Deck 6: Resource-Based Competitive Advantage

Question 1

Ordinary resources are those that a firm need not necessarily possess to be in business but that provide an advantage to the firm if it does have them.

Answer 1

False

Question 2

Ordinary resources must be developed at least as well as the standard for the industry.

Answer 2

True

Question 3

Extraordinary resources may not be a source of superior performance unless they are combined with other resources, either ordinary or extraordinary.

Answer 3

False

Question 4

An extraordinary resource should be analyzed to see if it is valuable, rare, difficult to imitate, without a substitute, and unable to be traded for.

Question 5

Farmer John grows corn, a commodity. John also has an unparalleled ability to recognize good advertising when he sees it. This resource or capability is likely to be valuable to John in his farming business.

Question 6

A resource that is perceived as rare can be just as powerful as a resource that is, in fact, rare.

Question 7

Patents, copyrights, and trademarks reveal information about a resource that makes it easier for a rival to imitate that resource.

Question 8

More often than not those resources that cannot be imitated involve unobservable routines or processes that are "behind the scenes."

Question 9

Resource substitution means that a firm can easily switch between two or more different resources that will provide the same competitive advantage - it offers the firm greater flexibility.

Question 10

The tradability of a resource refers to its transferability or mobility among competitors.

Question 11

An industry analysis may show no unique market positions for firms in the industry so a firm's competitive advantage will depend on one or more idiosyncratic resources.

Question 12

Rare, non-tradable, and non-substitutable resources can be appropriated by competitors with deep pockets.

Question 13

The durability of a competitive advantage from extraordinary resources may come from historical conditions, causal ambiguity, or social complexity.

Question 14

Causal ambiguity is a condition that exists when the link between a business's resources and its competitive advantage is known with certainty by managers or rivals.

Question 15

If the Classic Car Club in the opening vignette for the chapter is unable to successfully franchise its operations in the U.S., this would be a very good example of the impact of causal ambiguity.

Question 16

The three basic types of resources that managers today rely on in their development of strategy are physical capital, financial capital, and human capital.

Question 17

Ordinary resources are important only if they are built on a foundation of extraordinary resources and capabilities.

Question 18

An extraordinary resource must meet four out of the five VRIST criteria. It can then serve as the foundation for intermediate level capabilities.

Question 19

In a resource-based analysis it is important that a firm's managers develop a list of resources and capabilities that includes only intangible resources that they suspect may be extraordinary.

Question 20

For a resource-based analysis, it is best that the key decision makers in an organization develop a list of resources and capabilities.

Question 21

Answering the question "What is the cause of this outcome?" causes managers to think deeply about the resources and capabilities that are at the core of their company.

Question 22

A company might leverage an extraordinary resource position by replicating the resource or capability elsewhere in the organization.

Question 23

The founders of the Classic Car Club (CCC) described in the opening vignette for chapter six recognized an opportunity to

A) allow people to drive a variety of cars to which they would not ordinarily have easy access.
B) eliminate the need for most people to own a car - a member could just use one of the Club's cars when a car is needed.
C) increase the bargaining power of buyers of automobile insurance, thus lowering the average insurance rate for members.
D) help members learn about the upkeep and maintenance of a variety of older cars.

Question 24

Physical assets such as equipment, buildings, land, furniture, money and patents are ________ resources.

A) credible
B) capital
C) tangible
D) tacit

Question 25

The must-have resources a firm needs just to be a credible contender in the industry are called ________ resources.

A) skeletal
B) ordinary
C) stable
D) passive

Question 26

Which of the following is the best example of an intangible resource?

A) a high-traffic retail location
B) a large cash reserve
C) a good merchandise mix
D) a company's brand

Question 27

Resources that are believed by management to be rare, durable, non-substitutable, non-tradable, and valuable are ________ resources.

A) superb
B) superior
C) extraordinary
D) consequential

Question 28

Which of the following is not one of the dimensions that comprises the VRIST characteristics of extraordinary resources?

A) valuable
B) rare
C) instrumental
D) tradable

Question 29

In which of the following ways can a resource be used to create value?

