Question 1

Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which One Electro Inc. lags behind. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?
A) resource value
B) resource heterogeneity
C) resource immobility
D) resource imitation

Accepted Answer

The scenario illustrates resource heterogeneity. In the resource-based view, a firm is assumed to be a bundle of resources, capabilities, and competencies. The first critical assumption-resource heterogeneity-is that bundles of resources, capabilities, and competencies differ across firms. Resource immobility, the tendency of resources to be "sticky," is not discussed in this example. Value and imitability are aspects of the VRIO framework, not critical assumptions of the resource-based view.

Question 2

You are the manager of Impromptu Printing, a leading print shop. Impromptu's resources include a highly experienced staff and state-of-the-art printing presses. However, your closest competition has started to cut into your market share by offering same-day turnaround on most orders. Although your staffing and equipment is not optimized for rapid production, you decide to start offering a same-day guarantee to your customers. According to the resource-based view, what is wrong with this decision?
A) You have failed to take into account resource immobility.
B) Customers tend to have negative opinions of firms that imitate other firms.
C) Employees are often resistant to changes in strategy.
D) Your business is not organized to capture value.

Accepted Answer

One of the critical assumptions of the resource-based view is resource immobility, or the idea that resources are "sticky" and hard to replicate. By offering a service that you do not have the resources to provide, you risk disappointing and alienating your customers, which could lead to further losses of market share.

Question 3

Riya has recently started a restaurant in a commercial area that already has many other established restaurants and popular fast-food chains. Riya owns the building in which her restaurant is located, rather than leasing premises as her competitors do. This factor allows her to offer her products at a more competitive price. Riya has also invested a huge amount in designing the restaurant's interior and in equipping the kitchen with the appliances that are most widely used in her industry. In this scenario, which of the following is the most valuable resource for Riya's business?
A) the investments made by Riya on the restaurant's interior
B) the type of kitchen equipment widely used in her industry
C) the restaurant's late entry into the market
D) the building owned by Riya, which reduces cost of operations

Accepted Answer

A resource is valuable if it helps a firm increase the perceived value of its product or service in the eyes of consumers, either by adding attractive features or by lowering price because the resource helps the firm lower its costs.

Question 4

According to an evaluation using the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were
A) invaluable and common.
B) easy to imitate.
C) extremely rare.
D) non-substitutable.

Accepted Answer

Competitive advantage cannot be sustained if the underlying capability can easily be replicated and can thus be directly imitated. Despite Crocs' patents and celebrity endorsements, other firms were able to more or less directly copy Crocs shoes, taking a big bite out of its profits.

Question 5

Threadbare Industries is a new high-end textile company that has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Threadbare Industries to acquire using its capital?
A) a new CEO
B) software
C) a lease for a new building
D) brand name

Accepted Answer

A brand name will be the most difficult for Threadbare Industries to build merely using its capital. Tangible assets, such as buildings or computer servers, can be bought on the open market by any comers who have the necessary cash. However, a brand name must be built, often over long periods of time.

Question 6

How are the critical assumptions of the resource-based model of a firm fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure?
A) In the resource-based model, resources are freely available and mobile, whereas in the perfectly competitive industry structure, resources are highly immobile.
B) In perfect competition, it is extremely difficult to replicate the resource bundles of a firm, whereas in the resource-based model, it is extremely easy to imitate them.
C) In perfect competition, all firms have access to the same capabilities, whereas in the resource-based model, resource differences exist between firms in the same industry.
D) In the resource-based model, only physical assets of a firm are considered as resources, whereas in perfect competition, a firm's capabilities and competencies are also considered as resources.

Accepted Answer

In the resource-based view, a firm is assumed to be a bundle of resources, capabilities, and competencies. The first critical assumption-resource heterogeneity-is that bundles of resources, capabilities, and competencies differ across firms. In perfect competition, all firms have access to the same resources and capabilities, ensuring that any advantage that one firm has will be short-lived.

Question 7

The "Natural Nourishment" granola bars manufactured by Global Good Foods have been the top-selling granola bars in the market. Though the market for granola bars is flooded with competitors, Global Good has been able to maintain its market position for a long time. This is mainly attributed to the pleasant texture of its granola, which comes from a proprietary processing technique used by the company. This competency of Global Good Foods will be considered as a(n) ________ resource in the VRIO framework.
A) imitable
B) rare
C) intangible
D) organizational

Accepted Answer

This competency of Global Good Foods will be considered as a rare resource in the VRIO framework. A resource is rare if the number of firms that possess it is less than the number of firms it would require to reach a state of perfect competition.

