109. 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.
110. 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.
111. Which of the following is NOT an external event that reveals the “dark side” of core capabilities?
a. A new competitor figures out a better way to serve the firm’s customers.
b. New technologies emerge and replace those used by the firm.
c. A firm changes its focus to a new core competence.
d. Political or social events shift the foundation of current core capabilities.
112. 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.
113. Borders had a competitive advantage in physical location. However, Amazon fundamentally changed customer
buying habits, and Borders’ competitive advantage became a core
a. stagnation.
b. rigidity.
c. weakness.
d. inefficiency.
114. 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.
115. ______ 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
116. A product’s value is created by each of the following EXCEPT
a. high cost and highly differentiated features.
b. low cost.
c. highly differentiated features.
d. low cost and highly differentiated features.
117. A firm’s core competencies, integrated with an understanding of the results of studying the conditions in the
external environment, should
a. guarantee profits.
b. lead to a first-mover advantage.
c. drive the selection of strategies.
d. increase the firm’s market share.
118. 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.
119. 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.
120. Subscriptions to the New York Times have been decreasing as more customers receive their news through other
media. At the same time, advertisers have shifted portions of their spending to other media. The NYT’s managers
are making decisions under
a. certainty.
b. uncertainty.
c. intraorganizational conflict.
d. interorganizational conflict.
121. may exist among managers making decisions as well as among those affected by the decisions.
a. Certainty
b. Simplicity
c. Intraorganizatioinal conflicts
d. Interorganizational conflicts
122. 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
123. 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
124. 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
125. A food bank in Florida was struggling to serve its customers. It asked Walmart for help. Walmart sent a team of
managers who reorganized storage and transportation. The food bank was able to increase the number of clients
served by tenfold. Walmart shared its expertise in
a. distribution.
b. human resources.
c. marketing.
d. manufacturing.
126. Charmed by Claire is a successful retail boutique that sells women‘s accessories. Claire, the owner/manager,
knows that women have many options when buying jewelry. When customers enter her store they are greeted by
name and given prompt, friendly attention. Customers return to the store because the service is excellent. Claire
says the most important decision she makes is hiring the best staff because customer service is vital to her
business. Customer service is
a. a human resource.
b. an organizational resource.
c. a rare resource.
d. a core competency.
127. 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.
128. 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
129. 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
130. All core competencies have the potential to become core
a. rigidities.
b. stagnations.
c. inefficiencies.
d. weaknesses.
Subjective Short Answer
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 and carry
increased levels of inventory that are in fact sitting on its 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.
131. (Refer to Case Scenario 1). What value-chain activities appear to underlie Heartsong‘s competitive advantage?
132. (Refer to Case Scenario 1). Why might an outsourcing arrangement with EdFex be attractive to Heartsong?
133. (Refer to Case Scenario 1). What are the implications of an EdFex outsourcing arrangement for the capabilities
underlying Heartsong’s competitive advantage?
Case Scenario 2: ERP Inc.
ERP Inc. 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, such as 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 percent to 300 percent better than
competitors‘ software. ERPI estimates it will take two to three 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 million and $200 million, with the ERPI software component
accounting for about 20 percent of the installed cost (the remaining 80 percent 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.
134. (Refer to Case Scenario 2). How valuable, rare, costly to imitate, and nonsubstitutable are ERPI’s capabilities?
135. (Refer to Case Scenario 2). How sustainable is ERPI’s competitive advantage?
136. (Refer to Case Scenario 2). Imagine that ERPI’s historical growth strategy has focused on making one sale and
then moving on to the next target company. After several years of building market share using this approach, what
new resources has ERPI developed?
137. (Refer to Case Scenario 2). Which of the following represents the maximum level of performance ERPI should
expect to achieve?
A. below-average returns
B. average returns
C. average to above-average returns
D. above-average returns
Case Scenario 3: 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, 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 percent of sales), 184 in Canada, and 5 in Mexico. This physical presence
also has garnered Mangler a reputation for excellent, dependable service in its target markets, which in turn
translates into a vast and loyal clientele.
138. (Refer to Case Scenario 3). Mangler’s physical locations are best an example of
A. a core competency.
B. a capability.
C. an intangible resource.
D. a tangible resource.
139. (Refer to Case Scenario 3). Mangler’s reputation among its customers is an example of
A. a core competency.
B. a capability.
C. an intangible resource.
D. a tangible resource.
140. (Refer to Case Scenario 3). 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?
A. a core rigidity
B. a capability
C. an intangible resource
D. a tangible resource
Essay
141. 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?
142. What are the differences between tangible and intangible resources? Which category of resources is more valuable
to the firm?
143. Define capabilities and how they affect the firm’s strategic success.
144. 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.
145. Describe a value chain analysis. How does a value chain analysis help a firm gain competitive advantage?
146. Why is it important to prevent core competencies from becoming core rigidities?
147. What is value? Why is it important?
148. Define outsourcing. Why do organizations outsource?
149. Why is it important to identify internal strengths and weaknesses?
150. Describe an organization with which you are familiar. Does it have a sustainable competitive advantage?