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

Question 1

Analyzing the internal environment enables a firm to determine what it can do by identifying resources, capabilities, and core competencies in the internal organization.

Answer 1

True

Question 2

Compared to tangible resources, intangible resources are an inferior source of core competencies.

Answer 2

False

Question 3

Technology has made it more difficult for companies to find ways to develop competitive advantages.

Answer 3

True

Question 4

Firms achieve strategic competitiveness and earn above-average returns by acquiring, bundling, and leveraging their resources for the purpose of taking advantage of opportunities in the external environment in ways that create value for customers.

Question 5

Value is measured by the variable and fixed costs associated with the production and marketing of a particular product compared with the revenue and profits the product generates.

Question 6

Resources must be combined to form capabilities, as illustrated by Chipotle, which linked fresh ingredients with several other resources, including the marketing and training of employees, as the foundation for customer service as a capability.

Question 7

Creating customer value is the source of the firm's potential to earn above-average returns.

Question 8

Although an organization's good reputation is a valuable resource that takes years of superior marketplace competence to achieve, it is not a good basis for building a competitive advantage because it can be destroyed almost instantly by bad publicity.

Question 9

In today's global economy, some resources that were traditionally critical to firms' efforts to sell goods are now less likely to be a source of competitive advantage.?

Question 10

Capabilities of an organization emerge spontaneously through the interaction of tangible and intangible resources.

Question 11

The foundation of many capabilities lies in the unique skills and knowledge of a firm's employees.

Question 12

Resources are the source of capabilities, some of which lead to the development of core competencies.  In turn, some core competencies may lead to competitive advantage.

Question 13

The learning generated by making and correcting mistakes is generally unimportant to efforts to create new capabilities and core competencies.

Question 14

The value of tangible assets, such as the firm's borrowing capacity and its physical plant, is high because these assets can be easily leveraged to derive additional value.

Question 15

Firms should seek to continually develop new core competencies because all core competencies guarantee above-average profit.

Question 16

Analyzing the internal environment enables a firm to determine what it might do by identifying what opportunities and threats exist.

Question 17

Walmart uses core competencies, such as information technology and distribution channels, to create value for its customers through its "everyday low prices."

Question 18

The need to meet quarterly earnings results causes managers to accurately examine the firm's internal organization.

Question 19

Understanding how to leverage the firm's unique bundle of resources and capabilities is a key outcome decision makers seek when analyzing the internal organization.

Question 20

By themselves, resources can allow firms to create value for customers as the foundation for earning above-average returns.

Question 21

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.

Question 22

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

Question 23

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

Question 24

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.

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

The firm with the most capabilities wins.

Question 30

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

Question 31

All competitive advantages have:

A) a limited life.
B) an expiration date.
C) the ability to earn above-average returns indefinitely.
D) the ability to lead to more competitive advantages.

Question 32

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.

Question 33

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

Question 34

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

Question 35

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

Question 36

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.

Question 37

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

Question 38

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

Question 39

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.

Question 40

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.

Question 41

The key to achieving competitiveness, earning above-average returns, and remaining ahead of competitors in the long run is to manage current core competencies:

A) in a way that uniquely bundles and leverages the firm's existing resources.
B) while simultaneously developing new ones.
C) and imitate the core competencies of successful competitors.
D) in order to preserve and enhance them against the firm's competitors.

Question 42

Capabilities typically come from:

A) individual resources.
B) one unique resource.
C) several outstanding resources used independently.
D) combining resources.

Question 43

A decision that results in failure:

A) is a career-ending event because it is so unusual.
B) often results from lack of accountability.
C) fosters organizational inertia.
D) allows for learning.

Question 44

______ is measured by a product's performance characteristics and its attributes for which customers are willing to pay.

A) Competitive advantage
B) Profit potential
C) Contribution
D) Value

Question 45

The most numerous of the following organizational characteristics are:

A) resources.
B) capacities.
C) capabilities.
D) core competencies.

Question 46

By emphasizing core competencies when formulating strategies, companies learn to compete primarily on the basis of:

A) intangible resources.
B) their primary activities.
C) firm-specific differences.
D) efficiency of production.

Question 47

Value consists of:

A) a product's proprietary characteristics and attributes for which customers are willing to pay.
B) a product's performance characteristics and attributes for which customers are willing to pay.
C) a product's proprietary characteristics and attributes for which customers consider paying.
D) a product's performance characteristics and attributes for which customers consider paying.

