Deck 3: Evaluating a Firms Internal Capabilities

Question 1

Studying a firm's value chain forces us to think about firm resources in an aggregated way.

Answer 1

False

Question 2

The value chain model developed by McKinsey and Company divides value-creating activities into two large categories: primary activities and secondary activities.

Answer 2

False

Question 3

If a firm creates environmental pollution in the process of manufacturing its goods, the pollution is known as an externality.

Answer 3

True

Question 4

Within the VRIO framework, valuable resources and capabilities are also known as strengths.

Question 5

Within the VRIO framework, resources and capabilities that are not valuable are also known as weaknesses.

Question 6

A firm's plant and equipment, its geographic location and its access to raw materials are all examples of physical resources.

Question 7

In the VRIO framework, the R represents resources.

Question 8

Many firms have resources and capabilities that are used to neutralize threats and the use of these resources enables the firms to increase their net revenues.

Question 9

Financial resources include only the profits a firm has made earlier in its history and that it has reinvested in itself.

Question 10

Resources in the resource based view are defined as the tangible and intangible assets that a firm controls, which it can use to conceive and implement its strategies.

Question 11

In general, as long as the number of firms that possess a particular valuable resource or capability is less than the number of firms needed to generate perfect competition dynamics in an industry, that resource or capability can be considered rare and a potential source of competitive advantage.

Question 12

One of the key assumptions of the RBV is resource homogeneity.

Question 13

When firms without a resource or capability face a cost disadvantage in obtaining or developing it compared to firms that already possess it, this resource or capability is described as perfectly imitable.

Question 14

Most firms have a resource base that is composed primarily of valuable but common resources and capabilities, some of which are essential if a firm is to gain competitive parity.

Question 15

In general, firms that use their resources and capabilities to exploit opportunities or neutralize threats will see no increase in their net revenues nor a decrease in their net costs compared to the situation where they are not using these resources and capabilities to exploit opportunities or neutralize threats.

Question 16

The assumption of resource immobility holds that it may be very costly for firms without certain resources and capabilities to develop or acquire them.

Question 17

Capabilities are a subset of a firm's resources and are defined as tangible and intangible assets that enable a firm to take full advantage of other resources it controls.

Question 18

Organizational resources include the training, experience, judgment, intelligence, relationships and insight of individual managers and workers in a firm, while human resources are an attribute of collections of individuals.

Question 19

Inputs whose quantity of supply is fixed and whose demand does not respond to price increases are said to be elastic in supply.

Question 20

A resource can be a source of competitive advantage even if the resource is controlled by numerous firms.

Question 21

A firm's formal reporting structure is a description of who in an organization reports to whom and is often embedded in a firm's organizational chart.

Question 22

In general, imitation can occur in one of two ways: direct duplication or substitution.

Question 23

If a resource or capability is valuable and rare but not costly to imitate, exploiting this resource will generate a sustainable competitive advantage for a firm.

Question 24

________ in the RBV are defined as the tangible and intangible assets that a firm controls that it can use to conceive and implement its strategies.

A) Management controls
B) Capabilities
C) Resources
D) Compensation policies

Question 25

Compensation policies are the ways that firms pay employees, and such policies create incentives for employees to behave in certain ways.

Question 26

The interpersonal relations among managers in a firm, a firm's culture, and a firm's reputation among suppliers and customers can all act to make a firm's resources and capabilities socially complex.

Question 27

Tacit cooperation is only a viable strategy when an industry is perfectly competitive.

Question 28

Any actions that a firm takes that have the effect of reducing the level of rivalry in an industry that also do not require firms in an industry to negotiate with each other can be thought of as explicit cooperation.

Question 29

Decisions made by other firms given the strategic choices of a particular firm define the nature of the competitive dynamics that exist in an industry.

Question 30

One reason a firm may not respond to another firm's competitive advantage is because it does not have the resources or capabilities to do so.

Question 31

If there is a conflict between the resources a firm controls and the firm's organization, the resources should be changed.

