Deck 3: The Internal Environment: Resources, Capabilities, Competencies, and Competitive Advantages

Question 1

The learning generated by making and correcting mistakes is generally unimportant to efforts to create new capabilities and core competencies.

Answer 1

False

Question 2

Creating customer value is the source of the firm's potential to earn above-average returns.

Answer 2

True

Question 3

People are a critical resource for helping organizations learn how to continuously innovate.

Answer 3

True

Question 4

Resources are the source of capabilities, some of which lead to the development of core competencies; in turn, some core competencies may lead to competitive advantage.

Question 5

Firms should seek to continually develop new core competencies because all core competencies have limited life spans.

Question 6

The Chapter 3 Strategic Focus illustrates the challenge facing strategic managers in making decisions about the appropriate use of their companies' resources and capabilities. While a number of firms have successfully used resources and capabilities to earn above average returns, others have not been so successful.

Question 7

In today's global economy, traditional factors such as labor costs, access to financial resources and raw materials, and protected or regulated markets are less likely to become core competencies and possibily competitive advantages.

Question 8

The sustainability of a competitive advantage depends upon the rate of obsolescence of the core competence, the availability of substitutes for the core competence, and the imitability of the core competence.

Question 9

Value is measured by the variable and fixed costs associated with the production and marketing of a particular product compared with the revenue and profits the product generates.

Question 10

Analyzing the internal environment enables a firm to determine what it might do by identifying what opportunities and threats exist.

Question 11

A global mind-set is free of the assumptions of a single country, culture, or context.

Question 12

Walmart uses core competencies such as information technology and distribution channels to create value for its customers through its "everyday low price."

Question 13

Value is created when firms innovately bundle and leverage their resources to form capabilities and core competencies.

Question 14

The challenge and difficulty of making effective decisions are implied by preliminary evidence suggesting that one-half of organizational decisions fail.

Question 15

The Chapter 3 Opening Case demonstrates that although conditions in the economic environment influenced Subway's success, the manner in which Subway used its resources and capabilities also influenced that success.

Question 16

Given enough time, any firm's competitive advantage can be imitated by its competitors.

Question 17

Firms achieve strategic competitiveness and earn above average returns by acquiring, bundling, and leveraging their resources for the purpose of taking advantage of opportunities in the external environment in ways that create value for customers.

Question 18

Understanding how to leverage the firm's unique bundle of resources and capabilities is a key outcome decision makers seek when analyzing the internal organization.

Question 19

Analyzing the internal environment enables a firm to determine what it can do by identifying resources, capabilities, and core competencies in the internal organization.

Question 20

The need to meet quarterly earnings numbers disciplines managers to accurately examine the firm's internal organization.

Question 21

Capabilities of an organization emerge spontaneously through the interaction of tangible and intangible resources.

Question 22

Older employees are less valuable resources to firms than younger employees, because the older employees have lower stocks of knowledge. Consequently, employee reductions should begin with early retirement inducements.

Question 23

The Chapter 3 Strategic Focus shows that inability to effectively use a firm's resources and capabilities can contribute to a CEO's short tenure as happened with Christina Norman, former CEO of the Oprah Winfrey Network (OWN).

Question 24

Although an organization's good reputation is a valuable resource that takes years of superior marketplace competence to achieve, it is not a good basis for building a competitive advantage because it can be destroyed almost instantly by bad publicity.

Question 25

According to the Chapter 3 Strategic Focus, P&G typically uses its capabilities and core competencies to grow through mergers, acquisitions, and cooperative relationships.

Question 26

Trademarks and copyrights are examples of a firm's tangible resources.

Question 27

The foundation of many capabilities lies in the unique skills and knowledge of a firm's employees.

Question 28

At IBM, human capital is critical to forming and using the firm's capabilities in customer relationships, scientific and research skills, and technical skills in hardware, software, and services.

Question 29

According to the Chapter 3 Strategic Focus, organic (internal) growth at P&G benefits the company by allowing it to draw on core competencies and capabilities to become stronger.

Question 30

"Motivating, empowering, and retaining employees" is an example of a capability that resides within the "Human Resources" functional area.

Question 31

By themselves, resources can allow firms to create value for customers as the foundation for earning above-average returns.

Question 32

Compared to tangible resources, intangible resources are an inferior source of core competencies.

