Question 1

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 refers to the purchase of a value-creating activity from an external supplier. Option A refers to spin-off while option B refers to selling, both of which are not directly related to outsourcing. Option D refers to the use of computers to obtain data, which is not necessarily outsourcing.

Question 2

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 Acme's present core competencies is important, focusing on developing future competitive advantages is crucial for continued long-term success. In a rapidly changing market, Acme must adapt and innovate to stay ahead of competitors. This may involve investing in new technologies and training employees in new skills to meet emerging customer needs. neglecting future development could result in a decline in business as competitors gain an advantage.

Question 3

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 4

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

Since the manufacturer's main competitive advantage lies in its innovative toys and games, outsourcing research and development would be detrimental to the company's long-term success. It would be more beneficial for the company to consider outsourcing other functions, such as operations, supply-chain management, and distribution, to reduce costs and remain competitive on price.

Question 5

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

Accepted Answer

The answer of Why is it important to prevent core...

Question 6

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

Accepted Answer

The answer of Describe a value chain analysis. How does...

Question 7

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 helps firms to identify the activities that create value and those that do not. By doing so, firms can focus on enhancing the value-added activities and eliminate or minimize those activities that do not add value. Value chain analysis is primarily an internal analysis tool rather than an external one. While it can help identify opportunities for value creation, its main purpose is to evaluate the firm's internal operations. It also helps to identify the firm's core competencies in the primary activities of the firm.

Question 8

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

A firm changing its focus to a new core competence is an internal event, as the firm has control over its own strategic direction. The other options are external events that can impact the firm's core capabilities and reveal weaknesses or shortcomings.

Question 9

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

Accepted Answer

The answer of Describe the importance of internal analysis to...

Question 10

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 store's core competency was its ability to offer fine quality fabrics and technical advice to customers for sewing. However, it appears that the store's focus on high-end sewing has become a core rigidity, as it no longer fits the current market demand. The owner's lament about declining demand and lack of interest from young women suggests that the store needs to pivot, either by offering a wider range of fabrics that cater to different skill levels or by finding ways to make high-end sewing more accessible to younger generations.

Question 11

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

Accepted Answer

The answer of What are the differences between tangible and...

Question 12

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 while contracting out non-core activities to specialized external providers who can perform these activities more efficiently and effectively. This is because few firms possess superior capability in all primary and support activities. By outsourcing non-core activities, firms can reduce costs, access specialized expertise, and improve organizational flexibility, allowing them to better compete in the marketplace. Therefore, option B is the correct choice. Options A, C, and D are incorrect, as they do not directly relate to the benefits of outsourcing.

Question 13

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

Support activities are those that are necessary for the functioning of primary activities but are not directly involved in production or sales. Finance, human resources, and management information systems are all examples of support activities. Follow-up service, on the other hand, is a primary activity that involves post-sales services such as maintenance and customer support. Therefore, the answer is C.

Question 14

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 positive relationships with suppliers and customers is social capital, which is an essential ingredient to creating value. Choices A, C, and D are not directly related to the concept of social capital.

Question 15

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.

Accepted Answer

The answer of Describe the four specific criteria that managers...

Question 16

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 while leaving non-core activities to specialized providers. This enables the firm to create more value and increase competitiveness. Option A is incorrect as outsourcing may require significant coordination efforts. Option C is not necessarily true, as outsourcing may not have a direct impact on the creative and innovative functions of the firm. Option D is also incorrect, as outsourcing may not require all support activities to be included.

Question 17

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 involves the transfer of resources such as knowledge between organizations. To achieve this, there needs to be a high level of trust between the parties involved, as trust facilitates effective communication and sharing of resources.

Question 18

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 a business or industry that facilitate knowledge sharing and resource access. By building such networks and fostering strong relationships, companies can improve their ability to transfer knowledge and collaborate effectively. Choice A, guidelines for sharing knowledge and resources, is a tool that can be used to facilitate knowledge sharing but is not sufficient on its own. Choice C, penalties for not sharing knowledge and resources, may have some impact but is not likely to be as effective as positive incentives. Choice D, training employees on how to cooperate, is important but is only one aspect of building an effective knowledge-sharing culture.

Question 19

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

Accepted Answer

The answer of Define capabilities and how they affect the...

Question 20

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

A new technology emerged and changed customer shopping patterns with the advent of e-commerce and online bookselling, which Borders failed to adapt to and ultimately led to their bankruptcy. It is unlikely that changing political or social events were the main cause and a failure to analyze the value chain may have been a contributing factor, but not the primary cause.

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

Outsourcing is the

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

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?

Value chain analysis is a tool used to

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

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

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

A major reason outsourcing is effective is that

Examples of support activities include all of the following EXCEPT

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

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.

Which of the following is TRUE about outsourcing?

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

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

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

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