Question 1

Why is it important to prevent core competencies from becoming core rigidities?

Accepted Answer

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Question 2

Describe a value chain analysis. How does a value chain analysis help a firm gain competitive advantage?

Accepted Answer

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Question 3

Which of the following is NOT an external event that reveals the "dark side" of core capabilities?
A) A new competitor figures out a better way to serve the firm's customers.
B) New technologies emerge and replace those used by the firm.
C) A firm changes its focus to a new core competence.
D) Political or social events shift the foundation of current core capabilities.

Accepted Answer

The other options (A, B, and D) all involve external events that can challenge or expose weaknesses in a firm's core capabilities. Option C, however, refers to a change in focus rather than an external event. While changing core competencies can certainly have strategic implications and impact a firm's performance, it is not inherently an external event in the same way as the other options.

Question 4

Value chain analysis is a tool used to
A) analyze a firm's external environment for value-creating opportunities.
B) analyze a firm's value chain activities and support functions in isolation from its competitors' value chain.
C) understand the parts of the firm's operation that create value and those that do not.
D) identify the firm's core competencies in each of the primary activities of the firm.

Accepted Answer

Value chain analysis is used to understand the parts of the firm's operation that create value and those that do not. It helps a firm to identify opportunities to reduce costs, improve efficiency, and leverage key resources and capabilities. It is a tool used to analyze the different activities involved in producing and delivering a product or service and to identify the costs incurred in each activity. By understanding the value chain, a firm can determine which activities are essential and which ones can be outsourced or eliminated. This analysis provides insights into the firm's strengths and weaknesses and helps the firm to develop strategies that align with its core competencies.

Question 5

Examples of support activities include all of the following EXCEPT
A) Finance.
B) Human Resources.
C) Follow-up Service.
D) Management Information Systems.

Accepted Answer

Follow-up service is a primary activity as it directly involves the interaction with the customer after the sale. Finance, human resources, and management information systems are all support activities that assist in the functioning of the primary activities.

Question 6

Outsourcing is the
A) spinning off of a value-creating activity to create a new firm.
B) selling of a value-creating activity to other firms.
C) purchase of a value-creating activity from an external supplier.
D) use of computers to obtain value-creating data from the Internet.

Accepted Answer

Outsourcing involves buying a value-creating activity from an external supplier, which is why option C is the correct choice. Option A is incorrect because spinning off an activity creates a new firm, rather than outsourcing it. Option B is incorrect because selling an activity is not the same as outsourcing it to another firm. Option D is incorrect because using computers to access data is not related to outsourcing.

Question 7

It is possible that Borders' core competencies of store locations and a desirable physical environment for customers became core rigidities eventually leading to the filing of bankruptcy as a result of
A) changing political events.
B) changing social events.
C) a new technology emerging and changing customer shopping patterns .
D) failure to accurately analyze the value chain.

Accepted Answer

Borders' core competencies were focused on physical store locations and providing a desirable in-store environment. However, the emergence of new technologies such as e-commerce and the change in customer shopping patterns towards online shopping led to a decline in sales and eventually bankruptcy. Borders failed to adapt to the changing market and did not invest enough in their digital and online presence. This highlights how their core competencies became core rigidities, hindering their ability to adapt to changing customer needs and ultimately leading to their downfall. Politcal and social events and failure to analyze the value chain may have played a role, but the emergence of new technology was the biggest factor in Borders' bankruptcy.

Question 8

Firms that have strong positive relationships with suppliers and customers are said to have _________________, an essential ingredient to creating value.
A) customer value
B) social capital
C) effective marketing
D) an attractive industry

Accepted Answer

The term used to describe strong relationships with suppliers and customers is "social capital," which is defined as the value created through social networks, shared norms, and interpersonal trust. This is an essential ingredient for creating value in business. Choices A, C, and D are not directly related to the concept of social capital.

