Deck 4: Building Competitive Advantage

Question 1

The simplest measure of efficiency is the quantity of inputs that it takes to produce a given output.

Answer 1

True

Question 2

If a company's profitability is higher than the industry average, it has a competitive advantage.

Answer 2

True

Question 3

The primary value chain activities create value for the customer, while the support activities play no part in creating value.

Answer 3

False

Question 4

The more value a company creates for its customers, the more willing customers are to pay a higher price.

Question 5

The R&D function of the value chain can help to lower costs or raise the value of a product and permit a company to charge higher prices.

Question 6

A value chain is a sequence of activities for transforming inputs into outputs that are valued by customers.

Question 7

In the value chain, support activities are those involved in the physical creation of the product, its marketing and delivery to buyers, and its after-sales service.

Question 8

Brad has developed a new, improved planting procedure for use in his apple orchard. Brad is creating a process innovation.

Question 9

Efficiency, quality, innovation, and customer responsiveness are the four generic building blocks of competitive advantage.

Question 10

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

Question 11

Michael Porter has argued that low cost and differentiation are the two basic strategies for creating value and attaining a competitive advantage in an industry.

Question 12

The two least important components of efficiency for many companies are employee productivity and capital productivity.

Question 13

Primary activities of the value chain relate to the design creation, and delivery of the product, its marketing, and its support and after-sale service.

Question 14

The attributes of many physical products include the form, features, performance, durability, reliability, style, and design of the product.

Question 15

In the value chain, research and development (R&D) is concerned with the design of products and production processes.

Question 16

Employee productivity is usually measured by output per employee and capital productivity by output per unit of invested capital.

Question 17

With regard to quality as reliability, a product can be said to be reliable when it consistently does the job it was designed for, does it well, and rarely, if ever, breaks down.

Question 18

A company has a competitive advantage when its profitability is higher than the average for its industry.

Question 19

To achieve a competitive advantage, a company must excel in all of the building blocks of competitive advantage-efficiency, quality, innovation, and responsiveness to customers.

Question 20

The price a company charges for a good or service is typically less than the value placed on that good or service by the customer.

Question 21

Customer response time is the time it takes for a good to be delivered or a service to be performed.

Question 22

Defection rate refers to the percentage of a company's employees who defect every year to competitors.

Question 23

Learning effects are cost savings that come from learning through extensive R&D.

Question 24

There is a positive relationship between the length of time that a customer stays with a company and profit per customer.

Question 25

Additional sources of enhanced customer responsiveness include superior design, superior service, and superior after sales service and support.

Question 26

A company's customers are a good source of quality information but of little use as a source of new product ideas.

Question 27

Product and process innovation are perhaps the most important building blocks of competitive advantage.

Question 28

Process innovation is the development of a new process for producing products and delivering them to customers.

Question 29

Strong brand loyalty reduces customer defection rates.

Question 30

Information systems refer to the largely electronic systems for managing inventory, tracking sales, pricing products, selling products, dealing with customer service inquiries, etc.

Question 31

A small reduction in materials and transportation costs can have a substantial impact on profitability.

Question 32

Competition can be viewed as a process driven by innovations.

Question 33

Innovation can result in new products that better satisfy customer needs, improved quality of existing products, or reduced costs.

Question 34

Mass customization is the ability of companies to use flexible manufacturing technology to customize at cost normally associated with mass production.

Question 35

The idea behind self-managing teams is to give middle management more control over lower-level hiring and firing decisions.

Question 36

Marketing strategy refers to the position that a company takes with regard to pricing, promotion, advertising, product design, and distribution.

Question 37

Customer defection rates are determined by customer loyalty which is a function of a company's ability to satisfy its customers.

Question 38

To add value, R&D can increase a product's functionality to make it more attractive to customers.

Question 39

The main goal for a company's human resource function is to find ways to lower wage and benefits costs.

Question 40

The principle tool that most managers now use to increase the reliability of their product offering is the Six Sigma quality improvement methodology.

Question 41

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

A) R&D
B) Marketing and sales
C) Production
D) After-sales service and support
E) Human resources

Question 42

Ford Motors developed the Explorer sport utility vehicle, the number one selling SUV in the U.S., based on an extensive study of customer preferences. Which value chain activity of Ford conducted those studies?

