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Chapter 03 Assessing the Internal Environment of the Firm Answer Key
True / False Questions
1.
One advantage of SWOT analysis is that it helps managers to identify strengths that are almost always
sources of sustainable competitive advantages.
2.
The SWOT analysis can show managers how to achieve a competitive advantage.
3.
The strengths and capabilities of a firm are enough to enable it to achieve a competitive advantage in the
marketplace.
4.
Toyota paid a heavy price for its excessive emphasis on cost control. By focusing on one strength
exclusively, it suffered severe losses. This is an example of the limitations of a SWOT analysis.
5.
In conducting a SWOT analysis, a risk for strategists is that they rely on traditional definitions of their
industry and competitive environment and therefore focus too narrowly on current competitors.
6.
The SWOT framework is sufficient as the primary basis for evaluating the external opportunities and
threat of the company.
7.
The SWOT framework is not sufficient as the primary basis for evaluating the internal strengths and
weaknesses of a company.
8.
Top managers have learned not to rely on SWOT to stimulate self-reflection and group discussions
about how to improve their firm and position for success.
9.
Company strengths and weaknesses are tied to its stated goals and objectives.
10.
If a firm builds its strategy on a capability that cannot, by itself, create or sustain competitive advantage,
it is wasting its time and resources.
11.
Focusing too narrowly on current customers, technologies and competitors can lead a company to
overlook periphery industry boundaries and a new set of competitive relationships.
12.
Encyclopedia Britannica lost competitive positioning due to a misunderstanding of the change in
competitors, when the CD-based encyclopedia became popular for home computers.
13.
The static nature of the SWOT assessment is a positive advantage for it as an evaluation framework.
14.
Value-chain analysis assumes that the basic economic purpose of a firm is to create value and it is a
useful framework for analyzing the strengths and weaknesses of the firm.
15.
In value-chain analysis, value is measured by the market value of the total stock outstanding of the
company.
16.
Primary activities contribute to the physical creation of a product or service, its sale and transfer to the
buyer, and its service after the sale.
17.
The value-chain concept assumes that both primary and support activities are capable of producing
value for customers.
18.
Inbound logistics include all activities associated with transforming inputs into the final product form
such as machining, packaging, assembly, equipment, testing, printing, and facility operations.
19.
Support activities provide support for primary activities, but not each other.
20.
Establishing a customer service hotline to handle customer complaints would be considered a primary
activity in value-chain analysis.
21.
Technology development is a much broader concept than research and development.
22.
In value-chain analysis, finance and accounting are considered part of the general administration of a
firm.
23.
Frito-Lay uses crowdsourcing to make its Super Bowl ads. This is an example of a primary activity in
the value chain.
24.
Campbell Soup uses an electronic network to facilitate its continuous-replenishment program with its
most progressive retailers. This is known as an operations primary activity in the value chain.
25.
Technip has developed intelligent pipes that can monitor and regulate the temperature throughout an oil
pipeline. This is an example of a procurement support activity in the value chain.
26.
At Sephora.com, a customer service representative taking a phone call from a repeat customer has
instant access to what shade of lipstick she likes best. This is an example of a procurement support
activity in the value chain.
27.
Managers should focus their attention on interrelationships among value-chain activities within the firm,
not on relationships among activities within the firm and other organizations (such as suppliers and
customers).
28.
Some leading edge companies are applying the prosumer concept. Here, firms team up with their
suppliers and alliance partners to satisfy their customer needs.
29.
Value-chain analysis can only be applied to manufacturing operations.
30.
Information technology (IT) can also play a key role in enhancing the value that a company can provide
its customers and, in turn, increasing its own revenues and profits. IT is an activity within the support
activities of general administration.
31.
Campbell Soup uses electronic networks in order to improve the efficiency of outbound logistics. This
is an example of relationships among activities within the firm and with other stakeholders that are part
of the company expanded value chain.
32.
Some firms find great value by not incorporating their customers into the value creation process.
33.
Crowdsourcing has many benefits, including the example in which McDonalds set up a Twitter
campaign to promote positive word of mouth which became a platform for people looking to bash the
chain.
34.
Strong brands are typically built through consistent, effective marketing, and companies need to weigh
the potential for misbehaving customers to thwart their careful efforts.
35.
Porsche received a lot of negative feedback when it announced plans to release an SUV, but it went
ahead anyway, and the Porsche Cayenne was a great success. This is an example of a peril of making
decisions based on crowdsourcing.
36.
At times, the difference between manufacturing and service is in providing a customized solution rather
than mass production, as is common in manufacturing.
37.
A travel agent does not add value by creating an itinerary that includes transportation, accommodations,
and activities that are customized to your budget and travel dates.
38.
A law firm renders services that are specific to client needs and circumstances. This is an example of the
transformation process of a service organization.
39.
The activities that may provide support only to one company may be critical to the primary value-
adding activity of another firm.
40.
The resource-based view of the firm focuses solely on the internal analysis of the operations of the
firm.
41.
Tangible resources are assets that are relatively easy to identify such as financial and physical assets.
42.
Intangible resources of a firm refer to its capacity to deploy tangible resources over time and leverage
those resources effectively.
43.
Financial resources such as cash and cash equivalents are intangible resources.
44.
Effective strategic planning processes are intangible resources.
45.
Company reputation with customers, suppliers and other stakeholders is an intangible resource.
46.
Examples of organizational capabilities are outstanding customer service, excellent product
development capabilities, superb innovation processes, and flexibility in manufacturing processes.
47.
Harley-Davidson sells accessories, clothing, toys and motorcycles. They have a brand image in common
which is a tangible resource.
48.
Comcast gets a bad review on Yelp. This is an example of harm to a tangible resource.
49.
FedEx employees take computer-based job competency tests every 6 to 12 months in order to identify
areas of individual weakness and provide input to a computer database of employee skills. This is an
example of a tangible resource.
50.
Trade secrets are intangible resources.
51.
Modern plant and facilities as well as favorable manufacturing locations are tangible resources.
52.
Patents, copyrights, and trademarks are intangible resources.
53.
Products and services that are difficult to imitate help firms sustain their profitability.
54.
Path dependency has no impact on the inimitability of resources.
55.
Capabilities that exhibit causal ambiguity are difficult to imitate.
56.
For a resource to provide a firm with potential sustainable advantages it must satisfy only two criteria:
rareness and difficulty in substitution.
57.
Firms that are successful in creating competitive advantages that are sustainable for a period of time do
not have to be concerned about profits being retained by employees or managers.
58.
Employee exit cost is a factor that can increase employee bargaining power and help him or her
appropriate profits of the firm.
59.
Amazon Prime is an example of a difficult to imitate capability that gives it competitive advantage over
its rivals.
60.
Dell lost its competitive advantage by 2009 in part because it placed its efforts on operational excellence
to the exclusion of reinvention.
61.
The corporate culture at Southwest airlines is an example of causal ambiguity.
62.
People want to partner with you because they have heard you are a credible company built through a
culture of trust. In a sense, being a great company to work for also makes you a great company to work
with. This is an example of causal ambiguity.
63.
Two valuable firm resources (or two bundles of resources) are strategically equivalent when each one
can be exploited separately to implement the same strategies.
64.
Though two teams could have different ages, functional backgrounds, experience, and so on, they could
be strategically equivalent and thus substitutes for one another.
65.
Several pharmaceutical firms have seen the value of patent protection erode in the face of new drugs
that are based on different production processes and act in different ways, but can be used in similar
treatment regimes. This example illustrates the lack of sustainable competitive advantage being offered
by the product.
