entry were high. D. Groupon invested in resources that were invaluable and common.

A. Groupon's competency was not hard to imitate. As discussed in Strategy Highlight 4.1, to target and fine-tune its local deals, Groupon relies heavily on human labor to do the selling. Barriers to entry in this type of business are nonexistent because Groupon's competency is built more on a tangible resource (labor) than on an intangible one (proprietary technology). Given that Groupon's valuable and rare competency was not hard to imitate, hundreds of new ventures (so-called "Groupon clones") rushed in to take advantage of the opportunity.

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. B. IBM hired a new CEO to refocus the company on satisfying market needs, which demanded IT services. C. IBM focused on producing mainframe and mini-computers that would be produced by fully integrated companies. D. IBM helped kick-start the PC revolution in 1981 by setting an open standard in the computer industry with the introduction of the IBM PC.

A. IBM successfully transformed itself multiple times in the data information industry over a period of more than 100 years. As discussed in Strategy Highlight 4.2, IBM's dynamic capability to successfully transform itself multiple times over its more than 100-year history enabled it to maintain its competitive advantage.

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. B. It is the firm's current level of intangible resources. C. It is the firm's current level of tangible resources that are common to other firms. D. It is the firm's level of expertise to efficiently deploy a valuable resource.

A. It is the firm's level of investments to maintain or build a resource. Resource flows are 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. B. It creates a situation in which different social and business systems interact with one another. C. It makes it difficult for competitors to deploy their resources by creating ambiguity within their organizational structures. D. It makes it difficult for competitors to imitate core competencies quickly due to time compression diseconomies.

A. It makes it difficult for the competitors to understand why a company has been so successful. Causal ambiguity describes a situation in which the cause and effect of a phenomenon are not readily apparent. To formulate and implement a strategy that enhances a firm's chances of gaining and sustaining a competitive advantage, managers need to have a hypothesis or theory of how to compete. Understanding the underlying reasons of observed phenomena is, however, far from trivial.

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. B. It makes the source of the company's competitive advantage causally ambiguous. C. It makes the source of the company's competitive advantage socially complex. D. It results in greater immobility and heterogeneity of the company's resources.

A. It results in a reduction in the company's intangible-resource stocks. An implication of high turnover in a company is that it results in a reduction in the company's intangible-resource stocks. The outflows of resources represent a reduction in a firm's intangible-resource stocks. Significant resource leakage can erode a firm's competitive advantage.

Which of the following best exemplifies social complexity as an isolating mechanism? A. Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success. B. Kristin's Cosmetics failed to acquire the resources for its eyeliner at a low cost and thereby lost its competitive advantage over Monica's Makeup. C. Kristin's Cosmetics had difficulty competing with Monica's Makeup because it could not access the many makeup factories in Kentucky as easily as its competitor. D. Kristin's Cosmetics did not fully understand the reasons for the success of Monica's Makeup and therefore had difficulty competing with the firm.

A. Kristin's Cosmetics attempted to imitate how Monica's Makeup combined its management and product development systems with little success. Social complexity describes situations in which different social and business systems interact with one another. Copying the emerging complex social systems is difficult for competitors because neither direct imitation nor substitution is a valid approach. Therefore, Kristin's Cosmetics attempt to imitate how Monica's Makeup combined its management and product development systems with little success is an example of social complexity as an isolating mechanism.

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. B. Onyxo Inc. should stick to its existing core competency, that is LCD technology, as it is the best in that segment. C. Onyxo Inc. should take proactive steps to reduce the causal ambiguity and socially complexity of its core competency. D. Onyxo Inc. should work on enhancing the mobility of its core competency.

A. Onyxo Inc. should start working on LED and 3-D television technologies to adapt its core competency to suit the external environment. According to the dynamic capabilities perspective, Onyxo Inc. should start working on LED and 3-D television technologies to adapt its core competency to suit the external environment. The essence of dynamic capabilities perspective is that competitive advantage is not derived from static resource or market advantages, but from a dynamic reconfiguration of a firm's resource base.

The perfectly competitive industry structure differs from the resource-based model in its view that A. all firms have access to the same resources. B. accessibility to bundles of resources differ across firms. C. resources tend to be "sticky." D. competencies differ across firms working in the same industry.

A. all firms have access to the same resources. The critical assumptions of the resource-based model of a firm are 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 resources and capabilities, ensuring that any advantage that one firm has will be short-lived.

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 B. path dependence limiting current decisions C. causal ambiguity D. social complexity

A. better expectations of future resource value Better expectations of future resource value describes a situation in which firms acquire resources at a low cost, which lays the foundation for a competitive advantage later.

