Deck 3: Internal Analysis: Resources and Competitive Advantage

Question 1

The quality of resources, especially the quality of advanced factors of production, is not a determinate of whether a company is effective in transforming inputs into outputs.

Answer 1

False

Question 2

The importance of reliability in building competitive advantage has increased dramatically over the past several decades.

Answer 2

True

Question 3

Nene works in a factory where she picks crab meat from crabs. She is paid per day based upon the number of pounds of crab meat that she picks. Nene's daily number of pounds of crab meat can be referred to as her productivity.

Answer 3

True

Question 4

Employee productivity is a common measure of efficiency.

Question 5

The primary activities of the value chain include the design, creation, and delivery of the product, the product's marketing, and its support and after-sales service.

Question 6

Process knowledge includes control systems and incentive systems while organizational architecture includes human skills and the style of decisions are made.

Question 7

At Adam's bicycle repair shop, the primary value-chain activity of production occurs each time a customer's bicycle is repaired.

Question 8

The Big Mac, the McFlurry and the McDonald's logo are all examples of the organizational architecture of the McDonald's company.

Question 9

Creating consumer value and differentiating product offerings is a result of the pursuit of efficiency, quality, innovation, and customer responsiveness through the completion of value-chain activities.

Question 10

The only change in pricing options available for a company that seeks to increase the average value per unit of their product to a customer is to raise prices to reflect a higher value.

Question 11

When completing the internal analysis process, a company must first develop an understanding of the role that resources have in determining competitive advantage then analyze the sources of competitive advantage to determine profitability.

Question 12

A resource is inimitable if competitors can copy it easily.

Question 13

The more firm-specific and difficult to imitate a resource is, the more likely a company holding that resource is said to have a distinctive competency.

Question 14

The price a company charges for a good or service is typically more than the utility placed upon that good or service by the customer.

Question 15

Internal analysis, coupled with an analysis of the company's external environment, gives managers the information they need to choose the strategy that will enable their company to attain a sustained competitive advantage.

Question 16

In the fashion industry, the time required to take a new product from design inception to placement in a retail store is known as customer response time.

Question 17

Creating a signature scent, choosing an original name, and configuring the shape and look of the bottle are all decisions made in the production phase of the value chain for a perfume company.

Question 18

The building blocks of competitive advantage are superior efficiency, quality, innovation and customer responsiveness.

Question 19

If a company's profitability is higher than the average profitability of all companies in its industry, it has a competitive advantage.

Question 20

The VRIO model is designed to help companies assess the quality of their resources and identify sources of competitive advantage.

Question 21

Which of the following statements about the impact of high product quality on competitive advantage is true?

A) It decreases the utility of the products.
B) It lowers unit costs of the products and allows room for product differentiation.
C) It adversely affects employee productivity.
D) It limits the company's ability to differentiate its products.
E) It increases the need for after-sales services.

Question 22

Which of the following is true about rareness and advanced factors of production?

A) Process knowledge, organizational architecture, and intellectual property are more difficult to imitate which results in a better chance in achieving long-term, sustainable competitive advantage.
B) Intellectual property is the only advanced factor of production that is unique enough to capture long-term, sustainable competitive advantage.
C) Since most process knowledge and organizational architecture is purchased from outside providers, it can be copied by other firms and does not lead to the rarity necessary to result in long-term, sustainable competitive advantage.
D) Advanced factors of production are not able to capture the uniqueness that basic factors of production can achieve and therefore do not factor into the pursuit of long-term, sustainable competitive advantage.
E) Advanced factors of production are less likely to be rare and are in general easier for rivals to imitate resulting in the inability for firms to achieve long-term, sustainable competitive advantage.

Question 23

The concept of efficiency as a building block of competitive advantage applies to:

A) all products produced by a firm.
B) only those products that consumers believe to be high quality.
C) only those products of a firm popular among a large customer base.
D) custom-made products only.
E) only those products that have been redesigned.

Question 24

Intel's invention of the microprocessor in the early 1970s, Cisco's development of the router for routing data over the Internet in the mid-1980s, and Apple's development of the iPod, iPhone, and iPad in the 2000s can be referred to as which type of innovation?

A) Process
B) Product
C) Customer
D) Resource
E) Value-chain

Question 25

Which of the following is a reason for the higher barrier to imitation for a company's that possesses rare and valuable process knowledge?

A) Process knowledge is often hidden from view within the firm and socially complex.
B) In most companies, employees have a complete understanding and direct access to the process knowledge of the firm.
C) Individuals hired by rival firms are able to provide a complete picture of a company's process knowledge due to their overall knowledge base.
D) By making small changes to the way a firm operates, implementation of a rival firm's process knowledge is relatively easy to achieve.
E) Rival organization's employees who possess the power and influence to implement change are often driven to appropriate another firm's process knowledge.

Question 26

Donna can make a chair for $100; she charges customers $150 to buy the chair, and customers perceive that the chair is worth $225. In this case, the consumer surplus is:

A) $50.
B) $75.
C) $125.
D) $150.
E) $225.

