Deck 3: Assessing the Internal Environment of the Firm

Question 1

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

Answer 1

False
Explanation: While we believe SWOT analysis is very helpful as a starting point, it should not form the primary basis for evaluating the internal strengths and weaknesses of the company or the opportunities and threats in the environment.

Question 2

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.

Answer 2

False
Explanation: Inbound logistics is primarily associated with receiving, storing, and distributing inputs to the product. Operations include all activities associated with transforming inputs into the final product form, such as machining, packaging, assembly, testing, printing, and facility operations.

Question 3

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

Answer 3

True
Explanation: Service is a primary activity which includes all actions associated with providing service to enhance or maintain the value of the product, such as installation, repair, training, parts supply, and product adjustment.

Question 4

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.

Question 5

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

Question 6

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 7

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 8

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

Question 9

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

Question 10

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

Question 11

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 12

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

Question 13

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

Question 14

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

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.

Question 17

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 18

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

Question 19

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 20

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

Question 21

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 22

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

Question 23

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

Question 24

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 25

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 26

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

Question 27

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 28

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 29

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 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

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 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

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

Question 37

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 38

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 39

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 40

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 41

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

Question 42

Effective strategic planning processes are intangible resources.

Question 43

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

Question 44

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

Question 45

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

Question 46

Capabilities that exhibit causal ambiguity are difficult to imitate.

Question 47

Trade secrets are intangible resources.

Question 48

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

Question 49

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

Question 50

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

Question 51

Patents, copyrights, and trademarks are intangible resources.

Question 52

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

Question 53

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

Question 54

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

Question 55

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

Question 56

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 57

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

Question 58

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 59

Path dependency has no impact on the inimitability of resources.

Question 60

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

Question 61

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

Question 62

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 63

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 64

The total debt ratio is used to measure profitability.

Question 65

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

Question 66

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 67

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 68

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 69

The price-earnings ratio is used to measure profitability.

Question 70

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

Question 71

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 72

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

Question 73

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

Question 74

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

Question 75

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 76

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 77

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

Question 78

Inventory turnover is a measure of asset utilization.

Question 79

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

Question 80

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