A _____ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. A. business-level strategy B. code of ethics C. mission statement D. functional-level strategy

A. business-level strategy A business-level strategy details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. It may involve a single product or a group of similar products that use the same distribution channel.

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. B. reduce the immobility and the heterogeneity of the firm's resources. C. create a static fit between the company's internal resources and the external environment. D. reduce the causal ambiguity and the social complexity of the firm's source of success.

A. contribute to the firm's strategic position as either low-cost leader or differentiator. 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. Each distinct activity performed needs to either add incremental value to the product or service offering or lower its relative cost.

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 B. strategic equivalence C. substitution D. innovation

A. direct imitation Pulse Mobiles Inc. has used direct imitation to replicate the valuable and rare resource of Talkie Gen Inc. A competing firm can succeed in replicating a firm's valuable and rare resource by directly imitating the resource in question (direct imitation) or through working around it to provide a comparable product or service (substitution).

A firm will fail to create a sustained competitive advantage when the A. fit between its internal strengths and the external environment is static. B. source of its competitive advantage is causally ambiguous. C. source of its competitive advantage is socially complex. D. resource bundles exhibit heterogeneity and immobility.

A. fit between its internal strengths and the external environment is static. A firm must be able to change its resource base as the external environment changes. Rather than creating a static fit, the firm's internal strengths should change with its external environment in a dynamic fashion.

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 B. growth in the size of the market in which a firm operates C. rise in the income of the demographic segment to which a firm caters D. loss of a competitor's reputation

A. increase in a firm's customer loyalty The increase in a firm's customer loyalty best exemplifies a firm's internal strength. Strengths and weaknesses are internal to an organization, whereas opportunities and threats are external to the organization.

In knowledge-intensive industries, the marginal costs after initial invention are A. low. B. high. C. moderate. D. unpredictable.

A. low Although the initial investments to create first version of a new product or service is quite high in many knowledge-intensive industries, the marginal cost (the cost to produce the next unit) after initial invention is generally quite low.

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. B. dependence complexity. C. causal dependence. D. path immobility.

A. path dependence. Path dependence is a process in which the options that one faces in a current situation are affected by decisions made in the past.

To increase its competitive advantage, HRV Automobiles seeks to improve the efficiency of its production plants. By doing this, HRV is addressing a _____ in the value chain analysis. A. primary activity B. secondary activity C. support activity D. premier activity

A. primary activity Production plants are part of a firm's operations. Operations are primary activities in the value chain analysis.

In a generic value chain, a firm's after-sales service will be referred to as its _____. A. primary activity B. support activity C. static resource D. resource flow

A. primary activity The primary activities add value directly as a firm transforms inputs into outputs—from raw materials through production phases to sales and marketing, and finally customer service. Primary activities are: supply chain management, operations, distribution, marketing and sales, and after-sales service.

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 B. resource homogeneity C. resource perishability D. resource equality

A. 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.

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 B. resource heterogeneity C. resource mobility D. resource homogeneity

A. resource immobility This case is an example of resource immobility. Resources tend to be "sticky" and don't move easily from firm to firm. As a result, Continental and Delta were both unable to successfully copy SWA.

Dynamic capabilities are especially relevant for surviving and competing in markets that A. shift quickly. B. shift slowly. C. remain constant. D. remain unpredictable.

A. shift quickly. Dynamic capabilities are especially relevant for surviving and competing in markets that shift quickly.

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. B. inexhaustible. C. non-substitutable. D. nonambiguous.

A. socially complex. Although an observer may conclude that Zappos' culture, with its focus on providing superior customer service, might be the basis for its competitive advantage, engaging in reverse social engineering to crack Zappos' code of success might be much more difficult. A firm may be able to protect its competitive advantage (even for long periods of time) when the source of its competitive advantage is causally ambiguous or socially complex.

Due to path dependence A. strategic decisions have long-term consequences. B. the occurrence of time compression diseconomies becomes rare. C. competitors can easily imitate or create core competencies quickly. D. past decisions of a firm do not affect its current situation.

A. strategic decisions have long-term consequences. Strategic decisions have long-term consequences due to path dependence and time compression diseconomies; they are not easily reversible.

Path dependence rests on the notion that A. time cannot be compressed at will. B. strategic decisions are easily reversible. C. rare resources can be built in a short period of time. D. competitive advantage can be sustained indefinitely.

A. time cannot be compressed at will. Path dependence rests on the notion that time cannot be compressed at will. 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 of time.