Question 8

True Moto Corp. (TMC) is a leading automobile company. The company has been able to sustain its competitive advantage primarily due to its high-quality and efficient electric motors. Most of its competitors have failed to develop similar electric motors at a reasonable price. Which of the following resource attributes listed in the VRIO framework has helped TMC sustain its competitive advantage?
A) resource mobility
B) inexhaustible nature
C) intangibility of the company's resource
D) high costs involved in imitation

Accepted Answer

A resource is costly to imitate if firms that do not possess the resource are unable to develop or buy the resource at a reasonable price. If the resource in question is valuable, rare, and costly to imitate, then it is an internal strength and a core competency.

Question 9

Facing stiff competition in the e-reader market, Sumac Industries wants to protect its competitive advantage by increasing the perceived value of its reader. Sumac's best strategy to accomplish this would be to
A) increase the cost of production to add innovative new features.
B) highlight the number of celebrities who use Sumac e-readers.
C) lower the retail price of its e-reader to attract new customers.
D) try to imitate some of the features found in competing products.

Accepted Answer

A valuable product enables a firm to improve its profit margin by increasing sales without raising production costs. By touting the use of Sumac e-readers by celebrities, Sumac can differentiate itself from competitors and improve its perceived value, leading to higher sales. Adding expensive new features or lowering the retail price, on the other hand, will erode Sumac's profit margins, while imitating competitors will make it difficult for Sumac to differentiate itself.

Question 10

Home Value Inc., Max Cart Inc., and Nice Necessities Inc. are three consumer-product retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Judging from the market conditions described in this scenario, which of the following statements is true?
A) Resource immobility of the firms will be low.
B) The industry structure will be far from perfect competition.
C) Barriers to entry within the industry will be high.
D) Any advantage that one firm has will be short-lived.

Accepted Answer

If a resource is common, it will result in perfect competition where no firm is able to maintain a competitive advantage. In perfect competition, all firms have access to the same resources and capabilities, ensuring that any advantage that one firm has will be short-lived.

Question 11

In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility?
A) AP Corp. has earned a good reputation among its shareholders by investing more heavily in equipment than in building up brand equity.
B) Two Triangle Inc. has lost its market share because its resources are rigid, inflexible, and static.
C) Blue Elixir Corp. has been able to gain a competitive advantage because of its ability to efficiently move its resources from one manufacturing unit to another.
D) True 3 Inc. has been able to outperform its competitors because the uniqueness of its employee experience is difficult for competitors to replicate.

Accepted Answer

In the resource-based model of competitive advantage, resource immobility refers to the assumption that resources of a firm tend to be "sticky" and do not move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and, therefore, can last for a long time.

Question 12

The competitive advantage that one firm has will be short-lived in an industry in which
A) resource immobility is high.
B) perfect competition exists.
C) resource heterogeneity is high.
D) capabilities of a firm are not easily replicable.

Accepted Answer

In perfect competition, all firms have access to the same resources and capabilities, ensuring that any advantage that one firm has will be short-lived.

Question 13

Brain Boost Inc. is a leading educational toy company. Competitors across the globe have failed to imitate Brain Boost's production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Brain Boost Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate?
A) resource homogeneity
B) resource cost
C) resource substitution
D) resource immobility

Accepted Answer

The scenario best illustrates resource immobility. A critical assumption of the resource-based model-resource immobility-is that resources tend to be "sticky" and don't move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and, therefore, can last for a long time.

Question 14

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the
A) rival firms have better accessibility to quality resources, which they will be able to acquire and deploy to their benefit.
B) firm will have a sustained competitive advantage because of its unique resources that are difficult for others to replicate that are difficult for others to replicate.
C) competitors can easily replicate or copy the firm's resource bundles and capabilities.
D) resources of the firm cannot be effectively deployed within its own organization.

Accepted Answer

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the firm will have a sustained competitive advantage due to its unique resources. In the resource-based view, resource immobility is an assumption that resources of a firm tend to be "sticky" and do not move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and, therefore, can last for a long time.

Question 15

Gladiator Apparel is the market leader in the sportswear industry. Though most of its resources are common to those of its competitors, a few rare resources have helped the company gain and sustain a competitive advantage. Which of the following assets of Gladiator Apparel is most likely to be considered a rare resource that is contributing to its competitive advantage?
A) the company's land and buildings
B) the company's plant and machinery
C) the company's raw material supplies
D) the company's design patents

Accepted Answer

Gladiator's design patents would be considered a rare resource that is best contributing to its competitive advantage. A resource is rare if only one or a few firms possess it.

