MGMT 590 - Chapter 3

Internal analysis enables a firm to determine what the firm a. can do. b. should do. c. will do. d. might do.

A

It is increasingly difficult for a firm to develop and sustain a competitive advantage because of the effects of globalization and a. the rapid development of the Internet's capabilities. b. extensive use of outsourcing within the borders of the U.S. c. the declining number of inventions and patents developed by U.S. citizens. d. the simultaneous erosion of the U.S. work ethic and the U.S. education system.

A

____ is/are the source of a firm's ____, which is/are the source of the firm's ____. a. Resources, capabilities, core competencies b. Capabilities, resources, core competencies c. Capabilities, resources, above average returns d. Core competencies, resources, competitive advantage

A

A person who has made a successful decision when no obviously correct model or rule is available or when relevant data are unreliable or incomplete has exercised a. foresight. b. judgment. c. effective strategic thinking. d. decisiveness.

B

The key to achieving competitiveness, earning above-average returns, and remaining ahead of competitors in the long run is to manage current core competencies a. in a way that uniquely bundles and leverages the firm's existing resources. b. while simultaneously developing new ones. c. and imitate the core competencies of successful competitors. d. in order to preserve and enhance them against the firm's competitors.

B

By emphasizing core competencies when formulating strategies, companies learn to compete primarily on the basis of a. intangible resources. b. their primary activities. c. firm-specific differences. d. efficiency of production.

C

Today, a substantially slimmed-down Polaroid is introducing a number of new products including GL20 Camera Glasses which have a built-in camera and LCDs. This wave of new product development is explained by a. the funds provided by a patent infringement lawsuit won by Poloroid. b. weaker competitors in its industry. c. the learning that occured from making earlier mistakes. d. an easing of regulations governing Intellectual Propery Protection.

C

A decision that results in failure a. is a career-ending event because it is so unusual. b. often results from lack of accountability. c. fosters organizational inertia. d. allows for learning.

D

____ is measured by a product's performance characteristics and its attributes for which customers are willing to pay. a. Competitive advantage b. Profit potential c. Contribution d. Value

D

A company can earn above-average returns only when the value it creates is less than the costs incurred to create that value.

False

Capabilities are usually developed separately from specific functional areas such as manufacturing, R&D, and marketing.

False

Capabilities of an organization emerge spontaneously through the interaction of tangible and intangible resources.

False

Coca-Cola's brand name is a tangible source of competitive advantage for the company.

False

Value chain activities in the value chain create value, whereas support functions generate costs.

False

"Motivating, empowering, and retaining employees" is an example of a capability that resides within the "Human Resources" functional area.

True

A firm should outsource only activities where it cannot create value or where it is at a substantial disadvantage compared to competitors.

True

A global mind-set is free of the assumptions of a single country, culture, or context.

True

According to the Chapter 3 Strategic Focus, organic (internal) growth at P&G benefits the company by allowing it to draw on core competencies and capabilities to become stronger.

True

Analyzing the internal environment enables a firm to determine what it can do by identifying resources, capabilities, and core competencies in the internal organization.

True

Any core competency has the potential to lose its value creating ability.

True

At the conclusion of the internal analysis, firms must identify their strengths and weaknesses in resources, capabilities, and core competencies.

True

Core competencies are the activities a company performs especially well compared with competitors and through which the firm adds unique value to its goods and services.

True

Creating customer value is the source of the firm's potential to earn above-average returns.

True

Firms achieve strategic competitiveness and earn above average returns by acquiring, bundling, and leveraging their resources for the purpose of taking advantage of opportunities in the external environment in ways that create value for customers.

True

Firms can develop a capability and/or core competence in any of the value chain activities and in any of the support functions.

True

In today's global economy, traditional factors such as labor costs, access to financial resources and raw materials, and protected or regulated markets are less likely to become core competencies and possibly competitive advantages.

True

Interpersonal relationships, trust, friendships, and a firm's reputation are all examples of complex social phenomena that make capabilities costly to imitate.

True

Judgment is the capability of making successful decisions when no obviously correct model or rule is available or when relevant data are unreliable or incomplete.

True

One benefit of outsourcing is that it allows a firm to focus on those few value chain activities where it can produce the greatest value.

True

One criteria for a resource or capability to be a source of competitive advantage is that it allows the firm to perform a value-creating activity that competitors cannot perform.

True

People are a critical resource for helping organizations learn how to continuously innovate.

True

Resources are the source of capabilities, some of which lead to the development of core competencies; in turn, some core competencies may lead to competitive advantage.

True

Resources must be combined to form capabilities as illustrated by Subway which linked its fresh ingredients with several other resources including the continuous training it provides to those running the firm's units as the foundation for customer service as a capability.

True

The Chapter 3 Strategic Focus shows that inability to effectively use a firm's resources and capabilities can contribute to a CEO's short tenure as happened with Christina Norman, former CEO of the Oprah Winfrey Network (OWN).

True

The challenge and difficulty of making effective decisions are implied by preliminary evidence suggesting that one-half of organizational decisions fail.

True

Two concerns about outsourcing are the potential loss of a firm's innovative ability and the loss of jobs within companies that decide to outsource some of their work.

True

Understanding how to leverage the firm's unique bundle of resources and capabilities is a key outcome decision makers seek when analyzing the internal organization.

True

Value is created when firms innovately bundle and leverage their resources to form capabilities and core competencies.

True

The three conditions that characterize difficult managerial decisions concerning resources, capabilities, and core competencies are a. complexity, rarity, and human intellectual capital. b. uncertainty, complexity, and intraorganizational conflicts. c. imitability, complexity, and interorganizational conflicts. d. imitability, comparability, and human intellectual capital.