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 B. inexhaustible C. tangible D. perishable

A. valuable Crystal's competency in designing and manufacturing microprocessors will be considered a valuable resource in the VRIO framework. A resource is valuable if it helps a firm increase the perceived value of its product or service in the eyes of consumers, either by adding attractive features or by lowering price because the resource helps the firm lower its costs.

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? A. resource equality B. resource heterogeneity C. resource mobility D. resource maturity

B 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.

Several senior managers recently left Bass Automobile Inc. and went to work at Unicorn Autos Inc., a rival company. What does this imply? A. The resource stock of Bass Automobiles Inc. increased. B. Bass Automobiles Inc. faced resource leakage. C. The resource flow into Unicorn Autos Inc. reduced. D. Bass Automobiles Inc.'s tangible assets decreased.

B. Bass Automobiles Inc. faced resource leakage. Resource leakage might occur through employee turnover, especially if key employees leave. Significant resource leakage can erode a firm's competitive advantage.

_____ describes a situation in which the cause and effect of a phenomenon are not readily apparent. A. Resource immobility B. Causal ambiguity C. Resource heterogeneity D. Social complexity

B. Causal ambiguity Causal ambiguity is a situation in which the cause and effect of a phenomenon are not readily apparent.

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? A. EasyOpen failed to renew the patent after 10 years. B. EasyOpen's patent expired after 20 years. C. EasyOpen failed to copyright the corkscrew. D. EasyOpen's copyright expired after 30 years.

B. EasyOpen's patent expired after 20 years. IP protection does not last forever, however. Once the protection has expired the invention can be used by others. Patents usually expire 20 years after a patent was filed with the U.S. Patent and Trademark Office.

When evaluating the sustainability of a firm's competitive advantage, which of the following statements is not true? A. The competitive advantage will not be sustainable if there are substitutes for the firm's core competence. B. If managed effectively, existing core competencies can help sustain the competitive advantage indefinitely. C. Social complexity often leads to a competitive advantage that is sustainable. D. When expectations of future resource value turn out to be accurate and can be repeated, then a sustained competitive advantage is realized.

B. If managed effectively, existing core competencies can help sustain the competitive advantage indefinitely. Several conditions can only offer some protection to a successful firm by making it more difficult for competitors to imitate the resources, capabilities, or competencies that underlie its competitive advantage. However, no competitive advantage can be sustained 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 A. Finolo and Ethver will have a VRIO resource. B. Invoro will have a resource that is valuable but no longer rare. C. Invoro will have a sustainable competitive advantage in the industry. D. Invoro will have a resource that is rare but no longer valuable.

B. Invoro will have a resource that is valuable but no longer rare. If Finolo and Ethver develop the same customer knowledge base and create products that provide the same appeal, then Invoro will have a resource that is still valuable but no longer rare.

Which of the following management tools will help determine the external opportunities and threats that affect a firm? A. Porter's five forces analysis B. PESTEL analysis C. VRIO framework D. Ansoff's matrix

B. PESTEL analysis External opportunities (O) and threats (T) are in the firm's general environment and can be captured by the PESTEL analysis.

_____ describes a process in which the options one faces in a current situation are limited by decisions made in the past. A. Social complexity B. Path dependence C. Cannibalization D. Causal ambiguity

B. 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.

_____ 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. A. The VRIO framework B. The SWOT analysis C. The break-even analysis D. Ansoff's matrix

B. The SWOT analysis SWOT analysis is a framework that allows managers to synthesize insights obtained from an internal analysis of the company's strengths and weaknesses (S and W) with those from an analysis of external opportunities and threats (O and T).

Which of the following provides an example of how a firm's valuable resource can be imitated? A. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a sports car. 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. C. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of the U.S.S. Enterprise aircraft carrier. D. To compete with Build Your Own's model of the Eiffel Tower, Best Replica came out with a model of a grizzly bear.

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. A competing firm can succeed in imitating another firm's valuable resource by directly imitating the resource in question (direct imitation) or through working around it to provide a comparable product or service (substitution). So Best Replica imitated Build Your Own's model of the Eiffel Tower by coming out with a comparable product, namely a model of another landmark—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? A. Yes, because the new packaging has an endorsement by a celebrity. B. Yes, because the new packaging made the product more attractive in the eyes of consumers. C. No, because the new packaging did not improve the product itself. D. No, because the new packaging did help to not increase sales past the previous high for sales.

B. Yes, because the new packaging made the product more attractive in the eyes of consumers. According to the VRIO framework, a resource is valuable if it helps a firm increase the perceived value of its product or service in the eyes of consumers.

A resource-based view of a firm provides a model that systematically aids in identifying A. related competencies. B. core competencies. C. competitive disadvantage. D. competitive parity.

