Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

A firm with a unique organizational culture and proprietary processes developed over a long period of time

Accepted Answer

A)  is likely to be undervalued by financial statements. 
B)  is likely to be resistant to inertia in the face of change. 
C)  is less likely to have sustainable competitive advantages than a firm with easily quantifiable resources. 
D)  will be unable to leverage these resources if the firm is sold.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

Firms and managers can learn from the failure resulting from a mistake-that is, what not to do when seeking competitive advantage.

Accepted Answer

A) True 
 B)False

Question 8

____ can be viewed as the capacity to take action.

Accepted Answer

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

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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.

Accepted Answer

A) True 
 B)False

Question 11

Southwest Airlines has a complex interrelationship between its culture and staff that adds value in ways that other airlines cannot (such as jokes on flights or the cooperation between gate personnel and pilots). These examples illustrate which of the following criteria for sustainable competitive advantage?

Accepted Answer

A)  valuable. 
B)  rare. 
C)  costly to imitate. 
D)  nonsubstitutable.

Question 12

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?

Accepted Answer

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

Question 13

Case Scenario : B.B. Mangler.
B.B. Mangler is a top U.S. business-to-business distributor of maintenance, repair, and service equipment, components, and supplies such as compressors, motors, signs, lighting and welding equipment, and hand and power tools. Customers include contractors, service and maintenance shops, manufacturers, hotels, government, and health care and educational facilities. Mangler's industry is typically referred to as MRO, which is an acronym for maintenance, repair, and supplies. Mangler states its strategy as having the "capacity to quickly offer an unmatched breadth of lowest total cost MRO solutions to business." Mangler's GoMRO sourcing center for indirect spot buys locates products through its unique database of 8,000 suppliers and 5 million products. Mangler also dominates the North American market in terms of its sheer local physical presence. It has 388 physical branches in the U.S. largest cities, including Puerto Rico (90% of sales), 184 in Canada, and five in Mexico. This physical presence also has garnered them a reputation for excellent, dependable service in their target markets, which in turn translates into a vast and loyal clientele.
-(Refer to the above Case Scenario) The Internet threatens to displace physical locations as a basis for competitive advantage. If Mangler's vast network of branch offices were an integral part of its core competencies, what might the branches become if the basis for competitive advantage in the MRO industry moves to the Internet?

Accepted Answer

A)  a core rigidity 
B)  a capability 
C)  an intangible resource 
D)  a tangible resource

Question 14

Firms that achieve competitive parity can expect to

Accepted Answer

A)  earn below-average returns. 
B)  earn average returns. 
C)  earn above-average returns. 
D)  initially earn above-average returns, declining to average returns.

Question 15

Value-creating primary activities include

Accepted Answer

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 16

____ 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 17

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.

Accepted Answer

A) True 
 B)False

Question 18

Case Scenario : 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 the above Case Scenario) If the time for the competitor to produce a product similar to ERPI's were 2-3 months instead of 2-3 years, which portion of your assessment of ERPI's capabilities would change?

Accepted Answer

A)  Valuable 
B)  Rare 
C)  Costly-to-imitate 
D)  None of these would change

Question 19

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

Accepted Answer

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 20

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 core competencies. 
D)  more likely to be reflected on the firm's balance sheet.

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

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

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

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

A firm with a unique organizational culture and proprietary processes developed over a long period of time

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

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.

Firms and managers can learn from the failure resulting from a mistake-that is, what not to do when seeking competitive advantage.

____ can be viewed as the capacity to take action.

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

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.

Firms that achieve competitive parity can expect to

Value-creating primary activities include

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

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.

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

Compared to tangible resources, intangible resources are