Question 32

Whenever the sources for competitive advantage are widely diffused across people, locations, and processes in a firm, those sources will be costly to imitate.

Question 33

Most technological developments in an industry are diffused throughout firms in that industry in a relatively brief period of time, but only if the technology in question has not been patented.

Question 34

If all a firm does is create value in the same way as its competitors, the best performance it can ever expect to gain is competitive parity.

Question 35

When tacit cooperation has the effect of reducing supply and increasing prices, it is known as tacit collusion.

Question 36

For Southwest Airlines, competitive advantage falls into two big categories: financial decisions made by Southwest and Southwest's approach to managing people.

Question 37

A sustained competitive advantage can be competed away by strategic imitation if competing firms face an important cost disadvantage in duplicating a successful firm's valuable resources.

Question 38

In the end, competitive advantage is so important to a firm's success, it must remain the sole property of senior management.

Question 39

The ability of firms to acquire, develop, and use resources often depends upon their place in time and space, and firms that do not have space-and-time-dependent resources face a significant cost disadvantage in obtaining and developing them.

Question 40

A process is said to be path dependent when imitating firms are not able to understand the relationship between the resources and capabilities controlled by a firm and that firm's competitive advantage.

Question 41

If firms that do not possess valuable and rare resources or capabilities face a cost disadvantage in obtaining these resources or capabilities compared to the firms that already possess them, these resources and capabilities are termed

A) rare.
B) valuable.
C) imperfectly imitable.
D) perfectly imitable.

Question 42

The theoretical roots of the resource-based view can be traced to research done by

A) David Ricardo.
B) Adam Smith.
C) Oliver Williamson.
D) Joseph Schumpeter.

Question 43

________ implies that for a given business activity, some firms may be more skilled in accomplishing this activity than other firms.

A) Resource mobility
B) Resource homogeneity
C) Resource immobility
D) Resource heterogeneity

Question 44

Firms that possess and exploit costly-to-imitate, rare and valuable resources in choosing and implementing their strategies may enjoy a period of

A) temporary competitive advantage.
B) competitive disadvantage.
C) competitive parity.
D) sustained competitive advantage.

Question 45

Computer hardware and software technology, robots used in manufacturing and automated warehouses are examples of which type of resources?

A) financial resources
B) physical resources
C) human resources
D) organizational resources

Question 46

Resources and capabilities, such as interpersonal relations among managers and a firm's culture, that may be costly to imitate because they are beyond the ability of firms to systematically manage and influence are referred to as

A) socially complex.
B) causally ambiguous.
C) path dependent.
D) the result of unique historical conditions.

Question 47

ESPN's development of an extensive offering of X-Games coverage that is unmatched by any other sports outlet is an example of which element of the VRIO framework?

A) organization
B) imitability
C) competitive parity
D) rarity

Question 48

If in the process of maximizing its performance, a firm engages in activities that pollute the environment, the impact of that pollution is a(n)

A) capability.
B) externality.
C) competitive advantage.
D) weakness.

Question 49

Most firms have a resource base that is composed primarily of resources and capabilities that are

A) valuable but not rare.
B) neither valuable nor rare.
C) valuable and rare.
D) rare but not valuable.

Question 50

If a firm's resources and capabilities are costly to imitate because imitating firms may not understand the relationship between the resources and capabilities controlled by a firm and that firm's competitive advantage, this competitive advantage is said to be protected from imitation by

A) path dependence.
B) causal ambiguity.
C) unique historical conditions.
D) social complexity.

Question 51

________ are a subset of a firm's resources and are defined as tangible and intangible assets that enable a firm to take full advantage of other resources it controls.

A) Retained earnings
B) Capabilities
C) Human resources
D) Financial resources

Question 52

The set of business activities in which a firm engages to develop, produce, and market its products or services is known as its

A) value chain.
B) physical resources.
C) organizational resources.
D) human resources.

