Deck 3: Evaluating a Firms Internal Capabilities

Question 1

Describe the difference between resources and capabilities.

Answer 1

Resources in the RBV are defined as the tangible and intangible assets that a firm controls that it can use to conceive of and implement its strategies.Examples of resources might include a firm's factories (a tangible asset),its products (a tangible asset),its reputation among customers (an intangible asset),and teamwork among its managers (an intangible asset). 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.That is,capabilities do not enable a firm to conceive of and implement its strategies by themselves but enable a firm to use other resources to conceive of and implement such strategies.Examples of capabilities might include a firm's marketing skills and teamwork and cooperation among its managers.

Question 2

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.

Answer 2

D

Question 3

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.

Answer 3

False

Question 4

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 5

LaserTech's new technology is an example of

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

Question 6

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 7

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 8

________ 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 9

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 10

________ 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 11

________ 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 12

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 13

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

Question 14

The 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 15

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

Question 16

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 17

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

Question 18

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 19

The inability of rivals to develop or acquire technology similar to that of LaserTech is an illustration of

A)resource immobility.
B)resource heterogeneity.
C)causal ambiguity.
D)path dependence.

Question 20

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 21

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 22

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 23

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 24

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 25

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 26

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 27

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 28

Identify the four broad categories that a firm's resources and capabilities can be classified into.

Question 29

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 30

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 31

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 32

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 33

If LaserTech's new technological development were due to proprietary investments the company made when it was first founded twenty years ago,this would be an example of

A)social complexity.
B)tacit collusion.
C)path dependence.
D)causal ambiguity.

Question 34

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 35

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

Question 36

Identify and describe the two fundamental assumptions about the resources and capabilities that firms may control that the RBV rests on.

Question 37

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 38

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 39

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 40

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 41

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

Question 42

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 43

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 44

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 45

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 46

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 47

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 48

In the VRIO framework,the R represents resources.

Question 49

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

Question 50

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

Question 51

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 52

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

Question 53

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 54

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 55

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 56

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 57

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 58

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

Question 59

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

Question 60

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

Question 61

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.

Question 62

Define the concept of a value chain.

Question 63

The fact that it would be would be difficult and costly for firms to match Bates' capabilities in the tool industry indicates that these capabilities are

A)imperfectly imitable.
B)causally ambiguous.
C)substitutable.
D)perfectly imitable.

Question 64

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 65

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

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

Question 66

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 67

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 68

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 69

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 70

Bates' culture is an example of a(n)

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

Question 71

The reward system Bates uses to encourage employees to find ways to reduce costs is an example of a(n)

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

Question 72

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 73

The budgeting and reporting activities that Bates uses are examples of

A)informal management controls.
B)formal reporting structures.
C)formal management controls.
D)primary value chain activities.

Question 74

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 75

Identify two forms of imitation and describe four sources of costly imitation.

Question 76

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 77

Identify four components of a firm's organization that are relevant to the question of organization and discuss what role they play in building a competitive advantage.

Question 78

Discuss whether a firm must be the only one to possess a valuable resource or capability in order for the firm to benefit from the resource or capability's rarity or if other firms may own it as well.

Question 79

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

Question 80

Identify the four questions represented in the VRIO framework that one must ask about a resource or capability to determine its competitive potential.