Deck 3: The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages

Question 1

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.

Answer 1

False

Question 2

The best way to understand the relationship between resources, capabilities, and core competencies is to recognize that resources are the source of capabilities.Some capabilities lead to the development of core competencies and these, in turn, may lead to competitive advantages.

Answer 2

True

Question 3

Chipotle linked fresh ingredients with the marketing and training of employees to build customer service as a capability.This example illustrates the way in which resources must be combined in order to form capabilities.

Answer 3

True

Question 4

Creating value for customers is the source of above-average returns for a firm.

Question 5

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.

Question 6

Firms should seek to continually develop new core competencies because all core competencies guarantee above-average profit.

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

Technology has made it more difficult for companies to find ways to develop competitive advantages.

Question 12

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

Question 13

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.

Question 14

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.

Question 15

Resources, capabilities, and core competencies are the foundation of competitive advantage.

Question 16

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

Question 17

In today's global economy, some resources that were traditionally critical to firms' efforts to produce, sell, and distribute goods are now less likely to be a source of competitive advantage.

Question 18

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

Question 19

When comparing the resources a company has at its disposal, the capacity to innovate or a positive reputation, both of which are intangible, would be an inferior source of capabilities and core competencies than tangible resources such as copyrights, patents, and the ability to generate funds.

Question 20

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

Question 21

Interpersonal relationships, trust, friendships among managers and between managers and employees, and a firm's reputation with suppliers and customers are all examples of complex social phenomena that make capabilities easy to imitate.

Question 22

At Southwest Airlines, the complex interrelationship between the firm's 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.

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

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 United States.
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.

Question 30

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

Question 31

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

Question 32

All competitive advantages have:

A) a limited life.
B) unrestricted sustainability.
C) the ability to earn above-average returns indefinitely.
D) protections against imitability.

Question 33

Capabilities may be costly to imitate if firms have unique and valuable organizational cultures, are causally ambiguous, or are socially complex.

Question 34

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

Question 35

Apple has combined some of its tangible resources (such as financial resources and research laboratories) and intangible resources (such as scientists, engineers, and organizational routines) to complete research and development tasks to create a capability in R&D.

Question 36

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

Question 37

Two concerns about outsourcing are the potential loss of a firm's innovative ability and the loss of jobs within the focal firm.

Question 38

The trust that a firm has built between itself and its suppliers is an example of a costly-to-imitate capability that other firms cannot easily develop.

Question 39

The length of time a firm can expect to create value by using its core competencies is a function of how quickly competitors can successfully imitate a good, service, or process.

Question 40

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

Question 41

Capabilities typically come from:

A) individual resources.
B) one unique resource.
C) several outstanding resources used independently.
D) combining resources.

Question 42

Value consists of a product's:

A) proprietary characteristics and attributes for which customers are willing to pay.
B) performance characteristics and attributes for which customers are willing to pay.
C) proprietary characteristics and attributes for which customers consider paying.
D) performance characteristics and attributes for which customers consider paying.

Question 43

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

A) one-fourth
B) one-fifth
C) one-tenth
D) one-half

Question 44

The Obama administration expressed a desire to eliminate coal as an energy source, and introduced regulations to drive the coal industry out of business.The Trump administration eased regulations on the coal industry, but also took steps to encourage the development of other forms of energy.In light of this changing regulatory environment, decision makers in the energy industry are most affected by what condition?

A) Uncertainty
B) Complexity
C) Intraorganizational conflict
D) Interorganizational conflict

Question 45

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.

Question 46

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

Question 47

Internal analysis enables a firm to determine what it:

A) can do.
B) should do.
C) will do.
D) might do.

Question 48

One reason executive judgment can be a particularly important source of competitive advantage is that judgment:

A) allows a firm to build a strong reputation.
B) compensates for lower returns during harsh market conditions.
C) increases human intellectual capacity.
D) allows for superior bundling of resources.