Question 9

Which of the following is TRUE about outsourcing?
A) Outsourcing allows firms to be more flexible, and requires minimal coordination.
B) Outsourcing allows firms to concentrate on those areas in which they can create value.
C) Outsourcing strengthens the creative and innovative functions within the firm.
D) Outsourcing is only effective when it includes all support activities.

Accepted Answer

Outsourcing allows firms to focus on their core competencies and delegate non-core activities to external vendors, thus increasing efficiency and productivity. This allows firms to concentrate on those areas in which they can create value, leading to overall organizational improvement. Option A is incorrect because effective coordination and communication are essential for successful outsourcing. Option C is incorrect because outsourcing is primarily used for cost savings and efficiency, not innovation. Option D may not always be feasible or necessary depending on the specific outsourcing arrangement.

Question 10

Knowledge transfer and access to resources within the value chain are enhanced by ________.
A) guidelines for sharing knowledge and resources
B) social capital
C) penalties for not sharing knowledge and resources
D) training employees on how to cooperate

Accepted Answer

Social capital refers to the relationships and networks within and between organizations that facilitate the exchange of knowledge and resources. By having strong social capital, organizations can more easily access and share valuable resources and knowledge with each other. Guidelines, penalties, and training can also be helpful, but they may be less effective without a strong social capital foundation.

Question 11

The owner of a store retailing fine quality fabrics for home-sewers bewails the fact that few young women know how to do fine tailoring, much less simple dressmaking. Many potential customers are unable to appreciate the premium quality of the fabrics available and are deterred by the high prices, as well as the complexity of fine sewing. In the past, the store had a strong demand for fabrics, large classes for women learning the fine points of sewing, and a reputation for excellent service and technical advice. Now the store is earning lower-than-average returns. This case is an example of
A) the hazard of competitors being able to imitate a firm's core competency.
B) the need for firms to stick to their core competencies through temporary downturns in market demand.
C) the lack of intangible resources undermining the core competencies of the firm.
D) core competencies that have become core rigidities.

Accepted Answer

The case describes how the store's previously successful core competency of teaching fine sewing and providing technical advice has become a core rigidity that no longer meets the needs of the market. Fewer women today have the desire or capability to perform fine sewing, and the store's high prices and emphasis on technical expertise no longer resonate. Thus, the store's previous strengths have now become inflexible liabilities.

Question 12

What are the differences between tangible and intangible resources? Which category of resources is more valuable to the firm?

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Question 13

To build social capital whereby resources such as knowledge are transferred across organizations requires _________between the parties.
A) a contract
B) determination
C) confidence
D) trust

Accepted Answer

Building social capital requires trust between the parties involved. Without trust, it is unlikely that organizations will be willing to share their resources, including knowledge, with others. Confidence and determination may be helpful, but trust is the most essential ingredient for building social capital. A contract may be useful to formalize the agreement between organizations, but it is not sufficient on its own to build social capital.

Question 14

A major U.S. manufacturer of children's toys believes its main competitive advantage lies in its continuing development of innovative toys and games. The company is facing increasing competition on price and it is strongly considering outsourcing to offshore firms as a means of reducing costs. The LAST function this firm should consider outsourcing is
A) operations.
B) research and development.
C) supply-chain management.
D) distribution.

Accepted Answer

The main competitive advantage of the company is its development of innovative toys and games, which is done through research and development. Therefore, outsourcing this function would jeopardize the company's competitive edge and could result in a dip in quality or uniqueness of their products.

Question 15

Define capabilities and how they affect the firm's strategic success.

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Question 16

Describe the four specific criteria that managers can use to decide which of their firm's capabilities have the potential to create a sustainable competitive advantage.

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Question 17

A major reason outsourcing is effective is that
A) it increases the innovative potential of the firm.
B) few firms possess superior capability in all primary and support activities.
C) it permits unlimited access to capital resources.
D) competitors do not have access to the same external sources.

Accepted Answer

Outsourcing allows firms to focus on their core competencies and rely on external firms with superior capabilities in other areas. This can lead to higher quality and more efficient operations. Additionally, outsourcing can often be more cost-effective than trying to develop in-house capabilities for every activity.

