Question 1

____ is measured by a product's performance characteristics and its attributes for which customers are willing to pay.

Accepted Answer

A)  Competitive advantage 
B)  Profit potential 
C)  Contribution 
D)  Value

Question 2

Capabilities

Accepted Answer

A)  tend to be developed through firm-wide interactions and reside in the firm as a whole. 
B)  tend to be concentrated in the support activities of the value chain. 
C)  tend to be concentrated in the primary activities of the value chain. 
D)  are often developed in specific functional areas.

Question 3

Which of the following is a true statement about capabilities?

Accepted Answer

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vulnerable to obsolescence than other intangible capabilities because of the tendency for employee knowledge to become outdated.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 4

According to the Chapter 3 Opening Case, all of the following are core competencies of Subway EXCEPT

Accepted Answer

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.

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

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) What are the implications of an EdFex outsourcing arrangement for the capabilities underlying Heartsong's competitive advantage?

Accepted Answer

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

Question 7

Capabilities typically come from

Accepted Answer

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

Question 8

Which of the following is NOT a reputational resource?

Accepted Answer

A)  Customer opinion that the firm's product are high quality. 
B)  Employees viewing the firm as a terrible place to work. 
C)  Suppliers' opinion that the firm pays its bills in a timely manner. 
D)  Customer opinion that using the firm's product makes them attractive.

Question 9

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?

Accepted Answer

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 10

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) Which of the following represents the maximum level of performance ERPI should expect to achieve?

Accepted Answer

A)  Below-average returns. 
B)  Average returns. 
C)  Average to above average returns. 
D)  Above average returns.

Question 11

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

Accepted Answer

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 12

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.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  operations. 
B)  research and development. 
C)  supply-chain management. 
D)  distribution.

Question 14

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

Accepted Answer

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

Question 15

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.

Accepted Answer

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 16

Valuable capabilities

Accepted Answer

A)  allow the firm to exploit opportunities in its external environment. 
B)  allow the firm to neutralize threats in its internal environment. 
C)  allow the firm to exploit opportunities or neutralize threats in its external environment. 
D)  none of the these are correct.

Question 17

Internal analysis enables a firm to determine what the firm

Accepted Answer

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

Question 18

The most numerous of the following organizational characteristics are

Accepted Answer

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

Question 19

All of the following are tangible resources EXCEPT

Accepted Answer

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

Question 20

Innovation, consumer understanding, brand-building, go-to-market, and scale are activities that P&G (Chapter 3 Strategic Focus) performs well and are examples of the company's __________ .

Accepted Answer

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

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