Deck 3: The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages

Question 1

Analyzing the internal environment enables a firm to determine what it might be able to do by identifying what opportunities exist.

Answer 1

False

Question 2

Some resources, such as financial capital, have inherent value to the firm, while others are not inherently valuable.

Answer 2

False

Question 3

Firms and managers can learn from the failure resulting from a mistake-that is, what not to do when seeking competitive advantage.

Answer 3

True

Question 4

The sustainability of a competitive advantage depends upon the imitability of the core competence, the availability of substitutes for the core competence, and the rate of obsolescence of the core competence.

Question 5

Value is created when the firm exploits its core competencies or competitive advantages to meet or exceed the demanding standards of global competition.

Question 6

Managerial decisions concerning resources, capabilities, and core competencies are characterized by three conditions: ambiguity, interconnectivity, and intraorganizational agreement.

Question 7

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.

Question 8

The need to meet quarterly earnings numbers disciplines managers to exercise judgment and to make strategic decisions that are best for the long-run performance of the firm.

Question 9

Analyzing the internal environment enables a firm to determine what it can do by identifying what opportunities exist.

Question 10

Firms should seek to continually develop new core competencies because all core competencies have limited life spans.

Question 11

The challenge and difficulty of making effective decisions are implied by preliminary evidence suggesting that one-half of organizational decisions fail.

Question 12

The core competencies of a firm should be the primary drivers of its strategy.

Question 13

Analysis of the firm's internal organization examines the firm's portfolio of resources but excludes the bundles of heterogeneous resources and capabilities.

Question 14

Given enough time, any firm's competitive advantage can be imitated by its competitors.

Question 15

In the global economy, traditional factors such as labor costs, access to financial resources and raw materials, and protected or regulated markets are no longer sources of competitive advantage.

Question 16

Creating customer value is the source of the firm's potential to earn above-average returns.

Question 17

A useful rule for evaluating whether a capability is a core competence is its historical ability to provide sustainable competitive advantage for the firm.

Question 18

In the long run, if an organization does not change it will fail.

Question 19

A global mind-set is free of the assumptions of a single country, culture, or context.

Question 20

In the global market, employees move freely from firm to firm, so they are not an important source of competitive advantage for the firm.

Question 21

Capabilities may be costly to imitate if they are causally ambiguous or socially complex.

Question 22

Primary activities in the value chain create value, whereas support activities in the value chain generate costs.

Question 23

Capabilities can be developed quickly in response to changes in the new competitive landscape.

Question 24

Every core competence is a capability and every capability is a core competence.

Question 25

There are specific models and rules that can be followed when conducting a value chain analysis in order to determine the objectively correct answer.

Question 26

The capacity to manage human intellect-and to convert it into useful products and services-is fast becoming the critical executive skill of the age.

Question 27

Costly-to-imitate capabilities are those which other firms cannot easily develop as they have no strategic equivalent.

Question 28

The more core competencies a firm has, the more likely it is to generate a sustained competitive advantage.

Question 29

A competitive advantage can be created when several resources are bundled together in a unique fashion.

Question 30

The value of tangible assets such as the firm's borrowing capacity and its physical plant are high because they can be easily leveraged to derive additional value.

Question 31

Coca-Cola's brand name is a tangible source of competitive advantage for the company.

Question 32

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.

Question 33

Only capabilities that are valuable, common, costly to imitate, and substitutable can be strategic capabilities.

Question 34

A company can earn above-average returns only when the value it creates is less than the costs incurred to create that value.

Question 35

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.

Question 36

Trademarks and copyrights are examples of a firm's tangible resources.

Question 37

Compared to tangible resources, intangible resources are an inferior source of core competencies.

Question 38

The foundation of all competitive advantages is technology.

Question 39

Capabilities of an organization emerge spontaneously through the interaction of tangible and intangible resources.

Question 40

Valuable capabilities allow the firm to exploit strengths or neutralize weaknesses in the internal environment.

Question 41

Criticism of 3M's reduced spending on research and development represent concerns over what?

A) A decline in the firm's profitability.
B) A reduction in the firms capability for innovation.
C) The substitution of innovation for efficiency.
D) The increase in expenses for downsizing resulting from this decision.

Question 42

A firm should always outsource primary and support activities for which its resources and capabilities are not a source of competitive advantage

Question 43

The proper matching of what a firm can do with what it might do allows the firm to

A) balance the internal characteristics of the firm with the characteristics of the external environment.
B) overcome the rigidity and inertia resulting from a history of success.
C) develop its vision, pursue its mission, and select and implement its strategies.
D) develop core competencies based on human knowledge.

Question 44

Outsourcing can add value to the product provided to the customers.

Question 45

Value consists of

A) A product's proprietary characteristics and by its attributes for which customers are willing to pay.
B) A product's performance characteristics and by its attributes for which customers are willing to pay.
C) A product's proprietary characteristics and by its attributes for which customers consider paying for.
D) A product's performance characteristics and by its attributes for which customers consider paying for.

Question 46

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 U.S.
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.

