Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

It is increasingly difficult for a firm to develop and sustain a competitive advantage because of the effects of globalization and

Accepted Answer

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.

Question 3

Case Scenario 1: Heartsong LLC.
Heartsong LLC is a designer and manufacturer of replacement heart valves based in Peoria, Illinois. While a relatively small company in the medical devices field, it has established a worldwide reputation as the provider of choice high-quality, leading-edge artificial heart valves. Most of its products are sold to large regional hospital systems and research hospitals. Specialty heart centers are another emerging, but fast-growing, market for its valves. While Heartsong would like to grow quickly, its growth is constrained by the need to finance larger production runs and then carry this additional inventory. For products like those of Heartsong, vendors typically do not collect payment until the unit is actually used in surgery. Moreover, heart valves are usually required on short notice which means that they must be either onsite, or inventoried at a nearby location. If nearby, then transport of the unit to a hospital or heart center occurs within a matter of hours, and sometimes minutes. For this reason, accelerated growth would require Heartsong to both finance increased production of its heart valves, along with carrying increased levels of inventory that are in fact sitting on their customers' shelves. In fact, inventory-carrying cost is its single largest cost outside of research and development. While profitable growth is necessary if Heartsong is to continue extending its competitive advantage through increasingly greater investments in basic heart valve R&D, it is not clear that the company can internally support all these increased financial commitments (R&D, manufacturing, and inventory). Doc Watson, the CEO of Heartsong, is considering an outside contractor, EdFex, to handle the inventorying, warehousing, and delivery of its valves. EdFex has secure, high-tech warehouses in most major population centers around the country, and can ensure delivery of a product to these markets from its warehouses in less than one hour.
-(Refer to Case Scenario 1) Why might an outsourcing arrangement with EdFex be attractive to Heartsong?

Accepted Answer

The answer of Case Scenario 1: Heartsong LLC.
Heartsong LLC is...

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

____ of organizational decisions fail.

Accepted Answer

A)  Few 
B)  About one-quarter 
C)  About half 
D)  Most

Question 8

____ is/are the source of a firm's ____, which is/are the source of the firm's ____.

Accepted Answer

A)  Resources, capabilities, core competencies 
B)  Capabilities, resources, core competencies 
C)  Capabilities, resources, above average returns 
D)  Core competencies, resources, competitive advantage

Question 9

The Chapter 3 Opening Case demonstrates that although conditions in the economic environment influenced Subway's success, the manner in which Subway used its resources and capabilities also influenced that success.

Accepted Answer

A) True 
 B)False

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.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Compared to tangible resources, intangible resources are

Accepted Answer

A)  of less strategic value to the firm. 
B)  not the focus of strategic analysis. 
C)  a superior source of capabilities. 
D)  more likely to be reflected on the firm's balance sheet.

Question 13

Case Scenario 1: Heartsong LLC.
Heartsong LLC is a designer and manufacturer of replacement heart valves based in Peoria, Illinois. While a relatively small company in the medical devices field, it has established a worldwide reputation as the provider of choice high-quality, leading-edge artificial heart valves. Most of its products are sold to large regional hospital systems and research hospitals. Specialty heart centers are another emerging, but fast-growing, market for its valves. While Heartsong would like to grow quickly, its growth is constrained by the need to finance larger production runs and then carry this additional inventory. For products like those of Heartsong, vendors typically do not collect payment until the unit is actually used in surgery. Moreover, heart valves are usually required on short notice which means that they must be either onsite, or inventoried at a nearby location. If nearby, then transport of the unit to a hospital or heart center occurs within a matter of hours, and sometimes minutes. For this reason, accelerated growth would require Heartsong to both finance increased production of its heart valves, along with carrying increased levels of inventory that are in fact sitting on their customers' shelves. In fact, inventory-carrying cost is its single largest cost outside of research and development. While profitable growth is necessary if Heartsong is to continue extending its competitive advantage through increasingly greater investments in basic heart valve R&D, it is not clear that the company can internally support all these increased financial commitments (R&D, manufacturing, and inventory). Doc Watson, the CEO of Heartsong, is considering an outside contractor, EdFex, to handle the inventorying, warehousing, and delivery of its valves. EdFex has secure, high-tech warehouses in most major population centers around the country, and can ensure delivery of a product to these markets from its warehouses in less than one hour.
-(Refer to Case Scenario 1) If Heartsong LLC is to continue extending its competitive advantage in high-quality, leading-edge artificial heart valves, it must keep the inventorying, warehousing, and delivery of its heart valves in-house rather than outsourcing these activities.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

The answer of Describe a value chain analysis. How does...

Question 17

Case Scenario 2: ERP Inc.
ERPI is a leading provider of enterprise integration software (EIS). EIS allows a firm to connect and integrate processes across all aspects of its business, regardless of where they are located around the world. ERPI is a product-focused company, whereas most competitors in its market space, like Oracle, operate as "solutions companies." Oracle and Microsoft have begun to devote considerable resources to the development of and acquisition of products to compete in the EIS space. Despite these recent threats, one benefit of its product-focused strategy is that ERPI's proprietary product is generally recognized as being 200% to 300% better than competitors' software. ERPI estimates it will take 2 to 3 years for competitors to develop the capabilities needed to bring a competing product to market. ERPI invests a considerable percentage of its profits in basic R&D to support its core products. As evidence of this, among its competitors the firm maintains the largest in-house programming staff dedicated solely to the development of advanced enterprise integration software. Installation and related consulting for EIS typically cost between $100 and $200 million, with the ERPI software component accounting for about 20% of the installed cost (the remaining 80% is spent on the actual installation, not counting the value of the customer's time). ERPI's target market consists of the world's largest manufacturing and industrial firms and it currently enjoys a 60 percent market share.
-(Refer to Case Scenario 2) How valuable, rare, costly to imitate, and nonsubstitutable are ERPI's capabilities?

Accepted Answer

The answer of Case Scenario 2: ERP Inc.
ERPI is a...

Question 18

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

Accepted Answer

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 19

If a firm has a service that is valuable, rare, and costly-to-imitate, but a substitute exists for the service, the firm will

Accepted Answer

A)  achieve competitive parity. 
B)  have a competitive disadvantage. 
C)  have a temporary competitive advantage. 
D)  gain a sustainable competitive advantage.

Question 20

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

Accepted Answer

A) True 
 B)False

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

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

It is increasingly difficult for a firm to develop and sustain a competitive advantage because of the effects of globalization and

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

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

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.

____ of organizational decisions fail.

is/are the source of a firm's , which is/are the source of the firm's .

The Chapter 3 Opening Case demonstrates that although conditions in the economic environment influenced Subway's success, the manner in which Subway used its resources and capabilities also influenced that success.

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.

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

Compared to tangible resources, intangible resources are

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

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

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

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

If a firm has a service that is valuable, rare, and costly-to-imitate, but a substitute exists for the service, the firm will

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