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c.
Capabilities; resources; above-average returns
d.
Core competencies; resources; competitive advantage
76. ______ can be viewed as the capacity to take action.
a.
Strategic assets
b.
Human capital
c.
Core competencies
d.
Functional capabilities
77. 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.
78. 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.
79. ______ 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
80. 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.
81. 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.
82. 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.
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c.
social complexity.
d.
unique historical conditions.
83. 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
84. 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.
85. 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.
86. 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.
87. 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.
88. Internal analysis enables a firm to determine what the firm:
a.
can do.
b.
should do.
c.
will do.
d.
might do.
89. 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.
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d.
gain a sustainable competitive advantage.
90. 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
91. 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
92. 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.
93. Examples of support activities include all of the following EXCEPT:
a.
finance.
b.
human resources.
c.
follow-up service.
d.
management information systems.
94. 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.
95. 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
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96. 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.
97. 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.
98. 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.
99. All core competencies have the potential to become core:
a.
rigidities.
b.
stagnations.
c.
inefficiencies.
d.
weaknesses.
100. 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.
101. 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.
102. 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
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b.
Rare
c.
Costly to imitate
d.
Nonsubstitutable
103. 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.
104. 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.
105. 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.
106. 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
107. 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
108. ______ 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
109. Because firms combine tangible and intangible resources to create capabilities:
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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.
110. All of the following are tangible resources EXCEPT:
a.
production equipment.
b.
distribution centers.
c.
a firm’s reputation.
d.
formal reporting structures.
111. 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
112. 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
113. 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.
114. 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.
115. The most numerous of the following organizational characteristics are:
a.
resources.
b.
capacities.
c.
capabilities.
d.
core competencies.
116. A major department store chain has a strict policy of banning photographs or videos of its sales floor or back-room
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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.
117. 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.
118. 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.
119. ______ 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
120. 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
121. 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.
122. 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
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123. 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.
124. What are the differences between tangible and intangible resources? Which category of resources is more valuable to
the firm?
125. Define outsourcing. Why do organizations outsource?
126. Why is it important to prevent core competencies from becoming core rigidities?
127. Describe a value chain analysis. How does a value chain analysis help a firm gain competitive advantage?
128. Why is it important to identify internal strengths and weaknesses?
129. 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.
130. 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?
131. Define capabilities and how they affect the firm’s strategic success.
132. What is value? Why is it important?
133. Describe an organization with which you are familiar. Does it have a sustainable competitive advantage?
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Answer Key
1. False
2. True
3. False
4. False
5. True
6. True
7. True
8. True
9. True
10. True
11. False
12. False
13. False
14. False
15. False
16. False
17. False
18. True
19. False
20. False
21. True
22. True
23. True
25. True
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26. True
27. True
28. True
29. False
30. False
31. False
32. False
33. True
34. False
35. True
36. False
37. True
38. False
39. True
40. b
41. b
42. d
43. a
44. b
45. a
46. b
47. c
48. b
49. c
51. c
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52. a
53. d
54. c
55. b
56. b
57. a
58. b
59. c
60. c
61. b
62. c
63. a
64. d
65. d
66. a
67. b
68. b
69. b
70. a
71. c
72. d
73. b
74. b
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77. c
78. b
79. a
80. a
81. c
82. c
83. c
84. a
85. c
86. b
87. c
88. a
89. c
90. c
91. b
92. b
93. c
94. a
95. c
96. b
97. b
98. a
99. a
100. b
102. c
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103. c
104. b
105. d
106. c
107. c
108. b
109. b
110. c
111. b
112. b
113. d
114. b
115. a
116. c
117. c
118. c
119. d
120. d
121. d
122. d
123. a
124. Resources are either tangible or intangible. Tangible resources are those assets that can be observed and quantified.
There are four types of tangible assets: financial resources (borrowing capacity, ability to generate internal funds);
physical resources (plant and equipment, access to raw materials); technological resources (patents, trademarks,
copyrights, and trade secrets); and organizational resources (formal reporting structure, planning, controlling and
coordinating systems). Intangible resources are those assets in the firm that are less visible. There are three types of such
resources: human resources (knowledge, trust, management capabilities, and organizational routines); resources for
innovation (ideas, scientific capability, and capacity for innovation); and reputation (reputation with customers, i.e., the
firm’s brand name and perceptions of product quality, and relationships with suppliers). Intangible assets develop over
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