B. core competencies. A resource-based view of a firm provides a model that systematically aids in identifying core competencies.

With regard to the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were A. invaluable and common. B. easy to imitate. C. extremely expensive. D. non-substitutable.

B. easy to imitate. Competitive advantage cannot be sustained if the underlying capability can easily be replicated and can thus be directly imitated. Despite its patents and celebrity endorsements, other firms were able to more or less directly copy Crocs shoes, taking a big bite into its profits.

All Purpose Tires, Inc. is planning to build a manufacturing plant in Tornado Alley—an area that often gets hit by tornados. According to the SWOT analysis, this location is considered to be an A. external opportunity. B. external threat. C. internal opportunity. D. internal threat.

B. external threat. An external threat is a danger in a firm's general environment.

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the A. rival firms have better accessibility to quality resources. B. firm will have a sustained competitive advantage because of its unique resources. C. competitors can easily replicate or copy the firm's resource bundles and capabilities. D. resources of the firm cannot be effectively deployed within its own organization.

B. firm will have a sustained competitive advantage because of its unique resources. 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 due to its unique resources. In the resource-based view, resource immobility is an assumption that resources of a firm tend to be "sticky" and do not 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.

The value chain describes the A. competitive challenges a firm faces in a highly dynamic external environment. B. internal activities a firm engages in when transforming inputs into outputs. C. current consequences a firm experiences due to its decisions in the past. D. strategic advantages a firm experiences when its resources lack causal ambiguity.

B. internal activities a firm engages in when transforming inputs into outputs. The value chain describes the internal activities a firm engages in when transforming inputs into outputs. Each activity the firm performs along the horizontal chain adds incremental value—raw materials and other inputs are transformed into components that are finally assembled into finished products or services for the end consumer.

If a resource is common A. competitive advantage will persist with one firm for a long period of time. B. it will result in perfect competition. C. it will result in greater resource immobility. D. competitive parity will cease to exist.

B. it will result in perfect competition. If a resource is common, it will result in perfect competition where no firm is able to maintain a competitive advantage.

The competitive advantage that one firm has will be short-lived in an industry where A. resource immobility is high. B. perfect competition exists. C. resource heterogeneity is high. D. capabilities of a firm are not easily replicable.

B. 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.

Which of the following resources is a firm's resource stock? A. cash in the bank B. reputation for quality C. land and building D. plant and machinery

B. reputation for quality Resource stocks are a firm's current level of intangible resources. A company's intangible resource stock includes its dynamic capabilities, new-product development, engineering expertise, innovation capability, reputation for quality, and so on.

Dynamic capabilities are essential for moving beyond a(n) _____ advantage. A. long-lived B. short-lived C. competitive D. inconsistent

B. short-lived Dynamic capabilities are essential for moving beyond a short-lived advantage.

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? A. path dependence B. social complexity C. resource mobility D. resource homogeneity

B. 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.

When a firm makes choices between a cost or value position to achieve competitive advantage, it is primarily involved in A. collective bargaining. B. strategic trade-offs. C. arbitration. D. mediation.

B. strategic trade-offs. To achieve a desired strategic position, managers must make strategic trade-offs—choices between a cost or value position.

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 A. immobile assets. B. support activities. C. resource flows. D. resource stocks.

B. support activities. Support activities are firm activities that add value indirectly, but are necessary to sustain primary activities. Thus, Chat Zone Inc. could solve its problem by working on its support activities.

A firm's resource is most likely to be an internal strength and a core competency when the resource is A. valuable but common. B. valuable and costly to imitate. C. easily accessible and mobile. D. easy to substitute.

B. valuable and costly to imitate. If the resource in question is valuable, rare, and costly to imitate, then it is an internal strength and a core competency.

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. It is advisable to outsource research and development functions. B. Competitive advantage cannot be gained through unrelated diversification. C. A firm must be effectively organized to capture value. D. It is better to build competitive advantage on tangible assets rather than intangible assets.

C. A firm must be effectively organized to capture value. To fully exploit the competitive potential of its resources, capabilities, and competencies, a firm must be organized to capture value—that is, it must have in place an effective organizational structure and coordinating systems. Due to a lack of appropriate organization, Xerox failed to appreciate and exploit the many breakthroughs made by its Palo Alto Research Center (PARC) in computing software and hardware.

Which of the following is a drawback of the SWOT analysis? A. The SWOT analysis takes into account only the internal environment of a firm, ignoring the equally important external environment. B. This framework is only applicable to the manufacturing industries; it is ineffective when applied to the service firms. 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. D. A drawback of this framework is that it allows managers to merely evaluate a firm's current situation, and not its future prospects.