Question 53

Inputs whose quantity of supply is fixed and does not respond to price increases are said to be

A) elastic in supply.
B) inelastic in supply.
C) elastic in demand.
D) perfectly competitive.

Question 54

The VRIO assumption that some of the resource and capability differences among firms may be long lasting because it may be very costly for firms without certain resources and capabilities to develop or acquire them is known as

A) resource mobility.
B) resource homogeneity.
C) resource immobility.
D) resource heterogeneity.

Question 55

In general, as long as the number of firms that possess a particular valuable resource or capability is less than the number of firms needed to generate perfect competition dynamics in an industry, that resource or capability can be considered ________ and a potential source of competitive advantage.

A) valuable
B) rare
C) inimitable
D) un-substitutable

Question 56

Which of the following is not one of the six distinct activities in McKinsey and Company's value chain model?

A) technology development
B) product design
C) manufacturing
D) inbound logistics

Question 57

To the extent that a firm's resources and capabilities enhance a firm's competitive position by enabling a firm to exploit its opportunities or neutralize its threats, these resources and capabilities are valuable and are known as

A) temporary competitive advantages.
B) sustainable competitive advantages.
C) core competencies.
D) strengths.

Question 58

A firm's marketing skills and teamwork as well as its cooperation among managers are examples of

A) financial resources.
B) human resources.
C) physical resources.
D) capabilities.

Question 59

A firm's formal reporting structure, its formal and informal planning and its controlling and coordinating systems are examples of which type of resources?

A) financial resources
B) physical resources
C) human resources
D) organizational resources

Question 60

The training, experience, judgment, intelligence, relationships and insight of individual managers and workers in a firm are examples of

A) physical resources.
B) human resources.
C) organizational resources.
D) financial resources.

Question 61

If Delta Airlines were to significantly change its fare structure and flight schedule to enhance its competitive position in response to aggressive price cutting by Southwest Airlines, this would be an example of

A) explicit collusion.
B) tacit collusion.
C) competitive dynamics.
D) a harvest strategy.

Question 62

Which of the following statements regarding the resource-based view is accurate?

A) Competitively valuable resources and capabilities are controlled only by a firm's general managers.
B) Only lower level employees need to accept the responsibility of creating, nurturing and exploiting resources and capabilities that can generate competitive advantages for a firm.
C) Employees should define their jobs in functional terms instead of in competitive and economic terms.
D) Competitive advantage is too important to remain the sole property of senior management.

Question 63

The range of formal and informal mechanisms to ensure that managers are behaving in ways consistent with a firm's strategies are referred to as

A) formal reporting structures.
B) organizational charts.
C) compensation policies.
D) management control systems.

Question 64

If there is a conflict between the resources a firm controls and that firm's organization, ________ should be changed.

A) the resources
B) both
C) nothing
D) the organization

Question 65

Southwest Airlines' strong internal culture that helps ensure that employees act in ways consistent with the company's strategy is an example of a(n)

A) informal management control.
B) formal management control.
C) compensation policy.
D) formal reporting structure.

Question 66

LaserTech is a manufacturer of industrial lasers and has developed a new, patented technology that allows its customers to manufacture their products more precisely with a higher level of consistency and at a lower cost than they could previously. LaserTech's executives believe that no rivals have a similar technology and that it would be very difficult for rivals to copy this technology since the benefits of the new technology can only be realized within LaserTech's system, which includes processes that are protected by trade secrets, making it difficult for rivals to understand the relationship between the company's new technology and its competitive advantage.
If one of LaserTech's rivals were to decide to divest its industrial laser manufacturing business in response to LaserTech's new technology, this would be an example of

A) competitive dynamics.
B) tacit collusion.
C) a sustainable distinctive competence.
D) competitive parity.

Question 67

Resources and capabilities that are valuable, rare, and costly to imitate are best described as

A) distinctive competencies.
B) entry barriers.
C) complementary resources and capabilities.
D) sustainable distinctive competencies.