Question 27

The simplest measure of efficiency is the:

A) amount of money the company budgets for work in the short term.
B) ratio of revenues divided by invested capital.
C) net profit expressed as a percentage of sales.
D) total costs of producing products.
E) quantity of inputs required to produce a given output.

Question 28

Intellectual property protections, including patents, trademarks and copyrights, typically provide a barrier to imitation.

Question 29

Resources:

A) are considered organized if they are easy to imitate by rivals.
B) include labor, land, management, physical, plant, and equipment.
C) are often homogeneous among companies.
D) do not include patents, copyrights, and trademarks.
E) are considered valuable only if they increase a company's costs.

Question 30

Anna bakes cookies for $10 per batch, she charges customers $15 to a batch, and customers perceive that the cookies are worth $25 per batch. Anna's profit margin is:

A) $5.
B) $7.50.
C) $10.
D) $15.
E) $25.

Question 31

Based on the VRIO framework, a resource can be considered a source of competitive advantage if it:

A) is shared by most companies in an industry.
B) is rare, valuable, difficult to imitate, and organized or managed by the company.
C) is the foundation of a company's strategic plan.
D) is kept as a trade secret rather than as a patent.
E) increases the cost of producing the product and, therefore, the price charged to customers.

Question 32

Competitive advantage is based:

A) upon the possession of distinctive competencies.
B) on low barriers to imitation.
C) on a higher cost structure.
D) on low utility.
E) on barriers to change in a company.

Question 33

Comparing the history of a firm's performance as well as its performance against competitors can benefit a firm in which of the following ways?

A) It can help determine whether the company's performance has improved or deteriorated over time.
B) It can measure whether strategies are maximizing the value that is being created.
C) It can ascertain if the firm's cost structure is in line with competitors.
D) It can establish if company resources are being used effectively.
E) All of these are benefits of comparing the history of a firm's performance as well as its performance against competitors.

Question 34

When conducting an internal analysis, a manager must do all of the following EXCEPT:

A) look at the way in which forces in the macroenvironment affect industry structure and influence opportunities and threats.
B) understand the role of rare, valuable, and hard-to-imitate resources in the establishment of competitive advantage.
C) appreciate how rare, valuable, and hard-to-imitate resources lead to superior efficiency, innovation, quality, and customer responsiveness.
D) analyze the sources of their company's competitive advantage to identify what drives the profitability of their enterprise.
E) analyze the sources of their company's competitive advantage to identify where opportunities for improvement might be.

Question 35

The more utility a company creates for its customers, the more flexibility it has in determining prices.

Question 36

Which of the following is one of the basic building blocks of competitive advantage?

A) Quantity
B) Logistics
C) Variety
D) Distribution
E) Innovation

Question 37

Kodak possesses the leading imaging technology. This technology has allowed the company to differentiate its products from those offered by rivals. Imaging technology is Kodak's:

A) distinctive competence.
B) profit.
C) support activity.
D) value chain.
E) organizational architecture.

Question 38

Which of the following is an important attribute for a product from a quality-as-reliability perspective?

A) Styling
B) Aesthetic appeal
C) Wait time at the point of sale
D) Features
E) Performance

Question 39

Customer response time is the time it takes for:

A) value to be placed on a company's products by customers.
B) development of a new process for producing products and delivering them to customers.
C) given inputs to be converted into an output.
D) development of products that have superior attributes to existing products.
E) a good to be delivered or a service to be performed.

Question 40

Which of the following is NOT true of capital productivity?

A) Changing the way a firm handles inventory to reduce capital expenditures can increase capital productivity.
B) It is an important measure of efficiency.
C) Higher capital productivity is achieved by eliminating unproductive assets or activities from a firm's capital.
D) It is measured by looking at a product's price.
E) It is the output produced by a dollar of capital invested in the business.

Question 41

Benchmarking can be defined as the practice of:

A) monitoring activities related to the design, creation, and delivery of a product, its marketing, and its support and after-sales service.
B) developing products that are new to the world or have superior attributes to existing products in the market.
C) measuring the time that it takes for a good to be delivered or a service to be performed.
D) measuring how well a company is doing by comparing it to another company, or to itself, over time.
E) analyzing the financial position of a company and creating the income statements and the balance sheets.

Question 42

Mikayla, a cost accountant, is responsible for gathering and monitoring data used for controlling the organization's costs. In which value-chain activity does Mikayla work?

A) Research and development
B) Human resources
C) Materials management
D) Marketing and sales
E) Company infrastructure

Question 43

Although several different measures of profitability exist, many authorities in the measurement of profitability argue that which of the following is the best measurement because "it focuses on the true operating performance of the company"?

A) Return on invested capital
B) Net profit margin
C) Return on equity
D) Capital turnover
E) Return on sales

Question 44

Which of the following support activities in the value chain controls the transmission of physical materials through the value chain, from procurement through production and into distribution?

A) Human resources
B) Information systems
C) Research and development
D) Logistics
E) Operations

Question 45

Which of the following measures how effectively the company uses its capital to generate revenues and is calculated by taking revenues and dividing it by invested capital?