Question 33

The value of tangible assets such as the firm's borrowing capacity and its physical plant are high because they can be easily leveraged to derive additional value.

Question 34

Coca-Cola's brand name is a tangible source of competitive advantage for the company.

Question 35

Capabilities are usually developed separately from specific functional areas such as manufacturing, R&D, and marketing.

Question 36

Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals.

Question 37

Judgment is the capability of making successful decisions when no obviously correct model or rule is available or when relevant data are unreliable or incomplete.

Question 38

Core competencies are the activities a company performs especially well compared with competitors and through which the firm adds unique value to its goods and services.

Question 39

According to the Chapter 3 Strategic Focus, while P&G has only a handful of capabilities, these capabilities result in well over a hundred core competencies that allow it to create unique value for customers.

Question 40

Resources must be combined to form capabilities as illustrated by Subway which linked its fresh ingredients with several other resources including the continuous training it provides to those running the firm's units as the foundation for customer service as a capability.

Question 41

Firms can develop a capability and/or core competence in any of the value chain activities and in any of the support functions.

Question 42

Any core competency has the potential to lose its value creating ability.

Question 43

One criteria for a resource or capability to be a source of competitive advantage is that it allows the firm to perform a value-creating activity that competitors cannot perform.

Question 44

A company can earn above-average returns only when the value it creates is less than the costs incurred to create that value.

Question 45

Value chain activities in the value chain create value, whereas support functions generate costs.

Question 46

Firms should outsource only activities where they can create the most value or where they are at an advantage compared to competitors.

Question 47

Two concerns about outsourcing are the potential loss of a firm's innovative ability and the loss of jobs within companies that decide to outsource some of their work.

Question 48

A firm should outsource only activities where it cannot create value or where it is at a substantial disadvantage compared to competitors.

Question 49

Costly-to-imitate capabilities are those which other firms cannot easily develop as they have no strategic equivalent.

Question 50

Interpersonal relationships, trust, friendships, and a firm's reputation are all examples of complex social phenomena that make capabilities costly to imitate.

Question 51

At Southwest Airlines, the complex interelationship between its culture and human capital adds value for customers in ways that other airlines cannot, such as jokes on flights by flight attendants and cooperation between gate personnel and pilots.

Question 52

Firms should never outsource a primary activity because of the danger of the activity being imitated by rivals.

Question 53

Only capabilities that are valuable, common, costly to imitate, and substitutable can be strategic capabilities.

Question 54

Valuable capabilities allow the firm to exploit strengths or neutralize weaknesses in the internal environment.

Question 55

If a core competence is emphasized when it is no longer competitively relevant, it can become a core rigidity.

Question 56

Capabilities may be costly to imitate if they have a unique and valuable organizational culture, and are causally ambiguous and socially complex.

Question 57

One benefit of outsourcing is that it allows a firm to focus on those few value chain activities where it can produce the greatest value.

Question 58

Every core competence is a capability and every capability is a core competence.

Question 59

At the conclusion of the internal analysis, firms must identify their strengths and weaknesses in resources, capabilities, and core competencies.

Question 60

Apple has combined some of its its tangible (e.g., financial resources and research laboratories) and intangible (e.g., scientists and engineers and organizational routines) resources to create a capability in R&D which creates a core competence in innovation.

Question 61

Today, a substantially slimmed-down Polaroid is introducing a number of new products including GL20 Camera Glasses which have a built-in camera and LCDs. This wave of new product development is explained by

A) the funds provided by a patent infringement lawsuit won by Poloroid.
B) weaker competitors in its industry.
C) the learning that occured from making earlier mistakes.
D) an easing of regulations governing Intellectual Propery Protection.

Question 62

____ is/are the source of a firm's ____, which is/are the source of the firm's ____.

A) Resources, capabilities, core competencies
B) Capabilities, resources, core competencies
C) Capabilities, resources, above average returns
D) Core competencies, resources, competitive advantage

Question 63

Which of the following is NOT a factor affecting sustainability of a competitive advantage?

A) The availability of substitutes for a firm's core competence.
B) The rate at which obsolescence of the core competence occurs because of environmental changes.
C) The imitability of a core competence.
D) The length of time the core competence has existed.