Question 48

It is increasingly difficult for a firm to develop and sustain a competitive advantage because of the effects of globalization and:

A) the rapid development of the Internet's capabilities.
B) extensive use of outsourcing within the borders of the United States.
C) the declining number of inventions and patents developed by U.S. citizens.
D) the simultaneous erosion of the U.S. work ethic and the U.S. education system.

Question 49

The proper matching of what a firm can do with what it might do:

A) balances the internal characteristics of the firm with the characteristics of the external environment.
B) overcomes the rigidity and inertia resulting from a history of success.
C) yields insights the firm requires to select its strategy.
D) develops core competencies based on human knowledge.

Question 50

The three conditions that characterize difficult managerial decisions concerning resources, capabilities, and core competencies are

A) complexity, rarity, and human intellectual capital.
B) uncertainty, complexity, and intraorganizational conflicts.
C) imitability, complexity, and interorganizational conflicts.
D) imitability, comparability, and human intellectual capital.

Question 51

The challenge and difficulty of making effective decisions are implied by preliminary evidence that ______ of organizational decisions fail.

A) one-fourth
B) one-fifth
C) one-tenth
D) one-half

Question 52

Which of the following is NOT a component of internal analysis leading to competitive advantage?

A) Tangible and intangible resources
B) Analysis of supplier power
C) Capabilities
D) Core competencies

Question 53

A person who has made a successful decision when no obviously correct model or rule is available or when relevant data are unreliable or incomplete has exercised:

A) foresight.
B) judgment.
C) effective strategic thinking.
D) decisiveness.

Question 54

______ are the source of a firm's ______, which are the source of the firm's ______.

A) Resources; capabilities; core competencies
B) Capabilities; resources; core competencies
C) Capabilities; resources; above-average returns
D) Core competencies; resources; competitive advantage

Question 55

All of the following are tangible resources EXCEPT:

A) production equipment.
B) distribution centers.
C) a firm's reputation.
D) formal reporting structures.

Question 56

One reason executive judgment can be a particularly important source of competitive advantage is that judgment:

A) allows a firm to build a strong reputation.
B) gains the loyalty of shareholders.
C) increases human intellectual capacity.
D) allows for superior bundling of resources.

Question 57

Which of the following is NOT required for a firm to achieve strategic competitiveness and earn above-average returns from its core competencies?

A) Core competencies must be acquired.
B) Core competencies must be bundled.
C) Core competencies must be internationalized.
D) Core competencies must be leveraged.

Question 58

Which of the following is NOT a factor affecting sustainability of a competitive advantage?

A) the availability of substitutes for a firm's core competence
B) the rate at which obsolescence of the core competence occurs because of environmental changes
C) the imitability of a core competence
D) the length of time the core competence has existed

Question 59

Judgment is the capacity for making a successful decision when:

A) there are multiple decision criteria.
B) no obviously correct model or rule is available.
C) cognitive biases create barriers to rationality.
D) there are contradictions between the firm's vision and its implemented strategy.

Question 60

Internal analysis enables a firm to determine what the firm:

A) can do.
B) should do.
C) will do.
D) might do.

Question 61

Valuable capabilities:

A) allow the firm to exploit opportunities in its external environment.
B) allow the firm to neutralize threats in its internal environment.
C) allow the firm to exploit opportunities or neutralize threats in its external environment.
D) allow the firm to neutralize opportunities in its internal environment.

Question 62

Capabilities:

A) tend to be developed through firm-wide interactions and reside in the firm as a whole.
B) tend to be concentrated in the support activities of the value chain.
C) tend to be concentrated in the primary activities of the value chain.
D) are often developed in specific functional areas.

Question 63

Innovation, consumer understanding, brand-building, go-to-market, and scale are activities that P&G performs well and are examples of the company's:

A) tangible resources.
B) intangible resources.
C) core competencies.
D) capabilities.

Question 64

Which of the following is NOT a reputational resource?

A) Customers' opinions that the firm's products are high quality
B) Employees' opinions of the firm as a terrible place to work
C) Suppliers' opinions that the firm pays its bills in a timely manner
D) Customers' opinions that using the firm's products makes them attractive

Question 65

Capabilities that other firms cannot develop easily are classified as:

A) costly to imitate.
B) rare.
C) valuable.
D) nonsubstitutable.

