Q&A Hero

Q: The foundation of many capabilities lies in the unique skills and knowledge of a firm's employees. a. True b. False

Q: 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. a. True b. False

Q: 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 create a capability in R&D that creates a core competence in innovation. a. True b. False

Q: At IBM, human capital is critical to forming and using the firm's capabilities in customer relationships, scientific and research skills, and technical skills in hardware, software, and services. a. True b. False

Q: Firms should seek to continually develop new core competencies because all core competencies guarantee above-average profit. a. True b. False

Q: Older employees are less valuable resources to firms than younger employees, because older employees have lower levels of knowledge. Consequently, employee layoffs should begin with early-retirement inducements. a. True b. False

Q: Resources must be combined to form capabilities, as illustrated by Chipotle, which linked fresh ingredients with several other resources, including the marketing and training of employees, as the foundation for customer service as a capability. a. True b. False

Q: Analyzing the internal environment enables a firm to determine what it might do by identifying what opportunities and threats exist. a. True b. False

Q: Describe an organization with which you are familiar. Does it have a sustainable competitive advantage?

Q: What is value? Why is it important?

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

Q: Describe the importance of internal analysis to the strategic success of the firm. Should not-for-profit organizations perform internal analysis? Why or Why not?

Q: Describe the four specific criteria that managers can use to decide which of their firm's capabilities have the potential to create a sustainable competitive advantage.

Q: Why is it important to identify internal strengths and weaknesses?

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

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

Q: Define outsourcing. Why do organizations outsource?

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

Q: All competitive advantages have: a. a limited life. b. an expiration date. c. the ability to earn above-average returns indefinitely. d. the ability to lead to more competitive advantages.

Q: 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

Q: One capability that can be learned from failure is when to: a. repeat with a modification. b. add more resources. c. dig in. d. quit.

Q: The corporate research division of Siemens files, on average, 25 patents a day. The patents are a(n) ______ resource. a. financial b. organizational c. physical d. technological

Q: ______ is measured by a product's performance characteristics and its attributes for which customers are willing to pay. a. Competitive advantage b. Profit potential c. Contribution d. Value

Q: 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.

Q: Many firms outsource the payroll function of paying employees to firms such as ADP. Payroll is a(n): a. value-chain activity. b. operation function. c. support function. d. supply-chain function.

Q: 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.

Q: The most numerous of the following organizational characteristics are: a. resources. b. capacities. c. capabilities. d. core competencies.

Q: 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.

Q: Capabilities: 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.

Q: Firms that have strong positive relationships with suppliers and customers are said to have ______, an essential ingredient to creating value. a. customer value b. social capital c. effective marketing d. an attractive industry

Q: Government agencies are known for having so many layers and rules that decisions are made slowly and inefficiently. In this case the ______ resource is a detriment to taxpayers using and paying for the bureaucracy. a. financial b. organizational c. physical d. technological

Q: All of the following are tangible resources EXCEPT: a. production equipment. b. distribution centers. c. a firm's reputation. d. formal reporting structures.

Q: 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.

Q: ______ is the ability to analyze, understand, and manage an internal organization in ways that are not dependent on the assumptions of a single country, culture, or context. a. Strategic thinking b. A global mind-set c. Profit-pooling d. Competency-discovering

Q: 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 technology 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. The costly-to-imitate test

Q: The ______ are those with the potential to be formed into core competencies as the foundation for creating value. a. "most" knowledge resources b. "most" capabilities c. "right" resources d. "dark side" resources

Q: All of the following were traditional sources of competitive advantage EXCEPT: a. labor costs. b. access to financial resources. c. protected markets. d. a highly educated labor market.

Q: Value consists of: a. a product's proprietary characteristics and attributes for which customers are willing to pay. b. a product's performance characteristics and attributes for which customers are willing to pay. c. a product's proprietary characteristics and attributes for which customers consider paying. d. a product's performance characteristics and attributes for which customers consider paying.

Q: Valuable capabilities: 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. allow the firm to neutralize opportunities in its internal environment.

Q: McDonald's culture, with an emphasis on cleanliness, consistency, service, and the training that reinforces the value of these characteristics, illustrates which of the following criteria for sustainable competitive advantage? a. Valuable b. Rare c. Costly to imitate d. Nonsubstitutable

Q: 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.

Q: Knowledge transfer and access to resources within the value chain are enhanced by: a. guidelines for sharing knowledge and resources. b. social capital. c. penalties for not sharing knowledge and resources. d. training employees on how to cooperate.

