Question 1

An important implication of the balanced scorecard is that managers need not look at their job as primarily balancing stakeholder demands.

Accepted Answer

The balanced scorecard emphasizes that managers should focus on aligning the organization's strategy with its vision and mission, rather than simply balancing competing stakeholder demands. By achieving alignment, the organization can create value for all stakeholders in a sustainable way.

Question 2

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

Accepted Answer

Leverage ratios, such as the debt-to-equity ratio or the interest coverage ratio, assess a company's use of debt and its ability to meet long-term financial obligations, indicating financial health and risk level.

Question 3

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

Accepted Answer

Financial analysis is a useful tool for assessing a company's strengths and weaknesses, but it cannot be used as a complete guide because it does not account for qualitative factors such as company culture, brand value, and market trends.

Question 4

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

Accepted Answer

For a resource to provide a firm with potential sustainable advantages, it must satisfy four criteria: value, rarity, inimitability (difficulty to imitate), and non-substitutability (difficulty in substitution).

Question 5

With reference to primary and support activities, explain how value-chain analysis might be applied to the service industry.

Accepted Answer

The answer of With reference to primary and support activities,...

Question 6

An increase in profits indicates an improvement in cash flow.

Accepted Answer

An increase in profits does not necessarily indicate an improvement in cash flow because profits are calculated based on revenues and expenses, while cash flow measures the actual inflow and outflow of cash. Profits can increase due to non-cash items like depreciation, or there may be delays in receiving cash from sales, both of which do not directly affect cash flow.

Question 7

Capabilities that are causally ambiguous are difficult to imitate.

Accepted Answer

Capabilities that are causally ambiguous are difficult to imitate because it is unclear how they lead to competitive advantage, making replication by competitors challenging.

Question 8

Outline the four factors that will explain how employees and managers, as the owners of valuable, rare, and inimitable resources, are able to obtain a proportionately high level of the profits that they generate.

Accepted Answer

The answer of Outline the four factors that will explain...

Question 9

Path dependency has no impact on the inimitability of resources.

Accepted Answer

Path dependency refers to the idea that past decisions and events can influence current choices and outcomes. It can impact the inimitability of resources by creating barriers to imitation or making it more difficult for competitors to replicate a resource. For example, if a resource has been developed over a long period of time, it may be difficult for a competitor to replicate that development process. Therefore, path dependency can impact the inimitability of resources.

Question 10

How can a firm develop (or enhance) its advantages in the marketplace by having strong, positive interrelationships among its value chain activities and those of its suppliers and customers? Provide an example.

Accepted Answer

The answer of How can a firm develop (or enhance)...

Question 11

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

Accepted Answer

The balanced scorecard is designed to provide a comprehensive view of an organization's performance by complementing traditional financial metrics with measures that reflect customer satisfaction, internal processes, and the organization's ability to innovate and improve. This approach ensures a more holistic assessment of performance beyond just financial outcomes.

Question 12

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

Accepted Answer

The balanced scorecard actually enables managers to evaluate their business from four perspectives: customer, financial, internal processes, and learning and growth.

Question 13

If employees' skills are idiosyncratic and rare (a source of resource-based advantage), they will lack bargaining power because the cost of replacing them is low for the firm.

Accepted Answer

If employees' skills are idiosyncratic and rare, they actually have high bargaining power because the cost of replacing them is high for the firm, making these employees valuable and difficult to replace.

Question 14

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

Accepted Answer

Exhibit 3.9 illustrates a 10-year period of return on sales (ROS) for a hypothetical company. As indicated by the dotted trend lines, the rate of growth (or decline) differs substantially over time periods, and periods of recession and economic boom may make the trends unreliable.

Question 15

What are some ways in which a firm's general administration can help create (or enhance) competitive advantages?

Accepted Answer

The answer of What are some ways in which a...

Question 16

What are the key advantages of value chain analysis over SWOT analysis?

Accepted Answer

The answer of What are the key advantages of value...

Question 17

What are some of the key strengths and limitations of SWOT analysis?

Accepted Answer

The answer of What are some of the key strengths...

Question 18

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.

Accepted Answer

Industry norms typically focus on averages or medians that reflect common performance metrics within an industry, but they do not necessarily account for all sizes and strategies of firms. Managers often select comparable firms that closely match their own in terms of size, market segment, and strategic approach.

Question 19

The resource-based view (RBV) combines both the internal analysis of the firm and the external analysis of the environment. Discuss and provide examples.

Accepted Answer

The answer of The resource-based view (RBV) combines both the...

Question 20

If competitors possess the same valuable resource, it is not a source of competitive advantage because all of these firms can potentially exploit that resource in the same way.

Accepted Answer

For a resource to be a source of competitive advantage, it must be valuable, rare, inimitable, and non-substitutable (VRIN criteria). If competitors possess the same valuable resource, it is not rare or inimitable, thus not a source of competitive advantage.

Quiz 3: Analyzing the Internal Environment of the Firm