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. Although the SWOT analysis is a widely used management framework, however, a word of caution is in order. 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? A. Bundles of resources, capabilities, and competencies differ temporarily across firms. B. Bundles of resources, capabilities, and competencies are mostly the same across firms. C. Bundles of resources, capabilities, and competencies differ across firms. D. Bundles of resources, capabilities and competencies are all the same across firms.

C. Bundles of resources, capabilities, and competencies differ across firms. Resource heterogeneity means that 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? A. In the resource-based model, resources are freely available and mobile, whereas in the perfectly competitive industry structure, resources are highly immobile. B. In perfect competition, it is extremely difficult to replicate the resource bundles of a firm, whereas in the resource-based model, it is extremely easy to imitate them. 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. D. In the resource-based model, only physical assets of a firm are considered as resources, whereas in perfect competition, a firm's capabilities and competencies are also considered as resources.

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. 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. 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.

Which of the following statements accurately describes a firm's resource stock? A. Resource stocks are a firm's level of resources that are common to competitors. B. Resource stocks are a firm's future estimate of both tangible and intangible resources. C. Resource stocks are a firm's current level of intangible resources. D. Resource stocks are a firm's level of investments to maintain or build a resource.

C. Resource stocks are a firm's current level of intangible resources. Resource stocks are a firm's current level of intangible resources. A company's intangible resource stock includes its dynamic capabilities, new-product development, engineering expertise, innovation capability, reputation for quality, and so on.

Which of the following accurately summarizes the difference between the resources and capabilities of a firm? A. Resources are tangible; capabilities are tangible and intangible. B. Resources are intangible; capabilities are tangible. C. Resources are tangible and intangible; capabilities are intangible. D. Resources are tangible; capabilities are intangible.

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

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? A. The competitor used a title for its assembly system that was similar to the title of Gogo's system. B. The competitor failed to apply for a patent of its assembly system. C. The competitor infringed on Gogo's patent of the "diagonal assembly system." D. The competitor produced an assembly system that was somewhat similar to Gogo's system.

C. The competitor infringed on Gogo's patent of the "diagonal assembly system." A company can often win a lawsuit against a competitor when the court finds that the competitor infringed on patents owned by the company.

Which of the following applies to the Strength-Threats quadrant of the SWOT matrix? A. The local fast-food chain Easy Hot Dogs expanded its limited menu to maintain its advantage against stiff competition. B. The local fast-food chain Easy Hot Dogs added a salad bar to maintain its competitive advantage against stiff competition. C. The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition. D. The local fast-food chain Easy Hot Dogs revised its image of being a cheap-food place to being a wholesome family place in order to maintain its competitive advantage against stiff competition.

C. The local fast-food chain Easy Hot Dogs used its wholesome image to maintain its competitive advantage against stiff competition. The Strength-Threats quadrant of the SWOT matrix uses an external strength, such as a wholesome image, to minimize the effect of an external threat, such as 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? A. The competitive advantage of Trust Machines Inc. will soon be lost. B. The resource heterogeneity of Trust Machines Inc. is low within the industry. C. The resources of Trust Machines Inc. are difficult to replicate or imitate. D. The environment in which Trust Machines Inc. operates is closest to perfect competition.

C. The resources of Trust Machines Inc. are difficult to replicate or imitate. According to the resource-based view of competitive advantage, the resources of Trust Machines Inc. are difficult to replicate or imitate. Because of resource immobility, the resource differences that exist between firms are difficult to replicate and, therefore, can last for a long time.

Which of the following management tools will help determine whether a firm's resources, capabilities, and competencies are strengths or weaknesses? A. Porter's five forces analysis B. PESTEL analysis C. VRIO framework D. Ansoff's matrix

C. VRIO framework Whether a firm's resources, capabilities, and competencies are strengths or weaknesses can be determined by applying the VRIO framework. External opportunities and threats are in the firm's general environment and can be captured by PESTEL and Porter's five forces analyses.

In the context of SWOT analysis, which of the following best exemplifies a firm's external opportunity? A. an increase in its financial resources B. an increase in its brand equity C. an increase in its customers' disposable income D. an increase in its employee productivity

C. an increase in its customers' disposable income In the context of SWOT analysis, an increase in its customers' disposable income best exemplifies a firm's external opportunity. Strengths and weaknesses are internal to an organization, whereas opportunities and threats are external to the organization.

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 A. path dependence. B. dependence complexity. C. causal ambiguity. D. social complexity.