B

Which of the following is not a component of internal analysis leading to competitive advantage? a. Tangible and intangible resources. b. Analysis of supplier power. c. Capabilities. d. Core competencies.

B

According to the Chapter 3 Opening Case, all of the following are core competencies of Subway EXCEPT a. Providing continuous training for its franchisees and those working within those units. b. Offering healthy and nutritious products to consumers. c. The challenging economic environment in which even affluent consumers are choosing to dine at quick-service restaurants such as Subway. d. Use of nontraditional locations such as appliance stores, automobile showrooms, and zoos.

C

The overall lesson from the Chapter 3 Strategic Focus about decision-making at several companies was the importance of _________ a. CEO compensation. b. the effect of unattractive industries on firm performance. c. making decisions about use of the firm's resources under conditions of uncertainty. d. competing against innovative rivals.

C

The proper matching of what a firm can do with what it might do a. balances the internal characteristics of the firm with the characteristics of the external environment. b. overcomes the rigidity and inertia resulting from a history of success. c. yields insights the firm requires to select its strategy. d. develops core competencies based on human knowledge.

C

____ of organizational decisions fail. a. Few b. About one-quarter c. About half d. Most

C

Which of the following is NOT a factor affecting sustainability of a competitive advantage? a. The availability of substitutes for a firm's core competence. b. The rate at which obsolescence of the core competence occurs because of environmental changes. c. The imitability of a core competence. d. The length of time the core competence has existed.

D

According to the Chapter 3 Strategic Focus, P&G typically uses its capabilities and core competencies to grow through mergers, acquisitions, and cooperative relationships.

False

According to the Chapter 3 Strategic Focus, while P&G has only a handful of capabilities, these capabilities result in well over a hundred core competencies that allow it to create unique value for customers.

False

Although an organization's good reputation is a valuable resource that takes years of superior marketplace competence to achieve, it is not a good basis for building a competitive advantage because it can be destroyed almost instantly by bad publicity.

False

Analyzing the internal environment enables a firm to determine what it might do by identifying what opportunities and threats exist.

False

Apple has combined some of its tangible (e.g., financial resources and research laboratories) and intangible (e.g., scientists and engineers and organizational routines) resources to create a capability in R&D which creates a core competence in innovation.

True

At IBM, human capital is critical to forming and using the firm's capabilities in customer relationships, scientific and research skills, and technical skills in hardware, software, and services.

True

At Southwest Airlines, the complex interrelationship between its culture and human capital adds value for customers in ways that other airlines cannot, such as jokes on flights by flight attendants and cooperation between gate personnel and pilots.

True

Capabilities may be costly to imitate if they have a unique and valuable organizational culture, and are causally ambiguous and socially complex.

True

Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals.

True

Firms should seek to continually develop new core competencies because all core competencies have limited life spans.

True

Given enough time, any firm's competitive advantage can be imitated by its competitors.

True

If a core competence is emphasized when it is no longer competitively relevant, it can become a core rigidity.

True

The firm combines individual tangible and intangible resources to create capabilities.

True

The foundation of many capabilities lies in the unique skills and knowledge of a firm's employees.

True

The sustainability of a competitive advantage depends upon the rate of obsolescence of the core competence, the availability of substitutes for the core competence, and the imitability of the core competence.

True

Trademarks and copyrights are examples of a firm's tangible resources.

True

Value consists of a. A product's proprietary characteristics and by its attributes for which customers are willing to pay. b. A product's performance characteristics and by its attributes for which customers are willing to pay. c. A product's proprietary characteristics and by its attributes for which customers consider paying for. d. A product's performance characteristics and by its attributes for which customers consider paying for.

B

As discussed in the Chapter 3 Strategic Focus, CEOs of companies such as Viacom, the Oprah Winfrey Network, the Gap, and Cisco frequently had to make decisions about __________________ and the success of those decisions affected the tenure of those CEOs. a. how to please customers b. how to best rivals c. use of the firm's resources d. their method of compensation

C

Which of the following is NOT required for a firm to achieve strategic competitiveness and earn above-average returns from its core competencies? a. Core competencies must be acquired. b. Core competencies must be bundled. c. Core competencies must be internationalized. d. Core competencies must be leveraged.

C

By themselves, resources can allow firms to create value for customers as the foundation for earning above-average returns.

False

Compared to tangible resources, intangible resources are an inferior source of core competencies.

False

Costly-to-imitate capabilities are those which other firms cannot easily develop as they have no strategic equivalent.

False

Every core competence is a capability and every capability is a core competence.

False

Firms should never outsource a primary activity because of the danger of the activity being imitated by rivals.

False

Firms should outsource only activities where they can create the most value or where they are at an advantage compared to competitors.

False

Older employees are less valuable resources to firms than younger employees, because the older employees have lower stocks of knowledge. Consequently, employee reductions should begin with early retirement inducements.

False

Only capabilities that are valuable, common, costly to imitate, and substitutable can be strategic capabilities.

False

The learning generated by making and correcting mistakes is generally unimportant to efforts to create new capabilities and core competencies.

False

The need to meet quarterly earnings numbers disciplines managers to accurately examine the firm's internal organization.

False

The value of tangible assets such as the firm's borrowing capacity and its physical plant are high because they can be easily leveraged to derive additional value.

False

Valuable capabilities allow the firm to exploit strengths or neutralize weaknesses in the internal environment.

False

Value is measured by the variable and fixed costs associated with the production and marketing of a particular product compared with the revenue and profits the product generates.

False

The Chapter 3 Strategic Focus illustrates the challenge facing strategic managers in making decisions about the appropriate use of their companies' resources and capabilities. While a number of firms have successfully used resources and capabilities to earn above average returns, others have not been so successful.

True

Walmart uses core competencies such as information technology and distribution channels to create value for its customers through its "everyday low price."

True