Question 49

Tangible resources include:

A) assets that are people-dependent, such as know-how.
B) assets that can be observed and quantified.
C) organizational culture.
D) a firm's reputation.

Question 50

Which of the following is NOT a factor affecting sustainability of a competitive advantage?

A) Availability of substitutes for a firm's core competence
B) Rate at which obsolescence of the core competence occurs because of environmental changes
C) Imitability of a core competence
D) Length of time the core competence has existed

Question 51

One of the managers at RDK has a successful track record that goes back several years.As a result, he has become extremely confident in his judgment, and has begun to make decisions without taking the time to evaluate contingencies that he feels are not relevant.This has led to some mistakes recently.The over-confidence exhibited by this manager is an example of what?

A) Cognitive bias
B) Intelligent risk-taking
C) Executive judgment
D) Value capability

Question 52

__________are the source of a firm's __________, which 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

Question 53

All of the following are tangible resources EXCEPT:

A) production equipment.
B) distribution centers.
C) a firm's reputation.
D) formal reporting structures.

Question 54

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.

Question 55

A marketing manager at GTA Technology wants the next generation of a particular application to include certain features.The product manager of that app insists that the feature would be costly to implement and could not be achieved by the desired release date unless additional resources, both financial and human, were directed to the app.The marketing manager insists that this is necessary, while the product manager feels that the inclusion of these features would not validate the extra investment.It is now up to the project manager to decide how to proceed.Which of the following conditions is most affecting the project manager's decision?

A) Uncertainty
B) Complexity
C) Intraorganizational conflict
D) Sustainability

Question 56

When considering the relationships among the various characteristics a firm possesses, it is necessary to understand that _________ are the most numerous.

A) resources
B) capacities
C) capabilities
D) core competencies

Question 57

By emphasizing core competencies when selecting and implementing 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.

Question 58

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.

Question 59

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.

Question 60

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.

Question 61

From a customer's point of view, for an organization's capability to be a core competence, it must be:

A) inimitable and unique.
B) valuable and unique.
C) inimitable and nonsubstitutable.
D) valuable and nonsubstitutable.

Question 62

At a manufacturing facility, which of the following would be categorized as an intangible resource?

A) The forklift
B) The quality control process
C) The forklift driver
D) The financial investment into building the warehouse

Question 63

Valuable capabilities allow the firm to:

A) exploit threats in its external environment.
B) neutralize opportunities in its internal environment.
C) exploit opportunities or neutralize threats in its external environment.
D) exploit opportunities and threats in its internal environment.

Question 64

Compared to intangible resources, in terms of their value, tangible resources are __________ constrained because they are __________ to leverage.

A) less; easier
B) less; harder
C) more; harder
D) more; easier

Question 65

An investor is considering buying a restaurant that has been in operation for a number of years.The restaurant has a highly regarded chef and many long-term kitchen and wait staff who work together smoothly.It has a reputation for dishes of consistently high quality and an appealing dining atmosphere.Which of the following should the investor consider when making a decision?

A) The investor should realize that the success of this restaurant is so heavily based on human resources that the business will likely be subject to inertia in the future.
B) The investor may find that the restaurant's financial statements undervalue the true value of its resources.
C) The investor should be aware that intangible assets are difficult to leverage into additional businesses.
D) The investor should search for a firm that has competitive advantages based on tangible resources.

Question 66

A major department store chain has a strict policy of banning photographs or videos of its sales floor or back-room operations.It also does not allow academics to conduct studies of it for publication in research journals.In fact, some of its own top managers refer to the management's policies on secrecy as "verging on paranoid." These policies indicate that the top management of the firm believes the organization's core competencies are:

A) causally ambiguous.
B) unobservable.
C) imitable.
D) common.

Question 67

Consider the criteria necessary for sustainable competitive advantage.Which of the following combinations would most likely bring about a temporary competitive advantage and the possibility for above-average returns?