A) Return on invested capital
B) Return on sales
C) Capital turnover
D) Cost of goods sold
E) Sales, general, and administrative expenses

Question 46

Innovation refers to the act of:

A) seeking patent protection for new products.
B) developing new products and processes.
C) measuring time taken for a service to be provided.
D) measuring the output produced by an employee.
E) identifying and satisfying the needs of a customer.

Question 47

The term value chain refers to the idea that a company is:

A) one of a series of units that comprise an industry segment.
B) the producer of a series of customer-valued products that are linked together.
C) a chain of functional activities that transform inputs into products.
D) one of a series of economic functions.
E) a collection of various products and their attributes.

Question 48

Cost of goods sold is reported on the:

A) balance sheet.
B) financial position statement.
C) cash budget.
D) income statement.
E) overhead expense statement.

Question 49

Using the value chain model, which of the following primary activities is performed after the production phase, as inputs are transformed into outputs?

A) Research and development
B) Marketing and sales
C) Customer service
D) Production
E) Human resources

Question 50

Ray, a toymaker, knits a stuffed unicorn for Belle. Which function of the value chain is illustrated in this scenario?

A) Marketing and sales
B) Distribution
C) Research and development
D) Production
E) Customer service

Question 51

Which of the following are primarily the digital systems for managing inventory, tracking sales, pricing products, selling products, and dealing with customer service inquiries?

A) Information systems
B) Logistics
C) Corporate infrastructure
D) Marketing and sales
E) Materials management

Question 52

Which of the following correctly describes the difference between product and process innovation?

A) An example of product innovation is just-in-time inventory systems while an example of process innovation is Cisco's development of the router.
B) Product innovation generates value by creating new products while process innovation often allows a company to create more value by lowering production costs.
C) Product innovation lowers production costs while process innovation provides enhanced versions of existing products that customers perceive as having more value.
D) Product innovation is more important than process innovation in achieving competitive advantage.
E) Product innovation decreases a company's pricing options while process innovation increases production costs.

Question 53

Which of the following best describes product innovation?

A) Transforming a quantity of inputs into a given output
B) Identifying and satisfying a customer's needs
C) Creating products that have superior attributes than existing products
D) Developing a new process that focuses on quantity rather than quality
E) Measuring the quantity of outputs produced per employee

Question 54

Research and development activities are concerned with:

A) enhancing the design of products to create the impression of superior value.
B) establishing greater efficiency in the production processes to lower costs.
C) increasing the functionality of products.
D) making products more attractive to increase value.
E) All of these are research and development activities.

Question 55

Using the value-chain model, which of the following primary activities is performed last, as inputs are transformed into outputs?

A) Research and development
B) Marketing and sales
C) Logistics
D) Production
E) Customer service

Question 56

Ford Motor Company developed the Explorer sports utility vehicle (SUV) in 1990, and it is still one of the best-selling SUVs in the United States, based on an extensive study of customer preferences. Which value-chain activity of Ford conducted those studies?

A) Research and development
B) Human resources
C) Materials management
D) Marketing and sales
E) Company infrastructure

Question 57

Which primary activity in the value chain is concerned with the design of products and production processes?

A) Research and development
B) Marketing and sales
C) Materials management
D) Production
E) Company infrastructure

Question 58

Mike works as a corporate trainer, teaching new employees how to perform manufacturing tasks. In which value-chain activity does Mike work?

A) Research and development
B) Human resources
C) Materials management
D) Production
E) Company infrastructure

Question 59

Dale's methods of fitting horseshoes save time and money for his employer at the local ranch. However, when Dale suggests that everyone use his method, his boss, Cedric, says, "No. That's not the way we've always done it around here." Cedric's resistance to change illustrates:

A) organizational inertia.
B) barriers to imitation.
C) barriers to mobility.
D) lack of distinctive competencies.
E) causal ambiguity.

Question 60

Ted is an accountant at ABC Company. He calculates the difference between total revenues and total costs before tax. Ted calculates the:

A) net profit.
B) capital turnover.
C) cost of goods sold.
D) return on sales.
E) invested capital.

Question 61

Describe the two main ways managers can increase return on invested capital (ROIC). Give examples of strategies that can be used to achieve each of these goals.

Question 62

What implications can be drawn about the idea that advanced factors of production usually make up the unique strengths of an organization?

Question 63

When Rollie's Car Wash began to lose business to rivals, Rollie read publications for car-wash owners to learn the best practices in the industry. Then he implemented the best practices. Rollie is using which of the following to improve his car wash?

A) Specialized assets
B) Benchmarking
C) The VRIO framework
D) Organizational inertia
E) Intellectual property

Question 64

Identify and describe the four building blocks of competitive advantage. Provide an example of each using a real company situation.

Question 65

How does the understanding of the dynamic relationships between value, pricing, demand, and costs affect a manager's decisions regarding profitability and maximizing competitive advantage?

Question 66

Evaluate and comment on this statement: "No competitive advantage lasts forever."

Question 67

Give one example of a firm that has achieved a distinctive competency in efficiency, quality, innovation, and responsiveness to customers and describe that competency.