True / False
1. Technology is a critical resource for helping organizations learn how to continually innovate.
a. True
b. False
2. Firms should seek to continually develop new core competencies because all core competencies guarantee above-
average profit.
a. True
b. False
3. Firms achieve strategic competitiveness and earn above-average returns by acquiring, bundling, and leveraging their
resources for the purpose of taking advantage of opportunities in the external environment in ways that create value
for customers.
a. True
b. False
4. Analyzing the internal environment enables a firm to determine what it might do by identifying what opportunities
and threats exist.
a. True
b. False
5. Analyzing the internal environment enables a firm to determine what it can do by identifying resources, capabilities,
and core competencies in the internal organization.
a. True
b. False
6. 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.
a. True
b. False
7. Resources are the source of capabilities, some of which lead to the development of core competencies; in turn,
some core competencies may lead to competitive advantage.
a. True
b. False
8. Value is measured by the variable and fixed costs associated with the production and marketing of a particular
product compared with the revenue and profits the product generates.
a. True
b. False
9. Creating customer value is the source of the firm‘s potential to earn above-average returns.
a. True
b. False
10. Walmart uses core competencies such as information technology and distribution channels to create value for its
customers through its “everyday low prices.”
a. True
b. False
11. The need to meet quarterly earnings numbers disciplines managers to accurately examine the firm’s internal
organization.
a. True
b. False
12. The learning generated by making and correcting mistakes is generally unimportant to efforts to create new
capabilities and core competencies.
a. True
b. False
13. By themselves, resources can allow firms to create value for customers as the foundation for earning above-
average returns.
a. True
b. False
14. Resources must be combined to form capabilities, as illustrated by Subway, which linked its fresh ingredients with
several other resources, including the continual training it provides to those running the firm‘s units as the foundation
for customer service as a capability.
a. True
b. False
15. GE’s brand name is a tangible source of competitive advantage for the company.
a. True
b. False
16. The value of tangible assets such as the firm’s borrowing capacity and its physical plant is high because they can be
easily leveraged to derive additional value.
a. True
b. False
17. Although an organization’s good reputation is a valuable resource that takes years of superior marketplace
competence to achieve, it is not a good basis for building a competitive advantage because it can be destroyed
almost instantly by bad publicity.
a. True
b. False
18. Compared to tangible resources, intangible resources are an inferior source of core competencies.
a. True
b. False
19. The foundation of many capabilities lies in the unique skills and knowledge of a firm’s employees.
a. True
b. False
20. Capabilities of an organization emerge spontaneously through the interaction of tangible and intangible resources.
a. True
b. False
21. Older employees are less valuable resources to firms than younger employees, because the older employees have
lower stocks of knowledge. Consequently, employee reductions should begin with early-retirement inducements.
a. True
b. False
22. 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
23. Capabilities are usually developed separately from specific functional areas such as manufacturing, R&D, and
marketing.
a. True
b. False
24. “Motivating, empowering, and retaining employees” is an example of a capability that resides within the human
resources functional area.
a. True
b. False
25. Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals.
a. True
b. False
26. 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 which
creates a core competence in innovation.
a. True
b. False
27. The firm with the most capabilities wins.
a. True
b. False
28. Valuable capabilities allow the firm to exploit strengths or neutralize weaknesses in the internal environment.
a. True
b. False
29. Costly–to–imitate capabilities are those which other firms cannot easily develop as they have no strategic equivalent.
a. True
b. False
30. Capabilities may be costly to imitate if firms have unique and valuable organizational cultures, are causally
ambiguous, and socially complex.
a. True
b. False
31. At Southwest Airlines, the complex interrelationship between its culture and human capital adds value for
customers in ways that other airlines cannot, such as jokes on flights by flight attendants and cooperation between
gate personnel and pilots.
a. True
b. False
32. Interpersonal relationships, trust, friendships, and a firm’s reputation are all examples of complex social phenomena
that make capabilities easy to imitate.
a. True
b. False
33. A company can earn above-average returns only when the value it creates is less than the costs incurred to create
that value.
a. True
b. False
34. Value chain activities in the value chain create value, whereas support functions generate costs.
a. True
b. False
35. 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
36. A firm should outsource only activities where it cannot create value or where it is at a substantial disadvantage
compared to competitors.
a. True
b. False
37. Firms should never outsource a primary activity because of the danger of the activity being imitated by rivals.
a. True
b. False
38. 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.
a. True
b. False
39. At the conclusion of the internal analysis, firms must identify their opportunities and threats in resources,
capabilities, and core competencies.
a. True
b. False
40. Any core competency has the potential to lose its value-creating ability.
a. True
b. False
41. 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.
42. 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.
43. 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.
44. 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
45. Internal analysis enables a firm to determine what the firm
a. can do.
b. should do.
c. will do.
d. might do.
46. 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.
47. The key to achieving competitiveness, earning above-average returns, and remaining ahead of competitors in the
long run is to manage current core competencies
a. in a way that uniquely bundles and leverages the firm’s existing resources.
b. while simultaneously developing new ones.
c. and imitate the core competencies of successful competitors.
d. in order to preserve and enhance them against the firm’s competitors.
48. Which of the following is NOT a component of internal analysis leading to competitive advantage?
a. tangible and intangible resources
b. analysis of supplier power
c. capabilities
d. core competencies
49. 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.
50. 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/
51.
to pay.
is measured by a product’s performance characteristics and its attributes for which customers are willing
a. Competitive advantage
b. Profit potential
c. Contribution
d. Value
52. 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.
53. 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
54. 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.
55. Today, a substantially slimmed-down Polaroid is introducing a number of new products, including GL20 Camera
Glasses which have a built-in camera and LCDs. This wave of new product development is explained by
a. the funds provided by a patent-infringement lawsuit won by Polaroid.
b. weaker competitors in its industry.
c. the learning that occurred from making earlier mistakes.
d. an easing of regulations governing intellectual property protection.
56. 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.
57. In the television show Mad Men, Don Draper is in charge of the creative department at an advertising agency. He
appears to spend most of his time drinking and relaxing, but occasionally he has a flash of insight that leads to a
new ad campaign. He provides which valuable intangible resource?
a. trust
b. ideas
c. brand name
d. capacity to innovate
58. Supply and demand impacts the level at which people are paid. If there are few people with a proven record of
using judgment effectively then they will be in high demand and offered high compensation. CEOs are valued for
their judgment as
a. resource allocators.
b. capability counters.
c. strategic leaders.
d. core competency accumulators.
59. 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.
60. 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.