Question 18

Case Scenario 1: Heartsong LLC.
Heartsong LLC is a designer and manufacturer of replacement heart valves based in Peoria, Illinois. While a relatively small company in the medical devices field, it has established a worldwide reputation as the provider of choice high-quality, leading-edge artificial heart valves. Most of its products are sold to large regional hospital systems and research hospitals. Specialty heart centers are another emerging, but fast-growing, market for its valves. While Heartsong would like to grow quickly, its growth is constrained by the need to finance larger production runs and then carry this additional inventory. For products like those of Heartsong, vendors typically do not collect payment until the unit is actually used in surgery. Moreover, heart valves are usually required on short notice which means that they must be either onsite, or inventoried at a nearby location. If nearby, then transport of the unit to a hospital or heart center occurs within a matter of hours, and sometimes minutes. For this reason, accelerated growth would require Heartsong to both finance increased production of its heart valves, along with carrying increased levels of inventory that are in fact sitting on their customers' shelves. In fact, inventory-carrying cost is its single largest cost outside of research and development. While profitable growth is necessary if Heartsong is to continue extending its competitive advantage through increasingly greater investments in basic heart valve R&D, it is not clear that the company can internally support all these increased financial commitments (R&D, manufacturing, and inventory). Doc Watson, the CEO of Heartsong, is considering an outside contractor, EdFex, to handle the inventorying, warehousing, and delivery of its valves. EdFex has secure, high-tech warehouses in most major population centers around the country, and can ensure delivery of a product to these markets from its warehouses in less than one hour.
-(Refer to Case Scenario 1) What value-chain activities appear to underlie Heartsong's competitive advantage?

Accepted Answer

The answer of Case Scenario 1: Heartsong LLC.
Heartsong LLC is...

Question 19

Acme Auto Repair has a thriving business based on its reputation for high-quality work, honesty, and skilled employees. For continued long-term success, Acme's owner should
A) concentrate on maintaining Acme's present core competencies.
B) focus on developing Acme's future competitive advantages.
C) place more emphasis on tangible resources which are less vulnerable to obsolescence than intangible resources.
D) recognize that core competencies derived from human resources are more subject to becoming core rigidities than are core competencies based on other types of resources.

Accepted Answer

While maintaining core competencies is important, it is also crucial to focus on developing future competitive advantages to stay ahead of the competition. Acme Auto Repair should invest in innovation and technology to improve their services or consider expanding to new markets to increase their customer base. This way, they can sustain their business in the long run.

Question 20

Describe the importance of internal analysis to the strategic success of the firm.

Accepted Answer

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Quiz 3: The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages

Why is it important to prevent core competencies from becoming core rigidities?

Describe a value chain analysis. How does a value chain analysis help a firm gain competitive advantage?

Which of the following is NOT an external event that reveals the "dark side" of core capabilities?

Value chain analysis is a tool used to

Examples of support activities include all of the following EXCEPT

Outsourcing is the

It is possible that Borders' core competencies of store locations and a desirable physical environment for customers became core rigidities eventually leading to the filing of bankruptcy as a result of

Firms that have strong positive relationships with suppliers and customers are said to have _________________, an essential ingredient to creating value.

Which of the following is TRUE about outsourcing?

Knowledge transfer and access to resources within the value chain are enhanced by ________.

What are the differences between tangible and intangible resources? Which category of resources is more valuable to the firm?

To build social capital whereby resources such as knowledge are transferred across organizations requires _________between the parties.

Define capabilities and how they affect the firm's strategic success.

Describe the four specific criteria that managers can use to decide which of their firm's capabilities have the potential to create a sustainable competitive advantage.

A major reason outsourcing is effective is that

Acme Auto Repair has a thriving business based on its reputation for high-quality work, honesty, and skilled employees. For continued long-term success, Acme's owner should

Describe the importance of internal analysis to the strategic success of the firm.