C. 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.

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 A. time compression diseconomies. B. resource homogeneity. C. causal ambiguity. D. path dependence.

C. causal ambiguity. Gene Electronics Inc. has been protected from losing its competitive advantage as a result of causal ambiguity. Causal ambiguity describes a situation in which the cause and effect of a phenomenon are not readily apparent.

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 A. competitive dependence. B. resource mobility. C. causal ambiguity. D. path dependence.

C. causal ambiguity. The term that best applies to this difficulty is known as causal ambiguity. Everyone can see that Apple has had several hugely successful innovative products such as the iMac, iPod, iPhone, and the iPad, combined with its hugely popular iTunes services. A deep understanding, however, of exactly why Apple has been so successful is very difficult. Even Apple's managers themselves may not be able to clearly pinpoint the sources of their success.

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 A. resource flow. B. dynamic capabilities. C. core rigidity. D. value chain.

C. core rigidity. A core competency can turn into a core rigidity if a firm relies too long on the competency without honing, refining, and upgrading as the environment changes.

Each activity a firm performs along the horizontal value chain adds _____ value. A. temporary B. little C. incremental D. absolute

C. incremental Each activity the firm performs along the horizontal value chain adds incremental value. Raw materials and other inputs are transformed into components that are finally assembled into finished products or services for the end consumer.

A firm's business strategy will lead to a competitive advantage if it allows the firm to A. execute the same activities performed by the rivals in a similar manner. B. reduce the value gap. C. perform different activities than its rivals. D. position itself below the productivity frontier.

C. perform different activities than its rivals. Business strategy is more likely to lead to a competitive advantage if it allows firms to either perform similar activities differently, or perform different activities than their rivals that result in creating more value or offering similar products or services at lower cost.

The resource-based view of a firm assumes that the A. resources of firms are highly scarce and hence the government interferes to ensure equal distribution. B. resources of firms are highly exhaustible and hence they cannot contribute to their competitive advantage. C. resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another. D. resource bundles of firms competing in the same industry tend to be highly mobile, moving easily from firm to firm.

C. resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another. 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. The first critical assumption—resource heterogeneity—is that bundles of resources, capabilities, and competencies differ across firms.

Due to resource immobility, a critical assumption in the resource-based model of a firm, the A. competitive advantage of a firm exists for a short period of time. B. resource bundles of a firm can be easily imitated by competitors. C. resource differences between firms last for a long time. D. competencies and capabilities of all firms in an industry are similar.

C. resource differences between firms last for a long time. 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. Because of resource immobility, the resource differences that exist between firms are difficult to replicate and, therefore, can 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? A. the movement in the music industry from renting works to buying works to own B. the need for Apple to create an image as a leader in technical audio research C. the change in content delivery from ownership via downloads to streaming on demand D. the demand for the extremely high-quality headphones that Beat produced

C. the change in content delivery from ownership via downloads to streaming on demand Two main reasons spurred Apple's acquisition of Beats. First, Apple hoped that some of Beats' coolness would spill over to its brand, which had become somewhat stale. Second, content delivery, especially in music, was moving rapidly from ownership via downloads to streaming on demand. Apple was hoping that by acquiring Beats Electronics it could become a leader in the music streaming space.

If a resource is rare or unique to a particular firm, then A. the industry in which the firm operates will experience perfect competition. B. the mobility of the resource will be high. C. the firm will be able to maintain a competitive advantage for a long period. D. it will be less costly for rivals to imitate the resource.

C. the firm will be able to maintain a competitive advantage for a long period. 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. A firm is on the path to competitive advantage only if it possesses a valuable resource that is also rare.

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 A. causal ambiguity. B. diseconomies of scope and scale. C. time compression diseconomies. D. social complexity.

C. 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 of time. Trying to achieve the same outcome in a short time period, even with higher investments, tends to lead to inferior results.

According to the VRIO framework, a firm can gain a competitive advantage if it has resources that are _____ and captured by an organized firm. A. varied, refined, costly to introduce B. valuable, refined, costly to introduce C. valuable, rare, costly to imitate D. varied, rare, costly to imitate

C. valuable, rare, costly to imitate According to the VRIO framework, a firm can gain a competitive advantage if it has resources that are: valuable, rare, costly to imitate, and captured by an organized firm.

Which of the following is not a condition that can help a firm sustain its competitive advantage? A. when managers have consistently better expectations about the future value of resources B. when the resource advantage can only be imitated after a long period of time C. when past decisions act as constraints for the current dynamic capabilities D. when the source of the competitive advantage is causally ambiguous

C. when past decisions act as constraints for the current dynamic capabilities When past decisions act as constraints on a firm's current dynamic capabilities, it will be difficult to sustain a competitive advantage. Path dependence describes a process in which the options one faces in a current situation are limited by decisions made in the past. Often, early events—sometimes even random ones—have a significant effect on final outcomes.