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

Question 43

A firm can use __________ strategy, including aggressive pricing and promotion, to increase sales volume which leads to cost reductions from scale and learning effects.

A) R&D
B) a differentiation
C) TQM
D) marketing
E) a cost leadership

Question 44

John's bakery is able to produce exactly the right types of bread each day and have them available when customers come into the store. John's bakery is superior in

A) innovation.
B) quality
C) human resources.
D) customer responsiveness
E) efficiency.

Question 45

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

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

Question 46

Which of the following functions does not contribute to increased efficiency?

A) Research and development
B) Production
C) Marketing
D) Materials management
E) All of these contribute to increased efficiency.

Question 47

Examples of successful new product launches include all of the following except

A) Sony Walkman
B) Sony Playstation
C) Nokia cell phones
D) Apple Computer's Newton - personal digital assistant.
E) Cisco Systems innovations paved the way for rapid growth of the Internet

Question 48

Which of the following statements concerning customer defection rates is incorrect?

A) Defection rates are determined by customer loyalty.
B) The longer a company holds on to a customer, the volume of customer-generated unit sales is greater and the average cost of each sale is lower.
C) Lowering customer defection rates allows a company to achieve a lower cost structure.
D) R&D should address the issue of customer loyalty in product development.
E) There is a positive relationship between length of time that a customer stays with the company and profit per customer.

Question 49

The four generic building blocks of competitive advantage are

A) low cost, quality, efficiency, and customer responsiveness.
B) differentiation, quality, innovation, and customer responsiveness.
C) quality, efficiency, differentiation, and customer responsiveness.
D) customer responsiveness, quality, efficiency, and human resources.
E) quality, customer responsiveness, innovation, and efficiency.

Question 50

The reasons that explain why so many new products fail to generate an economic return include all of the following except

A) the demand for innovations is inherently uncertain.
B) the technology is poorly commercialized.
C) many fail because of poor positioning strategy.
D) development costs are not kept in check.
E) the products are slow to get to the market.

Question 51

Strong leadership from top management is

A) a value chain support activity.
B) needed to attain economies of scale.
C) needed to build brand loyalty.
D) part of the human resources value chain activity.
E) a primary activity in the value chain.

Question 52

When a firm produces products that customers perceive as having higher utility than those of its rivals, this firm's source of competitive advantage is

A) design.
B) low innovation.
C) superior quality.
D) efficiency.
E) customer responsiveness.

Question 53

Which of the following support activities in the value chain provides inputs that allow the primary activities to take place?

A) Human resources
B) Materials management, human resources, information systems, and company infrastructure
C) Company infrastructure
D) Human resources and company infrastructure
E) Information systems

Question 54

Which of the following is not an advantage of flexible manufacturing?

A) Customize product offering
B) Reduction in equipment setup times
C) Increased efficiency
D) Improved quality control
E) Easier project management

Question 55

Superior value requires that

A) a company have the lowest cost structure in an industry.
B) the gap between perceived value and costs of production be greater than the gap attained by competitors.
C) a company create the most valuable product in the eyes of the consumer.
D) a company create the highest quality product in the eyes of the consumer.
E) a company excel in all of the building blocks of competitive advantage.

Question 56

Which of the follow support activities in the value chain refers to the company-wide context within which all the other value creation activities take place?

A) Human resources
B) Information systems
C) Operations
D) Materials management
E) Company infrastructure

Question 57

Flexible manufacturing technology includes all of the following except

A) reduce setup time for complex equipment
B) use individual machines through better scheduling
C) increase product design and distribution
D) improve quality control
E) mass customization of outputs

Question 58

Cost accountants are responsible for gathering and monitoring data used for controlling the organization's costs. Cost accountants work in which value chain activity?

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

Question 59

The basic philosophy underlying quality improvement methodologies include all of the following except

A) costs decrease because of less work.
B) productivity improves.
C) better quality leads to higher market share.
D) reduces set-up time for complex manufacturing functions
E) increases the company's profitability and allows it to stay in business.

Question 60

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

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

Question 61

Identify and discuss the four building blocks of competitive advantage.