Question 66

______ is an example of a capability that is based in the functional area of distribution.

A) Effective use of logistics management techniques
B) Effective control of inventories through point-of-purchase data collection
C) Effective organizational structure
D) Product and design quality

Question 67

Compared to intangible resources, tangible resources are ______ constrained because they are ______ to leverage.

A) less; easier
B) less; harder
C) more; harder
D) more; easier

Question 68

Which of the following is a true statement about capabilities?

A) Capabilities are often developed in specific functional areas such as manufacturing, R&D, and marketing.
B) Valuable capabilities are based almost entirely on tangible resources.
C) Capabilities based on human capital are more vulnerable to obsolescence than other intangible capabilities because of the tendency for employee knowledge to become outdated.
D) The link between firm financial performance and capabilities is dependent on whether the capabilities are based on tangible or intangible resources.

Question 69

______ can be viewed as the capacity to take action.

A) Strategic assets
B) Human capital
C) Core competencies
D) Functional capabilities

Question 70

To provide a sustainable competitive advantage, a capability must satisfy all of the following criteria EXCEPT:

A) be technologically innovative.
B) be hard for competing firms to duplicate.
C) be without good substitutes.
D) be valuable to customers.

Question 71

From a customer's point of view, for an organization's capability to be a core competence it must be:

A) inimitable and unique.
B) valuable and unique.
C) inimitable and nonsubstitutable.
D) valuable and nonsubstitutable.

Question 72

Tangible resources include:

A) assets that are people-dependent, such as know-how.
B) assets that can be observed and quantified.
C) organizational culture.
D) a firm's reputation.

Question 73

The critical executive skill of the current business age is the ability to:

A) manage technological innovation.
B) manage human intellect.
C) initiate change and overcome inertia.
D) coordinate tangible and intangible resources.

Question 74

When firms lay off employees, they are:

A) treating employees as an intangible resource.
B) recognizing the reduced value of labor in the value chain.
C) eroding the organization's knowledge resources.
D) temporarily sacrificing a tangible asset that is easily replaced.

Question 75

Because firms combine tangible and intangible resources to create capabilities:

A) these capabilities are fragile and subject to sudden loss of value.
B) capabilities are often based on developing, carrying, and exchanging information and knowledge through the firm's human capital.
C) capabilities are easily transferred from one firm to another as employees change jobs.
D) these types of capabilities are considered primary activities in the value chain.

Question 76

Compared to tangible resources, intangible resources are:

A) of less strategic value to the firm.
B) less likely to be the focus of strategic analysis.
C) a superior source of capabilities.
D) more likely to be reflected on the firm's balance sheet.

Question 77

A major department store chain has a strict policy of banning photographs or videos of its sales floor or back-room operations. It also does not allow academics to conduct studies of it for publication in research journals. In fact, some of its own top managers refer to the management's policies on secrecy as "verging on paranoid." These policies indicate that the top management of the firm believes the organization's core competencies are:

A) causally ambiguous.
B) unobservable.
C) imitable.
D) common.

Question 78

An investor is considering buying a restaurant that has been in operation for a number of years. The restaurant has a highly regarded chef and many long-term kitchen and wait staff who work together smoothly. It has a reputation for dishes of consistently high quality and an appealing dining atmosphere. What should the investor consider when making a decision?

A) The investor will find that the success of this restaurant is so heavily based on human resources that the business will likely be subject to inertia in the future.
B) The investor will find that the restaurant's financial statements undervalue the true value of its resources.
C) The investor should be aware that intangible assets are difficult to leverage into additional businesses.
D) The investor should search for a firm that has competitive advantages based on tangible resources.

Question 79

Compared to tangible resources, intangible resources are ______ and ______.

A) less visible; more difficult to copy.
B) less visible; less difficult to copy.
C) more visible; more difficult to copy.
D) more visible; less difficult to copy.

Question 80

Several months ago, a restaurant developed a new appetizer that is a hit with customers. Many customers go to the restaurant just for the appetizer, and it was at the center of a recent highly positive review by a food critic. Preparation involves common ingredients and average culinary skills but requires a very high oven temperature, which significantly increases utility costs. Several competing restaurants have since added their own version of the appetizer to their menu. Which criterion for assessing capabilities/core competencies is met?

A) The restaurant has the capability to develop something that is valuable.
B) The restaurant has the capability to develop something that is rare.
C) The restaurant has the capability to develop something that is costly to imitate.
D) All of these criteria are met.