Question 47

Any core competency has the potential to lose its value creating ability.

Question 48

Which of the following best describes the effects of 3M's investments in Six Sigma initiatives?

A) These investments resulted in needed increases in operational efficiency.
B) These investments had an unintended effect of reducing the firm's capability in innovation.
C) These investments resulted in the development of an additional capability.
D) All of the above are correct.

Question 49

Resources and capabilities can be a source of rigidity for the firm.

Question 50

One criteria for a resource or capability to be a source of competitive advantage is that it allows the firm to perform a value-creating activity that competitors cannot perform.

Question 51

Leslie Wexner's comment that "Success begets failure" refers to the fact that as time passes, successful firms become complacent about the strength of their core competencies.

Question 52

Internal analysis enables a firm to determine what the firm

A) can do.
B) should do.
C) will do.
D) might do.

Question 53

The key to maintaining competitive advantage and earning above-average returns over the long run is to effectively manage current core competencies

A) in a way that uniquely bundles and leverages the firm's existing resources.
B) and develop a continuous stream of new competitive advantages.
C) and imitate the core competencies of successful competitors.
D) in order to preserve and enhance them against the firm's competitors.

Question 54

The Internet has changed many aspects of the value chain for a broad range of firms.

Question 55

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.

Question 56

One benefit of outsourcing is that it allows a firm to focus on those few value chain activities where it can produce the greatest value.

Question 57

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.

Question 58

Which of the following is FALSE?

A) Unique bundles of resources are the ultimate source of wealth creation.
B) The critical resource for firms is the ability to use the rapidly evolving Internet.
C) A global labor market for employees now exists.
D) Any competitive advantage will eventually disappear.

Question 59

Once a core competence has been identified and perfected, it is forever a source of competitive advantage.

Question 60

Firms should never outsource a primary activity because of the danger of the activity being imitated by rivals.

Question 61

The most numerous of the following organizational characteristics are

A) resources.
B) capacities.
C) capabilities.
D) core competencies.

Question 62

Competitive advantage typically comes from

A) individual resources.
B) one unique resource.
C) several outstanding resources used independently.
D) the unique bundling of several resources.

Question 63

Judgment is the capacity for making a successful decision when

A) there are multiple decision criteria.
B) no obviously correct model or rule is available.
C) cognitive biases create barriers to rationality.
D) there are contradictions between the firm's vision and its implemented strategy.

Question 64

A firm with a unique organizational culture and proprietary processes developed over a long period of time

A) is likely to be undervalued by financial statements.
B) is likely to be resistant to inertia in the face of change.
C) is less likely to have sustainable competitive advantages than a firm with easily quantifiable resources.
D) will be unable to leverage these resources if the firm is sold.

Question 65

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.

Question 66

____ is/are the source of a firm's ____, which is/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

Question 67

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.

Question 68

____ 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

Question 69

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.

Question 70

Complete the following about the difference between tangible and intangible resources. Tangible resources are ____ constrained because they are _____ to leverage due to _____ divisibility and deployability.

A) less; easier; unlimited
B) less; easier; limited
C) more; harder; limited
D) more; harder; unlimited

Question 71

Based on the strategic focus in Chapter 3, which of Hyundai's capabilities appears LEAST aligned with the value customers seek?

A) The establishment of production facilities in the Czech Republic.
B) The establishment of production facilities in the India.
C) The allocation of additional resources to R&D to increase vehicle quality.
D) The allocation of resources to develop a large car.

Question 72

____ of organizational decisions fail.

A) Few
B) About one-quarter
C) About half
D) Most

Question 73

By exploiting their core competencies to meet or exceed the standards of global competition, firms create ____ for customers.

A) values
B) valuation
C) valuables
D) value

Question 74

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.

Question 75

All of the following are tangible resources EXCEPT

A) production equipment.
B) distribution centers.
C) firm's reputation.
D) formal reporting structures.

Question 76

The quality of Hyundai vehicles has increased dramatically. Its cars now rank at the top of the list in vehicle quality, exceeding even Toyota. To management's surprise, this has not led to an increase in sales. From the standpoint of capabilities, what can we conclude about Hyundai's quality?

A) The increased quality fails the "value" test.
B) The increased quality fails the "rare" test.
C) The increased quality fails the "costly to imitate" test.
D) The increased quality fails the "nonsubstitutable" test.

Question 77

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.

Question 78

Decisions about the firms internal environment involve

A) choices about the assets the firm needs to collect and how to best use those assets.
B) choices about which resources should serve as the basis for capabilities.
C) choices about how to bundle resources.
D) choices about how to bundle capabilities.

Question 79

The condition of uncertainty in managerial decision-making occurs when

A) the firm's fundamental core competencies are incompatible.
B) there is intraorganizational conflict about the decision criteria to use.
C) there are rapid changes in customer needs, economic and political trends, and societal values.
D) there is no one optimal solution to a problem.

Question 80

Tangible resources include

A) assets that are people-dependent such as know-how.
B) assets that can be seen and quantified.
C) organizational culture.
D) a firm's reputation.