Deck 3: Assessing the Internal Environment of the Firm

Question 1

Toyota paid a heavy price for its excessive emphasis on cost control.By focusing on one strength exclusively,it suffered severe losses.This is an example of the limitations of a SWOT analysis.

Answer 1

True
Explanation: Sometimes firms become preoccupied with a single strength or a key feature of the product or service they are offering and ignore other factors needed for competitive success. For example, Toyota, the giant automaker, paid a heavy price for its excessive emphasis on cost control. The resulting problems with quality and the negative publicity led to severe financial losses and an erosion of its reputation in many markets.

Question 2

Company strengths and weaknesses are tied to its stated goals and objectives.

Answer 2

True
Explanation: Company strengths and capabilities, no matter how unique or impressive, may not enable it to achieve a competitive advantage in the marketplace. It is akin to recruiting a concert pianist to join a gang of thugs; even though such an ability is rare and valuable, it hardly helps the organization attain its goals and objectives.

Question 3

If a firm builds its strategy on a capability that cannot,by itself,create or sustain competitive advantage,it is wasting its time and resources.

Answer 3

True
Explanation: If a firm builds its strategy on a capability that cannot, by itself, create or sustain competitive advantage, it is essentially a wasted use of resources.

Question 4

The strengths and capabilities of a firm are enough to enable it to achieve a competitive advantage in the marketplace.

Question 5

Establishing a customer service hotline to handle customer complaints would be considered a primary activity in value-chain analysis.

Question 6

Support activities provide support for primary activities,but not each other.

Question 7

Focusing too narrowly on current customers,technologies and competitors can lead a company to overlook periphery industry boundaries and a new set of competitive relationships.

Question 8

The SWOT framework is not sufficient as the primary basis for evaluating the internal strengths and weaknesses of a company.

Question 9

The SWOT analysis can show managers how to achieve a competitive advantage.

Question 10

Primary activities contribute to the physical creation of a product or service,its sale and transfer to the buyer,and its service after the sale.

Question 11

Inbound logistics include all activities associated with transforming inputs into the final product form such as machining,packaging,assembly,equipment,testing,printing,and facility operations.

Question 12

The static nature of the SWOT assessment is a positive advantage for it as an evaluation framework.

Question 13

One advantage of SWOT analysis is that it helps managers to identify strengths that are almost always sources of sustainable competitive advantages.

Question 14

The SWOT framework is sufficient as the primary basis for evaluating the external opportunities and threat of the company.

Question 15

Top managers have learned not to rely on SWOT to stimulate self-reflection and group discussions about how to improve their firm and position for success.

Question 16

Encyclopedia Britannica lost competitive positioning due to a misunderstanding of the change in competitors,when the CD-based encyclopedia became popular for home computers.

Question 17

Value-chain analysis assumes that the basic economic purpose of a firm is to create value and it is a useful framework for analyzing the strengths and weaknesses of the firm.

Question 18

The value-chain concept assumes that both primary and support activities are capable of producing value for customers.

Question 19

In conducting a SWOT analysis,a risk for strategists is that they rely on traditional definitions of their industry and competitive environment and therefore focus too narrowly on current competitors.

Question 20

In value-chain analysis,value is measured by the market value of the total stock outstanding of the company.

Question 21

At Sephora.com,a customer service representative taking a phone call from a repeat customer has instant access to what shade of lipstick she likes best.This is an example of a procurement support activity in the value chain.

Question 22

A travel agent does not add value by creating an itinerary that includes transportation,accommodations,and activities that are customized to your budget and travel dates.

Question 23

Crowdsourcing has many benefits,including the example in which McDonalds set up a Twitter campaign to promote positive word of mouth which became a platform for people looking to bash the chain.

Question 24

Campbell Soup uses electronic networks in order to improve the efficiency of outbound logistics.This is an example of relationships among activities within the firm and with other stakeholders that are part of the company expanded value chain.

Question 25

Value-chain analysis can only be applied to manufacturing operations.

Question 26

Porsche received a lot of negative feedback when it announced plans to release an SUV,but it went ahead anyway,and the Porsche Cayenne was a great success.This is an example of a peril of making decisions based on crowdsourcing.

Question 27

Information technology (IT)can also play a key role in enhancing the value that a company can provide its customers and,in turn,increasing its own revenues and profits.IT is an activity within the support activities of general administration.

Question 28

Strong brands are typically built through consistent,effective marketing,and companies need to weigh the potential for misbehaving customers to thwart their careful efforts.

Question 29

The resource-based view of the firm focuses solely on the internal analysis of the operations of the firm.

Question 30

A law firm renders services that are specific to client needs and circumstances.This is an example of the transformation process of a service organization.

Question 31

Frito-Lay uses crowdsourcing to make its Super Bowl ads.This is an example of a primary activity in the value chain.

Question 32

Technip has developed intelligent pipes that can monitor and regulate the temperature throughout an oil pipeline.This is an example of a procurement support activity in the value chain.