Question 62

A company can create quality as excellence by emphasizing attributes of service associated with the product that include all of the following except

A) ordering ease
B) prompt delivery
C) easy installation
D) increasing innovation
E) maintenance services

Question 63

When a company successfully implements Six Sigma quality, about how many units will be defective?

A) 17% (one-sixth of the units)
B) 6% per million units
C) 0.6% per million units.
D) 3.4 defects per million units.
E) three per ten million units.

Question 64

Which of the following is not an intangible resource?

A) Technological know-how
B) A well-known brand name
C) a favorable corporate reputation
D) Marketing know-how
E) Plant and equipment

Question 65

Which of the following is not correct concerning self-managed teams?

A) Increased responsibility and empowerment are seen as motivators.
B) Performance bonuses linked to team production and quality targets are seen as motivators.
C) Cost savings arise from eliminating supervisors.
D) A flatter organizational hierarchy is created.
E) All of these statements are correct.

Question 66

Which of the following is not an example of a human resources strategy that could help improve organizational efficiency?

A) Hiring strategy
B) Just-in-time inventory system
C) Eliminating supervisors and flattening the organizational structure
D) Self-managing teams
E) Pay for performance

Question 67

Discuss the relationships between competitive advantage, distinctive competencies, resources, and capabilities.

Question 68

Customer responsiveness is an important ___________________ attribute that can help to build brand loyalty.

A) marketing
B) leadership
C) management
D) differentiating
E) None of the above

Question 69

The more firm-specific and difficult to imitate is a resource, the more likely a company is to have a/an ____________________.

A) tangible resource.
B) intangible resource.
C) distinctive competency.
D) effective marketing strategy.
E) strong barrier to imitation.

Question 70

Explain how tangible and intangible resources and capabilities can lead to distinctive competencies. Give specific examples.

Question 71

Comment on this statement: "No competitive advantage lasts forever."

Question 72

Which of the following is not one of the attributes that seem to be important in order for a product development team to function effectively?

A) A heavyweight project manager
B) A team leader that is able to act as an advocate of the team to senior management
C) The team should be composed of at least one member from each key function.
D) Team members should be co-located.
E) The organization should develop set policies and procedures that all development teams should follow.

Question 73

The intellectual property of an organization is

A) a tangible resource.
B) an intangible resource.
C) a tangible capability.
D) an intangible capability.
E) a tangible competence.

Question 74

Sourcing inputs from multiple suppliers is a strategy to

A) reduce risks linked to just-in-time inventory systems.
B) quickly move materials through the production process.
C) increase inventory turnover.
D) manage the distribution of finished products to end users.
E) decrease the organization's need for working capital.

Question 75

Capabilities are

A) a company's physical plant and equipment.
B) a company's technological know-how.
C) a company's resources.
D) a company's reputation.
E) a company's skills at coordinating resources and putting them to productive use.

Question 76

____________ are factors that make it difficult for a competitor to copy a company's distinctive competencies.

A) Barriers to innovation
B) Organizational inertia
C) Competitive dynamics
D) Barriers to imitation
E) Strategic commitments

Question 77

Which of the following is not part of the positioning strategy that a company adopts for a product?

A) price
B) product features
C) focus groups
D) advertising
E) promotion

Question 78

Which of the following is not consistent with the philosophy underlying quality improvement methodologies?

A) Improved quality reduces costs through less rework, fewer mistakes, and fewer delays.
B) Better quality leads to higher market share and allows the company to raise prices.
C) Senior managers must buy into quality improvement programs and communicate their importance to the organization.
D) Quality improvement methodologies recognize that quality problems generally come from worker error.
E) All of these are consistent with quality improvement methodologies.

Question 79

Give one example of a firm that has achieved a distinctive competency in efficiency, and describe that competency. Then do the same for a firm with a distinctive competency in quality, innovation, and responsiveness to customers.

Question 80

Just-in-time inventory systems

A) are used only by manufacturing firms.
B) are implemented primarily by the manufacturing function.
C) have components arrive at a manufacturing plant just in time to enter the production process.
D) are valuable in times when there is a labor dispute with a key supplier.
E) always keep extra inventory on hand for emergencies.