Question 16

The "diagonal assembly system" was a production system pioneered by the automobile company Gogo. Recently, Gogo was able to sue a competitor and won the suit, thereby receiving $100 million in damages. Which of the following would most likely enable Gogo to win such a lawsuit?
A) The competitor ran advertising that criticized Gogo's assembly system.
B) The competitor failed to apply for a patent of its own assembly system.
C) The competitor infringed on Gogo's patent of the "diagonal assembly system."
D) The competitor developed an assembly system that worked on a newer theory than Gogo's system.

Accepted Answer

A company can often win a lawsuit against a competitor when the court finds that the competitor infringed on patents owned by the company.

Question 17

Invoro is a market leader in consumer electronics. If Finolo and Ethver, companies that manufacture televisions, develop the same customer knowledge base and create products with the same customer appeal as Invoro, then
A) Finolo and Ethver will have a VRIO resource.
B) Invoro will have a resource that is valuable but no longer rare.
C) Invoro will have a sustainable competitive advantage in the industry.
D) Invoro will have a resource that is rare but no longer valuable.

Accepted Answer

If Finolo and Ethver develop the same customer knowledge base and create products that provide the same appeal, then Invoro will have a resource that is still valuable but no longer rare.

Question 18

Due to resource immobility, a critical assumption in the resource-based model of a firm, the
A) competitive advantage of a firm exists for a short period of time.
B) resource bundles of a firm can be easily imitated by competitors.
C) resource differences between firms last for a long time.
D) competencies and capabilities of all firms in an industry are similar.

Accepted Answer

Due to resource immobility, a critical assumption in the resource-based model of a firm, the resource differences between firms last for a long time. Because of resource immobility, the resource differences that exist between firms are difficult to replicate and, therefore, can last for a long time.

Question 19

Crystal Tech Inc.'s competency in designing and manufacturing efficient microprocessors has made its laptops the most advanced computers in the market. This competency, along with the just-in-time manufacturing system, has enabled Crystal Tech Inc. to increase its profitability by lowering its production costs. Thus, Crystal's competency in designing and manufacturing microprocessors will be considered a(n) ________ resource in the VRIO framework.
A) valuable
B) substitute
C) imitable
D) organized

Accepted Answer

Crystal's competency in designing and manufacturing microprocessors will be considered a valuable resource in the VRIO framework. A resource is valuable if it helps a firm increase the perceived value of its product or service in the eyes of consumers, either by adding attractive features or by lowering price because the resource helps the firm lower its costs.

Question 20

Salubre Pharmaceuticals invested $3.4 billion dollars to develop a new drug for individuals with diabetes. After Salubre receives FDA approval of the drug, its marginal cost to produce the drug for market will be
A) low.
B) high.
C) moderate.
D) unpredictable.

Accepted Answer

Although the initial investments to create the first version of a new product or service is quite high in many knowledge-intensive industries, the marginal cost (the cost to produce the next unit) after initial invention is generally quite low.

Quiz 4: Internal Analysis: Resources, Capabilities, and Core Competencies

According to an evaluation using the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were

Threadbare Industries is a new high-end textile company that has raised sufficient capital from multiple sources. It is planning to use its capital to purchase certain assets. Which of the following assets will be the most difficult for Threadbare Industries to acquire using its capital?

How are the critical assumptions of the resource-based model of a firm fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure?

Facing stiff competition in the e-reader market, Sumac Industries wants to protect its competitive advantage by increasing the perceived value of its reader. Sumac's best strategy to accomplish this would be to

In the context of the resource-based model of competitive advantage, which of the following scenarios best exemplifies resource immobility?

The competitive advantage that one firm has will be short-lived in an industry in which

In the context of the resource-based model of competitive advantage, if a successful firm exhibits resource immobility it means that the

The "diagonal assembly system" was a production system pioneered by the automobile company Gogo. Recently, Gogo was able to sue a competitor and won the suit, thereby receiving $100 million in damages. Which of the following would most likely enable Gogo to win such a lawsuit?

Invoro is a market leader in consumer electronics. If Finolo and Ethver, companies that manufacture televisions, develop the same customer knowledge base and create products with the same customer appeal as Invoro, then

Due to resource immobility, a critical assumption in the resource-based model of a firm, the

Salubre Pharmaceuticals invested $3.4 billion dollars to develop a new drug for individuals with diabetes. After Salubre receives FDA approval of the drug, its marginal cost to produce the drug for market will be