Question 33

At times,the difference between manufacturing and service is in providing a customized solution rather than mass production,as is common in manufacturing.

Question 34

Campbell Soup uses an electronic network to facilitate its continuous-replenishment program with its most progressive retailers.This is known as an operations primary activity in the value chain.

Question 35

Some leading edge companies are applying the prosumer concept.Here,firms team up with their suppliers and alliance partners to satisfy their customer needs.

Question 36

Managers should focus their attention on interrelationships among value-chain activities within the firm,not on relationships among activities within the firm and other organizations (such as suppliers and customers).

Question 37

Technology development is a much broader concept than research and development.

Question 38

In value-chain analysis,finance and accounting are considered part of the general administration of a firm.

Question 39

The activities that may provide support only to one company may be critical to the primary value-adding activity of another firm.

Question 40

Some firms find great value by not incorporating their customers into the value creation process.

Question 41

Modern plant and facilities as well as favorable manufacturing locations are tangible resources.

Question 42

Path dependency has no impact on the inimitability of resources.

Question 43

Tangible resources are assets that are relatively easy to identify such as financial and physical assets.

Question 44

Effective strategic planning processes are intangible resources.

Question 45

Comcast gets a bad review on Yelp.This is an example of harm to a tangible resource.

Question 46

Patents,copyrights,and trademarks are intangible resources.

Question 47

Firms that are successful in creating competitive advantages that are sustainable for a period of time do not have to be concerned about profits being retained by employees or managers.

Question 48

Company reputation with customers,suppliers and other stakeholders is an intangible resource.

Question 49

Financial resources such as cash and cash equivalents are intangible resources.

Question 50

Amazon Prime is an example of a difficult to imitate capability that gives it competitive advantage over its rivals.

Question 51

Intangible resources of a firm refer to its capacity to deploy tangible resources over time and leverage those resources effectively.

Question 52

Examples of organizational capabilities are outstanding customer service,excellent product development capabilities,superb innovation processes,and flexibility in manufacturing processes.

Question 53

For a resource to provide a firm with potential sustainable advantages it must satisfy only two criteria: rareness and difficulty in substitution.

Question 54

Products and services that are difficult to imitate help firms sustain their profitability.

Question 55

Trade secrets are intangible resources.

Question 56

Capabilities that exhibit causal ambiguity are difficult to imitate.

Question 57

Harley-Davidson sells accessories,clothing,toys and motorcycles.They have a brand image in common which is a tangible resource.

Question 58

Employee exit cost is a factor that can increase employee bargaining power and help him or her appropriate profits of the firm.

Question 59

FedEx employees take computer-based job competency tests every 6 to 12 months in order to identify areas of individual weakness and provide input to a computer database of employee skills.This is an example of a tangible resource.

Question 60

Dell lost its competitive advantage by 2009 in part because it placed its efforts on operational excellence to the exclusion of reinvention.

Question 61

Inventory turnover is a measure of asset utilization.

Question 62

Financial analysis provides an accurate way to assess the relative strengths of firms and can be used as a complete guide to study companies.

Question 63

Leverage ratios provide measures of the capacity of a firm to meet its long-term financial obligations.

Question 64

When evaluating the financial performance of a firm,it is important to compare the results with industry norms.

Question 65

The return on assets ratio is used to measure short-term solvency of the firm.

Question 66

The balanced scorecard enables managers to evaluate their business from only two perspectives: customer and financial.

Question 67

When using industry norms as a standard of comparison,managers must be sure that the firms used in the comparisons are representative of all sizes and strategies within the industry.

Question 68

The corporate culture at Southwest airlines is an example of causal ambiguity.

Question 69

The total debt ratio is used to measure profitability.

Question 70

The current ratio is used to measure long-term solvency.

Question 71

People want to partner with you because they have heard you are a credible company built through a culture of trust.In a sense,being a great company to work for also makes you a great company to work with.This is an example of causal ambiguity.

Question 72

The price-earnings ratio is used to measure profitability.

Question 73

Though two teams could have different ages,functional backgrounds,experience,and so on,they could be strategically equivalent and thus substitutes for one another.

Question 74

Several pharmaceutical firms have seen the value of patent protection erode in the face of new drugs that are based on different production processes and act in different ways,but can be used in similar treatment regimes.This example illustrates the lack of sustainable competitive advantage being offered by the product.

Question 75

A meaningful ratio analysis need only include how ratios change over time.

Question 76

Two valuable firm resources (or two bundles of resources)are strategically equivalent when each one can be exploited separately to implement the same strategies.

Question 77

A primary benefit of the balanced scorecard is that it complements financial indicators with operational measures of customer satisfaction,internal processes,and the innovation and improvement activities of the organization.

Question 78

Historical comparisons are most appropriate during periods of recession or economic boom.

Question 79

The profit margin ratio is used to measure long-term solvency.

Question 80

When using industry norms as a standard of comparison,managers must be sure that the firms used in the comparisons are representative of all sizes and strategies within the industry.