A) It can be used to lower costs while maintaining parity on product/service features.
B) It can be used to add features while maintaining parity on costs and prices.
C) It can be used to attract new customers while maintaining undiminished value for existing customers.
D) All of the above are ways a resource can be used to create value.

Question 30

While a resource may not be rare or unique by objective measures, it may still be a source of a resource-based competitive advantage by the standard of rareness if it

A) is perceived to be rare.
B) is managed exceedingly well.
C) can be hidden from rivals.
D) is used in a context in which it is valuable.

Question 31

Which of the following can make a resource difficult for competitors to imitate?

A) intellectual property protection by patents or trademarks
B) routines or processes that are largely unobservable
C) the quick turnover of resources that creates a moving target
D) Both A and B above can make resource imitation difficult.

Question 32

The legal means for protecting tangible and intangible assets through such things as patents, copyrights, and trademarks is called

A) a knowledge "fort."
B) intellectual property protection.
C) the law of torts.
D) setting up knowledge guardians.

Question 33

In the VRIST framework a substitute for a resource is

A) another resource that can provide comparable value-creating benefits.
B) a different product or service that serves the same function for a customer.
C) the same resource that has been developed contemporaneously by a competitor.
D) a resource that is deployed by the firm when the original resource is no longer available.

Question 34

Suppose that Caterpillar has invested in an extensive network of dealers and parts depots around the world to service its heavy equipment with the aim of making spare parts available within 48 hours or less when a piece of equipment breaks down. Komatsu, Caterpillar's rival, can reasonably substitute for this parts availability resource by

A) building its own network of parts depots and equipment dealers.
B) making heavy equipment that simply never breaks down.
C) sending spare parts by way of overnight delivery from just one or a few parts depots.
D) including a complete package of spare parts with every piece of equipment that it sells.

Question 35

If one person can be identified with certainty as the resource behind the success of a company and he or she is hired away by another company, the VRIST framework dimension of ________ is being illustrated.

A) imitation
B) substitution
C) rareness
D) tradability

Question 36

Which criterion below characterizes a resource that is unique to a business and that cannot be appropriated by potential competitors?

A) rare
B) non-tradable
C) non-substitutable
D) All of the above criteria should be met if a resource is to be unique and not appropriated by a competitor.

Question 37

Which of the following is not a contributor to the durability of a resource-based competitive advantage?

A) historical conditions
B) intense competition
C) causal ambiguity
D) social complexity

Question 38

A successful new product development team works in a state-of-the-art lab and is aided by a crack team of market researchers. This is likely to be a source of durable competitive advantage for the company because of

A) historical conditions.
B) smart investments.
C) social complexity.
D) efficient operations.

Question 39

Which of the following is not one of the categories of resources that one might examine for its ability to provide a competitive advantage?

A) knowledge
B) creative
C) human
D) technology

Question 40

Sets of tightly integrated activities, organizational skills, and internally developed routines that rely on extraordinary resources are called

A) business processes.
B) capabilities.
C) structural phenomena.
D) latent behaviors.

Question 41

________ and ________ are the foundations of superior performance.

A) Resources; capabilities
B) Assets; capital structure
C) Government support; market power
D) Profits; market share

Question 42

There are four steps required by a resource-based analysis. Which of the following is not one of those steps?

A) Develop a list of all the firm's resources and capabilities.
B) Divide resources and capabilities into those that are ordinary and those that are extraordinary.
C) Decide whether ordinary activities should be outsourced or not.
D) Analyze the apparent extraordinary resources to see if they meet the VRIST criteria.

Question 43

In a resource-based analysis, identifying ________ resources often presents the greatest challenge for managers.

A) financial
B) human
C) physical
D) intangible

Question 44

Leveraging extraordinary resource positions may be accomplished by

A) offshoring labor-intensive operations.
B) extending the current business model into additional products or customer segments.
C) adopting capabilities based on extraordinary resources that are used by competitors.
D) increasing the amount of debt used in the capital structure of the organization.

Question 45

Contrast ordinary and extraordinary resources. Provide an example of each.

Question 46

Describe (but don't merely list) the criteria that resources must meet to be considered extraordinary and the foundation for a sustainable competitive advantage.