Question 1

At Southwest Airlines, the complex interrelationship 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.

Accepted Answer

The statement is true. Southwest Airlines has cultivated a unique culture that values humor, teamwork, and employee empowerment, which translates into a distinctive customer experience. This culture is deeply intertwined with its human capital management practices, such as hiring for fit, investing in training and development, and providing flexible work arrangements. This approach has been a key driver of the company's success in a highly competitive industry.

Question 2

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

Accepted Answer

Costly-to-imitate capabilities are those that are difficult for other firms to replicate due to unique historical conditions, causal ambiguity, or social complexity, but they may have strategic equivalents.

Question 3

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

Accepted Answer

Motivating, empowering, and retaining employees are key functions of the human resources department. Therefore, it is an example of a capability that resides within the human resources functional area.

Question 4

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

Accepted Answer

This statement is ageist and not supported by evidence. Older employees can provide valuable knowledge, skills and experience to firms. Age should not be the sole criteria for layoffs.

Question 5

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

Accepted Answer

Any core competency can become outdated or irrelevant due to changes in technology, market trends or competition, which can result in a loss of value-creating ability. Therefore, it is important for companies to constantly evaluate their core competencies and adapt them as necessary to maintain their competitive advantage.

Question 6

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

Accepted Answer

Outsourcing is a strategic decision and should be done with careful consideration. The activities that are outsourced should not provide a competitive advantage or unique value proposition to the firm. If the firm is at a substantial disadvantage compared to competitors in performing certain activities, outsourcing can help the firm catch up or even perform better. By outsourcing non-core activities, a firm can focus on its core activities and achieve greater efficiency and effectiveness.

Question 7

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

Accepted Answer

Capabilities are developed in response to the needs and objectives of functional areas such as manufacturing, R&D, and marketing. They are often developed in coordination with these areas to ensure that they align with overall business strategy and goals.

Question 8

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

Accepted Answer

The answer of Value chain activities in the value chain...

Question 9

The firm with the most capabilities wins.

Accepted Answer

Having the most capabilities does not guarantee success; other factors like strategy, market conditions, and execution also play crucial roles.

Question 10

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

Accepted Answer

The answer of Valuable capabilities allow the firm to exploit...

Question 11

All competitive advantages have:

Accepted Answer

All competitive advantages have a limited life because competitors will try to imitate or surpass the advantage, making it less unique or valuable over time.

Question 12

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.

Accepted Answer

The statement accurately describes the importance of human capital at IBM.

Question 13

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

Accepted Answer

The statement is actually the opposite of the truth. A company can earn above-average returns only when the value it creates is greater than the costs incurred to create that value. This is known as creating economic value.

Question 14

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

Accepted Answer

Complex social phenomena are not easy to imitate, as they involve a range of interrelated factors such as personal connections, communication, shared values, and histories that cannot be easily copied. Therefore, interpersonal relationships, trust, friendships, and a firm's reputation are all examples of capabilities that are difficult to replicate and can provide a sustainable competitive advantage.

Question 15

Capabilities may be costly to imitate if firms have unique and valuable organizational cultures, are causally ambiguous, and socially complex.

Accepted Answer

Capabilities that are based on unique and valuable organizational cultures can be difficult for rival firms to imitate. Causal ambiguity occurs when the cause-and-effect relationship between a firm's resources and capabilities and its competitive advantage is not easily understood by rivals. Social complexity refers to the interpersonal relationships, trust, and shared goals within a firm, which are difficult to replicate. All of these factors contribute to the high cost of imitating capabilities.

Question 16

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

Accepted Answer

This statement is true. A resource or capability can only provide a competitive advantage if it allows the firm to do something better or differently than its competitors, creating value that customers are willing to pay for. If competitors can also perform the same activity, then the advantage is not sustainable.

Question 17

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

Accepted Answer

The given statement is false. Firms may outsource primary activities for various reasons such as cost savings, efficiency, or focus on core competencies. The risk of imitation by rivals can be mitigated by implementing strong intellectual property protection, maintaining quality standards, and fostering innovation.

Question 18

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

Accepted Answer

Core competencies are unique capabilities or strengths that give a company a competitive advantage over its competitors. These can include skills, knowledge, resources, or technologies that are difficult for rivals to imitate or replicate.

Question 19

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.

Accepted Answer

These are two common concerns about outsourcing.

Question 20

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

Accepted Answer

The statement accurately describes how Apple has used its tangible and intangible resources to create a core competence in innovation through R&D.

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