Question 64

The overall lesson from the Chapter 3 Strategic Focus about decision-making at several companies was the importance of _________

A) CEO compensation.
B) the effect of unattractive industries on firm performance.
C) making decisions about use of the firm's resources under conditions of uncertainty.
D) competing against innovative rivals.

Question 65

According to the Chapter 3 Opening Case, all of the following are core competencies of Subway EXCEPT

A) Providing continuous training for its franchisees and those working within those units.
B) Offering healthy and nutritious products to consumers.
C) The challenging economic environment in which even affluent consumers are choosing to dine at quick-service restaurants such as Subway.
D) Use of nontraditional locations such as appliance stores, automobile showrooms, and zoos.

Question 66

____ of organizational decisions fail.

A) Few
B) About one-quarter
C) About half
D) Most

Question 67

Which of the following is NOT required for a firm to achieve strategic competitiveness and earn above-average returns from its core competencies?

A) Core competencies must be acquired.
B) Core competencies must be bundled.
C) Core competencies must be internationalized.
D) Core competencies must be leveraged.

Question 68

By emphasizing core competencies when formulating strategies, companies learn to compete primarily on the basis of

A) intangible resources.
B) their primary activities.
C) firm-specific differences.
D) efficiency of production.

Question 69

It is increasingly difficult for a firm to develop and sustain a competitive advantage because of the effects of globalization and

A) the rapid development of the Internet's capabilities.
B) extensive use of outsourcing within the borders of the U.S.
C) the declining number of inventions and patents developed by U.S. citizens.
D) the simultaneous erosion of the U.S. work ethic and the U.S. education system.

Question 70

The three conditions that characterize difficult managerial decisions concerning resources, capabilities, and core competencies are

A) complexity, rarity, and human intellectual capital.
B) uncertainty, complexity, and intraorganizational conflicts.
C) imitability, complexity, and interorganizational conflicts.
D) imitability, comparability, and human intellectual capital.

Question 71

One reason executive judgment can be a particularly important source of competitive advantage is that judgment

A) allows a firm to build a strong reputation.
B) gains the loyalty of shareholders.
C) increases human intellectual capacity.
D) allows for superior bundling of resources.

Question 72

A decision that results in failure

A) is a career-ending event because it is so unusual.
B) often results from lack of accountability.
C) fosters organizational inertia.
D) allows for learning.

Question 73

Internal analysis enables a firm to determine what the firm

A) can do.
B) should do.
C) will do.
D) might do.

Question 74

The proper matching of what a firm can do with what it might do

A) balances the internal characteristics of the firm with the characteristics of the external environment.
B) overcomes the rigidity and inertia resulting from a history of success.
C) yields insights the firm requires to select its strategy.
D) develops core competencies based on human knowledge.

Question 75

A person who has made a successful decision when no obviously correct model or rule is available or when relevant data are unreliable or incomplete has exercised

A) foresight.
B) judgment.
C) effective strategic thinking.
D) decisiveness.

Question 76

Which of the following is not a component of internal analysis leading to competitive advantage?

A) Tangible and intangible resources.
B) Analysis of supplier power.
C) Capabilities.
D) Core competencies.

Question 77

As discussed in the Chapter 3 Strategic Focus, CEOs of companies such as Viacom, the Oprah Winfrey Network, the Gap, and Cisco frequently had to make decisions about __________________ and the success of those decisions affected the tenure of those CEOs.

A) how to please customers
B) how to best rivals
C) use of the firm's resources
D) their method of compensation

Question 78

Value consists of

A) A product's proprietary characteristics and by its attributes for which customers are willing to pay.
B) A product's performance characteristics and by its attributes for which customers are willing to pay.
C) A product's proprietary characteristics and by its attributes for which customers consider paying for.
D) A product's performance characteristics and by its attributes for which customers consider paying for.

Question 79

____ is measured by a product's performance characteristics and its attributes for which customers are willing to pay.

A) Competitive advantage
B) Profit potential
C) Contribution
D) Value

Question 80

The key to achieving competitiveness, earning above-average returns, and remaining ahead of competitors in the long run is to manage current core competencies

A) in a way that uniquely bundles and leverages the firm's existing resources.
B) while simultaneously developing new ones.
C) and imitate the core competencies of successful competitors.
D) in order to preserve and enhance them against the firm's competitors.