Question 68

If a resource or capability is valuable and rare but not costly to imitate, exploiting this resource will generate a(n)

A) sustained competitive advantage.
B) perfectly competitive environment.
C) temporary competitive advantage.
D) environment characterized by competitive parity.

Question 69

According to the research in strategic human resources management,

A) firms that are able to use human resource practices to develop socially complex human and organizational resources are able to gain competitive advantage over firms that do not engage in these practices.
B) firms that are able to use human resource practices to develop socially simplistic human and organizational resources are able to gain competitive advantage over firms that do not engage in these practices.
C) firms that are able to use human resource practices to develop socially complex human and organizational resources gain little advantage over firms that do not engage in these practices.
D) firms that are able to use human resource practices to develop socially complex human and organizational resources are at a competitive disadvantage when compared to firms that do not engage in these practices.

Question 70

Which of the following is an example of formal management controls?

A) a firm's culture
B) the willingness of employees to monitor each other
C) budgeting and reporting activities
D) managerial motivation

Question 71

When tacit cooperation has the effect of reducing supply and increasing prices, it is known as

A) monopolistic competition.
B) explicit collusion.
C) competitive parity.
D) tacit collusion.

Question 72

LaserTech is a manufacturer of industrial lasers and has developed a new, patented technology that allows its customers to manufacture their products more precisely with a higher level of consistency and at a lower cost than they could previously. LaserTech's executives believe that no rivals have a similar technology and that it would be very difficult for rivals to copy this technology since the benefits of the new technology can only be realized within LaserTech's system, which includes processes that are protected by trade secrets, making it difficult for rivals to understand the relationship between the company's new technology and its competitive advantage.
LaserTech's new technology appears to be

A) valuable and rare but not costly to imitate.
B) valuable and either rare or costly to imitate.
C) valuable but neither rare nor costly to imitate.
D) valuable, rare and costly to imitate.

Question 73

Resources that are valuable but not rare can be categorized as

A) organizational weaknesses.
B) distinctive competencies.
C) organizational strengths.
D) complementary resources and capabilities.

Question 74

A process is said to be ________ when events early in the evolution of a process have significant effects on subsequent events.

A) causally ambiguous
B) path dependent
C) socially complex
D) path independent

Question 75

Which of the following statements regarding patents is accurate?

A) Patents always increase the costs of imitation.
B) Patents may decrease, rather than increase, the costs of imitation.
C) Patents always decrease the costs of imitation.
D) Patents have no impact on the costs of imitation.

Question 76

The specific actions a firm takes to implement its strategies are known as

A) competitive advantages.
B) objectives.
C) goals.
D) tactics.

Question 77

Resources that generate a temporary competitive advantage are

A) valuable, rare and costly to imitate.
B) valuable but neither rare nor costly to imitate.
C) valuable and either rare or costly to imitate.
D) valuable and rare but not costly to imitate.

Question 78

Which of the following statements regarding competitive parity and competitive advantage is accurate?

A) Some firms develop valuable, rare, and costly-to-imitate resources and capabilities in being efficient second movers, that is, in rapidly imitating and improving on the product and technological innovations of other firms.
B) Firms that benchmark their performance against the performance of successful competitors can expect to develop at least a temporary competitive advantage.
C) Firms must be first movers to gain competitive advantages.
D) Even if all a firm does is create value in the same way as its competitors, the firm can expect to earn at least a temporary competitive advantage.

Question 79

Tacit cooperation is only a viable strategy when

A) an industry is perfectly competitive.
B) an industry is heterogeneous with respect to the products it sells and their cost structure.
C) there is a strong market share leader in the industry.
D) there are low entry barriers in the industry.

Question 80

Any actions a firm takes that have the effect of reducing the level of rivalry in an industry that also do not require firms in an industry to directly communicate or negotiate with each other can be thought of as

A) tacit cooperation.
B) tacit collusion.
C) explicit collusion.
D) competitive parity.