MGMT 425 MIDTERM - CH 4

resource

Any assets that a firm can draw on when formulating and implementing a strategy.

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

Core competencies

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

Dynamic capability

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

High costs involved in imitation

How are the critical assumptions of the resource-based model of a firm fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure?

In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry.

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

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

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

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

capability

Organizational and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically.

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

Path dependence

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

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

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

The company's machinery

social complexity

a situation in which different social and business systems interact with one another

casual ambiguity

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

path dependence

a situation in which the options one faces in the current situation are limited by decision made in the past

VRIO Framework

a theoretical framework that explains and predicts firm-level competitive advantage. A firm can gain a competitive advantage if it has resources that are: (V) valuable, (R) rare, (C) costly to imitate. The firm must also (O) organize to capture the value of resources.

resource immobility

assumption in the resource-based view that a firm has resources that tend to be "sticky" and that do not move easily from firm to firm

resource heterogeneity

assumption in the resource-based view that a firm is a bundle of resources and capabilities that differ across firms

According to the value chain analysis, which of the following is NOT a primary activity? a. supply chain management b. financial management c. operations d. marketing and sales

b. Financial management

isolating mechanism

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

substitution

comparable product or service

primary activities

firm activities that add value directly by transforming inputs into outputs as the firm moves a product or service horizontally along the internal value chain

support activities

firm activities that add value indirectly, but are necessary to sustain primary activities

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.

Microsoft's eventual industry dominance is largely credited to the:

initial breaks that Bill Gates got when starting Microsoft, which were leveraged for several decades through an effective strategy.

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

knowledge diffusion

intangible resource

resources that do not have physical attributes and thus are invisible

tangible resource

resources that have physical attributes and thus are visible

Due to path dependence:

strategic decisions have long-term consequences.

firm value chain

the internal activities a firm engages in when transforming inputs into outputs; each activity adds incremental value. Primary activities directly add value; support activities add value indirectly.

core competence

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 a lower cost

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

valuable and costly to imitate.

Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area where One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?

Resource heterogeneity

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

Isolating mechanisms

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.

strategic equivalent substitute

creating a new/different business model to satisfy customers needs previously met elsewhere (Amazon was a strategic equivalent substitute to brick-and-mortar retail stores)

knowledge diffusion

knowledge spreading/diffusing throughout a specific industry (Toyota had a temporary competitive advantage until the rest of the industry learned about lean manufacturing)

costly to imitate

one of the four key criteria in the VRIO framework... A resource is costly to imitate if firms that do not possess the resource are unable to develop or buy the resource at a comparable cost.

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

perfect competition exists.

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?

The company's chemical patents

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.

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

b. Social complexity

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

capabilities

A firm's resources and capabilities are costly to imitate. This is because rival companies do not clearly understand the relationship between the resources and capabilities controlled by the firm. In this case, the firm's competitive advantage is protected against imitation by _____.

causal ambiguity

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

d. Resource immobility