A) Valuable, rare, not costly to imitate, and possibly substitutable
B) Valuable, rare, costly to imitate, and possibly substitutable.
C) Valuable, not rare, not costly to imitate, and possibly substitutable.
D) Valuable, not rare, costly to imitate, and substitutable.

Question 68

Because firms combine tangible and intangible resources to create capabilities:

A) these capabilities are fragile and subject to sudden loss of value.
B) capabilities are often based on developing, carrying, and exchanging information and knowledge through the firm's human capital.
C) capabilities are easily transferred from one firm to another as employees change jobs.
D) these types of capabilities are considered primary activities in the value chain.

Question 69

Innovation, consumer understanding, brand-building, go-to-market, and scale are activities that P&G performs well and are examples of the company's:

A) tangible resources.
B) intangible resources.
C) core competencies.
D) capabilities.

Question 70

To provide a sustainable competitive advantage, a capability must satisfy all of the following criteria EXCEPT be:

A) technologically innovative.
B) hard for competing firms to duplicate.
C) without good substitutes.
D) valuable to customers.

Question 71

In the airline industry, frequent flyer programs, ticket kiosks, and e-ticketing are all examples of capabilities that are __________ but no longer __________.

A) rare; valuable
B) valuable; rare
C) socially complex; rare
D) valuable; causally ambiguous

Question 72

The PRQ chain of retail stores has achieved a high level of efficiency in its inventory control by collecting data at the point of purchase.This is an example of a capability in which specific functional area?

A) Research and development
B) Distribution
C) Management
D) Management information systems

Question 73

Compared to tangible resources, intangible resources are:

A) of less strategic value to the firm.
B) less likely to be the focus of strategic analysis.
C) a superior source of capabilities.
D) more likely to be reflected on the firm's balance sheet.

Question 74

Which of the following is a true statement about capabilities?

A) Capabilities are often developed in specific functional areas such as manufacturing, R&D, and marketing.
B) Valuable capabilities are based almost entirely on tangible resources.
C) Capabilities based on human capital are more vulnerable to obsolescence than other intangible capabilities because of the tendency for employee knowledge to become outdated.
D) The link between firm financial performance and capabilities is dependent on whether the capabilities are based on tangible or intangible resources.

Question 75

__________ can be viewed as the capacity to take action.

A) Strategic assets
B) Human capital
C) Core competencies
D) Functional capabilities

Question 76

__________ is an example of a capability that is based in the functional area of distribution.

A) Effective use of logistics management techniques
B) Effective control of inventories through point-of-purchase data collection
C) Effective organizational structure
D) Product and design quality

Question 77

Several months ago, a restaurant developed a new appetizer that is a hit with customers.Many customers go to the restaurant just for the appetizer, and it was at the center of a recent highly positive review by a food critic.Preparation involves common ingredients and average culinary skills but requires a very high oven temperature, which significantly increases utility costs.Several competing restaurants have since added their own version of the appetizer to their menu.Which of the following criterion for assessing capabilities/core competencies is met?

A) The restaurant has the capability to develop something that is valuable.
B) The restaurant has the capability to develop something that is rare.
C) The restaurant has the capability to develop something that is costly to imitate.
D) All of these criteria are met.

Question 78

When firms lay off employees, they are:

A) treating employees as an intangible resource.
B) recognizing the reduced value of labor in the value chain.
C) eroding the organization's knowledge resources.
D) temporarily sacrificing a tangible asset that is easily replaced.

Question 79

Which of the following is NOT a reputational resource?

A) Customers' opinions that the firm's products are high quality
B) Employees' opinions of their supervisors' fairness
C) Suppliers' opinions that the firm pays its bills in a timely manner
D) Customers' opinions that using the firm's products makes them attractive

Question 80

Compared to tangible resources, intangible resources are __________ and __________.

A) less visible; more difficult to copy
B) less visible; less difficult to copy
C) more visible; more difficult to copy
D) more visible; less difficult to copy