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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

The more core competencies a firm has, the more likely it is to generate a sustained competitive advantage.

Question 8

Resources are bundled to create capabilities which in turn are the source of core competencies which are then the basis of competitive advantages.

Question 9

Value is created when the firm exploits its core competencies or competitive advantages to meet or exceed the demanding standards of global competition.

Question 10

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.

Question 11

Capabilities are often developed in specific functional areas such as manufacturing, R&D, and marketing.

Question 12

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

Question 13

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

Question 14

GE was effective in developing its human capital, but failed in transferring that knowledge throughout the organization.

Question 15

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

Question 16

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.

Question 17

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

Question 18

In the global economy, traditional factors such as labor costs, access to financial resources and raw materials, and protected or regulated markets are no longer sources of competitive advantage.

Question 19

Some resources, such as financial capital, have inherent value to the firm, while others are not inherently valuable.

Question 20

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 21

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.

Question 22

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.

Question 23

Internal analysis enables a firm to determine what the firm

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

Question 24

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.

Question 25

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

Question 26

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 27

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.

Question 28

The proper matching of what a firm can do with what it might do allows the firm to

A) balance the internal characteristics of the firm with the characteristics of the external environment.
B) overcome the rigidity and inertia resulting from a history of success.
C) develop its vision, pursue its mission, and select and implement its strategies.
D) develop core competencies based on human knowledge.

Question 29

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

Question 30

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

Question 31

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

Question 32

The most numerous of the following organizational characteristics are

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

Question 33

An important capability of Ryanair is its excellent customer service, caring staff, and policy of having no hidden charges.

Question 34

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.

Question 35

Of Southwest Airline's competitors, Ryanair has been the most successful at imitating Southwest's low-cost strategy.

Question 36

Tangible resources include

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

Question 37

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 38

The essential purpose of the value chain is to create additional value without incurring significant costs while doing so and to capture the value that has been created.

Question 39

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

Question 40

Capabilities may be costly to imitate if they are causally ambiguous or socially complex.

Question 41

Value chain analysis is a tool used to

A) analyze a firm's external environment for value-creating opportunities.
B) analyze a firm's primary and support activity in isolation from influences of the external environment.
C) understand the parts of the firm's operation that create value and those that do not.
D) identify the firm's core competencies in each of the primary activities of the firm.

Question 42

Gamma, Inc., has struggled for industry dominance with Ardent, Inc., its main competitor, for years. Gamma has gathered and analyzed large amounts of competitive intelligence about Ardent. It has observed as much of the firm's internal functioning and technology as it can legally, yet Gamma cannot understand why Ardent has a competitive advantage over it. The source of Ardent's success is

A) impregnable.
B) causally ambiguous.
C) rationally obscure.
D) elusive.

Question 43

Acme Auto Repair has a thriving business based on its reputation for high-quality work, honesty, and skilled employees. For continued long-term success, Acme's owner should

A) concentrate on maintaining Acme's present core competencies.
B) focus on developing Acme's future competitive advantages.
C) place more emphasis on tangible resources which are less vulnerable to obsolescence than intangible resources.
D) recognize that core competencies derived from human resources are more subject to becoming core rigidities than are core competencies based on other types of resources.

Question 44

____ can be viewed as the capacity to take action.

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

Question 45

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 levels, 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 criteria 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 the these are met.

Question 46

Organizational culture is

A) amorphous and changeable.
B) not easily imitable.
C) so difficult to analyze that most firms should choose to ignore it.
D) typically fragile in the face of changes in the external environment.

Question 47

A local restaurant, Farm Fresh Ingredients, has become highly successful through its menu based solely on organically-raised chicken, beef, and organic seasonal produce. It has opened new locations in other cities, and these new locations are becoming highly profitable. Farm Fresh can expect that, at best, its competitive advantage will be

A) permanent.
B) sustainable.
C) temporary.
D) defensible.

Question 48

It is vital for firms to develop

A) one strong core competency.
B) as many core competencies as possible.
C) three or four core competencies.
D) an ever-changing array of competencies, as competencies rarely last longer than two years.

Question 49

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 50

Value chain support activities include

A) converting inputs into products.
B) developing advertising and promotional campaigns.
C) distributing the product to customers.
D) recruiting, hiring, and training personnel.

Question 51

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

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

Question 52

ACME Corp. is a leading provider of radios to the commercial market. Its products all rely on printed circuit board technology. ACME has protected its market leadership with continued advancements in this technology which it patents. A competitor has developed a radio for this market with equal performance but uses a software-based solution instead of circuit boards. ACME's technology leadership fails which capability test?

A) The value test
B) The rareness test
C) The substitutability test
D) It fails all three of these tests

Question 53

An investor is considering buying a restaurant that has been in operation for a number of years. The restaurant has a highly-reputed 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.

A) 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 will find that the restaurant's financial statements will undervalue the true value of its resources.
C) The investor should be aware that intangible assets are difficult to leverage into additional business.
D) The investor should search for a firm which has competitive advantages based on tangible resources.

Question 54

Regardless of the industry, the most valuable links on a firm's value chain will likely be

A) financial managers.
B) technology experts.
C) people who have knowledge of customers.
D) research and development specialists.

Question 55

The owner of a store retailing fine quality fabrics for home-sewers bewails the fact that few young women know how to do fine tailoring, much less simple dressmaking. Many potential customers are unable to appreciate the premium quality of the fabrics available and are deterred by the high prices, as well as the complexity of fine sewing. In the past, the store had a strong demand for fabrics, large classes for women learning the fine points of sewing, and a reputation for excellent service and technical advice. Now the store is earning lower-than-average returns. This case is an example of

A) the hazard of competitors being able to imitate a firm's core competency.
B) the need for firms to stick to their core competencies through temporary downturns in market demand.
C) the lack of intangible resources undermining the core competencies of the firm.
D) core competencies that have become core rigidities.

Question 56

Which of the following is a true statement about capabilities?

A) Capabilities exist when resources have been purposely integrated to achieve a specific task or set of tasks.
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 57

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 replace.

Question 58

A major reason outsourcing is being used is that

A) it increases the innovative potential of the firm.
B) few firms possess superior capability in all primary and support activities.
C) it permits unlimited access to capital resources.
D) competitors do not have access to the same external sources.

Question 59

A major U.S. manufacturer of children's toys believes its main competitive advantage lies in its continuing development of innovative toys and games. The company is facing increasing competition on price and it is strongly considering outsourcing to offshore firms as a means of reducing costs. The LAST function this firm should consider outsourcing is

A) production.
B) research and development.
C) information technology.
D) distribution.

Question 60

Value-creating primary activities include

A) purchasing raw materials and supplies.
B) recruiting, training, developing, and compensating employees.
C) selecting appropriate distribution channels.
D) planning corporate strategy and setting goals.

Question 61

Define capabilities and how they affect the firm's strategic success.

Question 62

Why is it important to prevent core competencies from becoming core rigidities?

Question 63

What are the differences between tangible and intangible resources? Which category of resources is more valuable to the firm?

Question 64

Describe a value chain analysis. How does a value chain analysis help a firm gain competitive advantage?

Question 65

Describe the importance of internal analysis to the strategic success of the firm.