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? A. $1,250,000 B. $150,000 C. $80,000 D. $350,000

D. $350,000 In monetary terms, GreenHarvest Inc.'s resource flows would be $350,000. Resource flows are a firm's level of investments to maintain or build a resource.

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? A. Blake Mouton managerial grid B. Ansoff's matrix C. BCG analysis D. SWOT analysis

D. SWOT analysis In this scenario, Juanita is using the SWOT analysis. SWOT analysis is a framework that allows managers to synthesize insights obtained from an internal analysis of the company's strengths and weaknesses (S and W) with those from an analysis of external opportunities and threats (O and T).

Which of the following is an accurate statement about value chain analysis? A. The value chain concept can be applied only to manufacturing firms. B. The value chain concept can be applied only to high-tech firms. C. The value chain concept can be applied only to manufacturing and high-tech firms. D. The value chain concept can be applied to all firms, including service firms.

D. The value chain concept can be applied to all firms, including service firms. The value chain concept can be applied to all firms, including service firms.

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 in tangible assets over intangible assets. B. Two Triangle Inc. has lost its market share because its resources are not mobile, that is 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 resources is difficult to replicate.

D. True 3 Inc. has been able to outperform its competitors because the uniqueness of its resources is difficult to replicate. In the resource-based model of competitive advantage, resource immobility refers to the assumption that resources of a firm tend to be "sticky" and do not 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.

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? A. money spent to buy rights of novel; screenwriter's experience adapting novels B. money spent to buy rights for the novel; locations in southern Arizona C. best-selling novel; locations in southern Arizona D. best-selling novel; screenwriter's experience adapting novels

D. best-selling novel; screenwriter's experience adapting novels The best-selling novel is intellectual property and therefore is an intangible resource. Also, a worker's experience is an intangible resource.

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? A. social complexity B. causal ambiguity C. time compression diseconomies D. better expectations of future resource value

D. better expectations of future resource value The scenario illustrates better expectations of future resource value. Sometimes firms can acquire resources at a low cost, which lays the foundation for a competitive advantage later when expectations about the future of the resource turn out to be more accurate.

Firms pursuing a differentiation strategy primarily seek to A. keep their cost structures lower than that of the cost leader. B. reduce the value gap to gain a competitive advantage. C. provide products that are a direct imitation of the competitors' products. D. create higher customer perceived value than the value that competitors create.

D. create higher customer perceived value than the value that competitors create. A differentiation strategy seeks to create higher value for customers than the value that competitors create, by delivering products or services with unique features while keeping costs at the same or similar levels.

In the context of SWOT analysis, which of the following best exemplifies a firm's internal weakness? A. fall in the purchasing power of the firm's customers B. increased competition in the industry where the firm operates C. irregularity in the raw materials supply throughout the industry D. decline in the firm's market share

D. decline in the firm's market share In the context of SWOT analysis, decline in a firm's market share best exemplifies a firm's internal weakness. Strengths and weaknesses are internal to an organization, whereas opportunities and threats are external to the organization.

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. A. value chain perspective B. two-factor theory C. expectancy theory D. dynamic capabilities perspective

D. dynamic capabilities perspective Dynamic capabilities describe a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage.

Creating resources that meet the VRIO criteria is strategically important to a firm because it A. helps the firm curb its resource heterogeneity and resource immobility. B. facilitates greater knowledge diffusion in the industry. C. leads to competitive parity within the industry. D. helps the firm to gain and sustain a competitive advantage.

D. helps the firm to gain and sustain a competitive advantage. 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. For a firm to gain and sustain a competitive advantage, its resources and capabilities need to interact in such a way as to create unique core competencies. Only a few competencies may turn out to be core competencies that fulfill the VRIO requirements.

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? A. resource mobility B. inexhaustible nature C. intangibility of the company's resource D. high costs involved in imitation

D. high costs involved in imitation A resource is costly to imitate if firms that do not possess the resource are unable to develop or buy the resource at a reasonable price. If the resource in question is valuable, rare, and costly to imitate, then it is an internal strength and a core competency.

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? A. inconsistent results B. same results C. better results D. inferior results

D. inferior results Trying to achieve the same outcome in a short time period, even with higher investments tends to lead to inferior results.

Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, a firm will only be successful today if its A. competitive advantage is derived from static resource or market advantages. B. resource advantage is not causally ambiguous or socially complex. C. resource advantage is maintained for a short period of time. D. internal strengths change with its external environment in a dynamic fashion.

D. internal strengths change with its external environment in a dynamic fashion. Given the accelerated pace of technological change, in combination with deregulation, globalization, and demographic shifts, dynamic markets today are the rule rather than the exception. As a response, a firm may create, deploy, modify, reconfigure, or upgrade resources so as to provide value to customers and/or lower costs in a dynamic environment.

According to the value chain analysis, which of the following is a primary activity? A. research and development B. human resources management C. accounting and finance D. marketing and sales

D. marketing and sales The primary activities add value directly as the firm transforms inputs into outputs—from raw materials through production phases to sales and marketing, and finally customer service. Primary activities are: supply chain management, operations, distribution, marketing and sales, and after-sales service.

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? A. causal ambiguity B. knowledge diffusion C. social complexity D. path dependence

D. 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.

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? A. quality standards, which are common and mandatory throughout the industry B. inexpensive unskilled labor that is easily accessible by all companies C. component parts that are sourced from competitors' suppliers D. production systems that reduce costs by 30 percent below the current industry standards

D. production systems that reduce costs by 30 percent below the current industry standards Otion Inc. should primarily focus on production systems that reduce costs by 30 percent below industry standards to achieve its objective. A resource is valuable if it allows a firm to take advantage of an external opportunity and/or neutralize an external threat.

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. A. tangible B. mobile C. imperishable D. rare

D. rare This unique asset that has helped Next Door Cellular gain a competitive advantage will be considered as a rare resource in the VRIO framework. A resource is rare if the number of firms that possess it is less than the number of firms it would require to reach a state of perfect competition.

To make the SWOT analysis an effective management tool, a strategist must first A. distinguish a firm's resources, competencies, and capabilities from each other. B. separate a firm's primary activities from support activities. C. analyze the pros and cons of strategic options. D. scan a firm's internal and external environments.

D. scan a firm's internal and external environments. To make the SWOT analysis an effective management tool, a strategist must first conduct a thorough external and internal analysis.

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 A. path dependence. B. technology transfer. C. knowledge diffusion. D. strategic equivalence.

D. strategic equivalence. In this scenario, Sensation Cosmetics accomplished substitution primarily through strategic equivalence. An avenue of imitation for a firm's valuable and rare resource is through substitution. This is often accomplished through 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? A. the company's land and buildings B. the company's plant and machinery C. the company's raw material supplies D. the company's chemical patents

D. the company's chemical patents Gene Craft's chemical patents would be considered a rare resource that is best contributing to its competitive advantage. A resource is rare if only one or a few firms possess it.

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? A. the investments made by Riya on the restaurant's interiors B. the latest kitchen equipment that is at par with the restaurant's competitors C. the restaurant's late entry into the market D. the land owned by Riya, which reduces cost of operations

D. the land owned by Riya, which reduces cost of operations A resource is valuable if it helps a firm increase the perceived value of its product or service in the eyes of consumers, either by adding attractive features or by lowering price because the resource helps the firm lower its costs.

Which of the following is a firm effect that has an impact on the competitive advantage of a firm? A. the exit barriers within the industry in which the firm operates B. the number of companies operating in the industry in which the firm operates C. the intensity of rivalry among existing companies in the firm's chosen industry D. the value and the cost position of the firm relative to its competitors

D. the value and the cost position of the firm relative to its competitors To formulate an effective business strategy, managers need to keep in mind that competitive advantage is determined jointly by industry and firm effects. At the firm level, performance is determined by value and cost positions relative to competitors. This is the firm's strategic position.

In the context of SWOT analysis, a firm can develop an offensive strategic option primarily by A. combining an internal weakness with an external threat. B. leveraging its internal strengths to minimize external threats. C. leveraging an external opportunity to overcome an internal threat. D. using its internal strengths to exploit external opportunities.

D. using its internal strengths to exploit external opportunities. In the context of SWOT analysis, a firm can develop an offensive strategic option primarily by using its internal strengths to exploit external opportunities. In the SWOT matrix, firms focus on the Strengths-Opportunities quadrant to derive "offensive" alternatives by using an internal strength in order to exploit an external opportunity.

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. A. inexhaustible B. rare C. intangible D. virtual

b. rare This competency of True Foods Inc. will be considered as a rare resource in the VRIO framework. A resource is rare if the number of firms that possess it is less than the number of firms it would require to reach a state of perfect competition.

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? A. resource homogeneity B. resource perishability C. resource equality D. resource immobility

d. 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.