Question 1

Next Door Cellular is a leading mobile network operator.Since most of the resources used by Next Door Cellular are easily available,the company's brand name is the only resource that distinguishes it from the other operators.No other competitor in the industry has a strong brand name like that of Next Door Cellular.This unique asset that has helped the company gain a competitive advantage will be considered as a(n)_____ resource in the VRIO framework.
A) tangible
B) mobile
C) imperishable
D) rare

Accepted Answer

This unique asset that has helped Next Door Cellular gain a competitive advantage 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 2

The competitive advantage that one firm has will be short-lived in an industry where
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 3

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 4

The perfectly competitive industry structure differs from the resource-based model in its view that
A) all firms have access to the same resources.
B) accessibility to bundles of resources differ across firms.
C) resources tend to be "sticky."
D) competencies differ across firms working in the same industry.

Accepted Answer

The critical assumptions of the resource-based model of a firm are fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure. 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 5

If a resource is common
A) competitive advantage will persist with one firm for a long period of time.
B) it will result in perfect competition.
C) it will result in greater resource immobility.
D) competitive parity will cease to exist.

Accepted Answer

If a resource is common, it will result in perfect competition where no firm is able to maintain a competitive advantage.

Question 6

In knowledge-intensive industries,the marginal costs after initial invention are
A) low.
B) high.
C) moderate.
D) unpredictable.

Accepted Answer

Although the initial investments to create 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.

Question 7

A firm's resource is most likely to be an internal strength and a core competency when the resource is
A) valuable but common.
B) valuable and costly to imitate.
C) easily accessible and mobile.
D) easy to substitute.

Accepted Answer

If the resource in question is valuable, rare, and costly to imitate, then it is an internal strength and a core competency.

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

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 in tangible assets over intangible assets.
B) Two Triangle Inc. has lost its market share because its resources are not mobile, that is 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 resources is difficult 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 10

Gene Craft Inc.is the market leader in the pharmaceutical 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 Gene Craft Inc.is most likely to be considered a rare resource that is best 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 chemical patents

Accepted Answer

Gene Craft's chemical 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 11

With regard to 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 expensive.
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 its patents and celebrity endorsements, other firms were able to more or less directly copy Crocs shoes, taking a big bite into its profits.

Question 12

The "Gold Crisps" potato wafers manufactured by True Foods Inc.have been the highest selling wafers in the market.Though the market for wafers is flooded with competitors,True Foods Inc.has been able to maintain its market position for a long time.This is mainly attributed to the unique taste of the wafers that comes from the unique natural flavoring used by the company.This competency of True Foods Inc.will be considered as a(n)_____ resource in the VRIO framework.
A) inexhaustible
B) rare
C) intangible
D) virtual

Accepted Answer

This competency of True Foods Inc. 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 13

Otion Inc.is a relatively new firm in the consumer electronics industry.The company's primary objective is to become the market leader in less than 5 years,for which it has to gain and sustain a competitive advantage.In the context of the VRIO framework,which of the following resources should Otion Inc.primarily focus on to achieve its objective?
A) quality standards, which are common and mandatory throughout the industry
B) inexpensive unskilled labor that is easily accessible by all companies
C) component parts that are sourced from competitors' suppliers
D) production systems that reduce costs by 30 percent below the current industry standards

Accepted Answer

Otion Inc. should primarily focus on production systems that reduce costs by 30 percent below industry standards to achieve its objective. A resource is valuable if it allows a firm to take advantage of an external opportunity and/or neutralize an external threat.

Question 14

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 used a title for its assembly system that was similar to the title of Gogo's system.
B) The competitor failed to apply for a patent of its assembly system.
C) The competitor infringed on Gogo's patent of the "diagonal assembly system."
D) The competitor produced an assembly system that was somewhat similar to 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 15

Trust Machines Inc.is a company that manufactures and markets consumer electronics.The unique microprocessors developed by the company contribute to its high resource immobility.According to the resource-based view of competitive advantage,which of the following is an implication of this situation?
A) The competitive advantage of Trust Machines Inc. will soon be lost.
B) The resource heterogeneity of Trust Machines Inc. is low within the industry.
C) The resources of Trust Machines Inc. are difficult to replicate or imitate.
D) The environment in which Trust Machines Inc. operates is closest to perfect competition.

Accepted Answer

According to the resource-based view of competitive advantage, the resources of Trust Machines Inc. are difficult to replicate or imitate. Because of resource immobility, the resource differences that exist between firms are difficult to replicate and, therefore, can last for a long time.

Question 16

If a resource is rare or unique to a particular firm,then
A) the industry in which the firm operates will experience perfect competition.
B) the mobility of the resource will be high.
C) the firm will be able to maintain a competitive advantage for a long period.
D) it will be less costly for rivals to imitate the resource.

Accepted Answer

If a resource is rare or unique to a particular firm, then the firm will be able to maintain a competitive advantage for a long period. A firm is on the path to competitive advantage only if it possesses a valuable resource that is also rare.

Question 17

Riya has recently started a restaurant in a commercial area where there are many other established restaurants and popular fast-food chains.Riya owns the plot on which her restaurant is located and this makes her cost of operations lower than the competitors.This factor allows her to offer her products at a competitive price.Riya has also invested a huge amount on the interiors of the restaurant and in equipping the kitchen with the latest appliances used by her competitors.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 interiors
B) the latest kitchen equipment that is at par with the restaurant's competitors
C) the restaurant's late entry into the market
D) the land 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 18

If Finolo and Ethver,companies that manufacture televisions,develop the same customer knowledge base and create products that provide the same customer appeal as Invoro,a market leader in consumer electronics,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 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) inexhaustible
C) tangible
D) perishable

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

EasyOpen Inc.gained a patent for an electronic corkscrew.Soon the company made a huge profit on this device.Recently,however,other firms have produced electronic corkscrews.As a result,EasyOpen lost its competitive advantage.Which of the following would most likely be the reason for this development?
A) EasyOpen failed to renew the patent after 10 years.
B) EasyOpen's patent expired after 20 years.
C) EasyOpen failed to copyright the corkscrew.
D) EasyOpen's copyright expired after 30 years.

Accepted Answer

IP protection does not last forever, however. Once the protection has expired the invention can be used by others. Patents usually expire 20 years after a patent was filed with the U.S. Patent and Trademark Office.

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

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

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?

The perfectly competitive industry structure differs from the resource-based model in its view that

If a resource is common

In knowledge-intensive industries,the marginal costs after initial invention are

A firm's resource is most likely to be an internal strength and a core competency when the resource is

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

With regard to the VRIO framework,Crocs Shoes was unable to sustain its competitive advantage primarily because its products were

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?

Trust Machines Inc.is a company that manufactures and markets consumer electronics.The unique microprocessors developed by the company contribute to its high resource immobility.According to the resource-based view of competitive advantage,which of the following is an implication of this situation?

If a resource is rare or unique to a particular firm,then

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