Q: All core competencies have the potential to become core: a. rigidities. b. stagnations. c. inefficiencies. d. weaknesses.

Q: All of the following are true about the strategic decisions managers make about their firm's internal organization EXCEPT that: a. they are directly correlated to executive compensation. b. they are non-routine. c. they have ethical implications. d. they significantly influence the firm's ability to earn above-average returns.

Q: 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.

Q: 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. What should the investor consider when making a decision? a. The investor will find 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 will 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.

Q: 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? a. Valuable b. Rare c. Costly to imitate d. Nonsubstitutable

Q: 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.

Q: Examples of support activities include all of the following EXCEPT: a. finance. b. human resources. c. follow-up service. d. management information systems.

Q: 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. operations. b. research and development. c. supply-chain management. d. distribution.

Q: Which of the following is NOT a reputational resource? a. Customers' opinions that the firm's products are high quality b. Employees' opinions of the firm as a terrible place to work 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

Q: Amazon is building a new distribution facility in Robbinsville, New Jersey. It is immediately off the exit of a major road. This is an example of a(n) ______ resource. a. financial b. organizational c. physical d. technological

Q: If a firm offers a service that is valuable, rare, and costly to imitate, but a substitute exists for the service, the firm will: a. achieve competitive parity. b. have a competitive disadvantage. c. have a temporary competitive advantage. d. gain a sustainable competitive advantage.

Q: Internal analysis enables a firm to determine what the firm: a. can do. b. should do. c. will do. d. might do.

Q: 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.

Q: Which of the following is TRUE about outsourcing? a. Outsourcing allows firms to be more flexible and requires minimal coordination. b. Outsourcing allows firms to concentrate on those areas in which they can create value. c. Outsourcing strengthens the creative and innovative functions within the firm. d. Outsourcing is effective only when it includes all support activities.

Q: A local restaurant, Farm Fresh Ingredients, has become highly successful through its menu, based solely on organically raised chicken and 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.

Q: Costly-to-imitate capabilities can emerge for all of the following reasons EXCEPT: a. lack of scientific transference. b. social complexity. c. unique historical conditions. d. causal ambiguity.

Q: Tools such as ______ help the firm focus on its core competencies as the source of its competitive advantages. a. marketing b. manufacturing c. outsourcing d. imitation

Q: A financial management firm has existed for more than 70 years. Some of its original clients' grandchildren are now clients of the firm themselves. The partners and staff of the firm have spent most or all of their careers with the firm. Many have even married into each other's families. This firm has capabilities that would be costly to imitate because of its a. access to large amounts of financial capital. b. causally ambiguous core competencies. c. social complexity. d. unique historical conditions.

Q: 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.

Q: 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.

Q: ______ 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

Q: A major reason outsourcing is effective 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.

Q: 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.

Q: ______ can be viewed as the capacity to take action. a. Strategic assets b. Human capital c. Core competencies d. Functional capabilities

Q: ______ 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

Q: Value chain activities are: a. the activities most likely to be imitated by competitors. b. activities or tasks the firm completes in order to produce products and then sell, distribute, and service those products in ways that create value for customers. c. the core competencies of the organization. d. the activities most crucial to implementing the firm's business strategy.

Q: 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 current 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.

Q: The challenge and difficulty of making effective decisions are implied by preliminary evidence that ______ of organizational decisions fail. a. one-fourth b. one-fifth c. one-tenth d. one-half

Q: 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.

Q: Capabilities that other firms cannot develop easily are classified as: a. costly to imitate. b. rare. c. valuable. d. nonsubstitutable.

Q: The capabilities used to create the sustainability/green initiatives at Walmart and Target are ______ but less likely to be ______. a. rare; valuable b. valuable; rare c. socially complex; rare d. valuable; causally ambiguous

Q: 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.

Q: 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.

Q: 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. gains the loyalty of shareholders. c. increases human intellectual capacity. d. allows for superior bundling of resources.

Q: The owner of a store that sells fine-quality fabrics for home seamstresses bemoans 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 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.

Q: Capabilities typically come from: a. individual resources. b. one unique resource. c. several outstanding resources used independently. d. combining resources.

Q: 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.

Q: Outsourcing is the: a. spinning off of a value-creating activity to create a new firm. b. selling of a value-creating activity to other firms. c. purchase of a value-creating activity from an external supplier. d. use of computers to obtain value-creating data from the Internet.