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

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

In the global economy, traditional factors such as labor costs, access to financial resources and raw materials, and protected or regulated markets are no longer sources of competitive advantage.

Answer 3

False

Question 4

The sustainability of a competitive advantage depends upon the imitability of the core competence, the availability of substitutes for the core competence, and the rate of obsolescence of the core competence.

Question 5

Value is created when the firm exploits its core competencies or competitive advantages to meet or exceed the demanding standards of global competition.

Question 6

People are a critical resource for helping organizations learn how to continuously innovate.

Question 7

The challenge and difficulty of making effective decisions are implied by preliminary evidence suggesting that one-half of organizational decisions fail.

Question 8

Given enough time, any firm's competitive advantage can be imitated by its competitors.

Question 9

Firms and managers can learn from the failure resulting from a mistake-that is, what not to do when seeking competitive advantage.

Question 10

A global mind-set is free of the assumptions of a single country, culture, or context.

Question 11

Analysis of the firm's internal organization examines the firm's portfolio of resources but excludes the bundles of heterogeneous resources and capabilities.

Question 12

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

Question 13

According to the Opening Case, Apple's strong financial performance in poor economic times is largely credited to its innovation capabilities.

Question 14

The Chapter 3 Strategic Focus makes the point that the management development process at GE was valuable, rare, but easy to imitate and substitutable.

Question 15

Some resources, such as financial capital, have inherent value to the firm, while others are not inherently valuable.

Question 16

The Strategic Focus shows that GE's its success was primarily based on tangible rather than intangible resources.

Question 17

Firms achieve strategic competitiveness and earn above average returns when their unique core competencies are effectively acquired, bundled, and leveraged to take advantage of opportunities in the external environment in ways that create value for customers.

Question 18

Firms should seek to continually develop new core competencies because all core competencies have limited life spans.

Question 19

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 20

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

Question 21

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

Question 22

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

Question 23

Capabilities can be developed quickly in response to changes in the new competitive landscape.

Question 24

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

Question 25

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 26

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

Question 27

Every core competence is a capability and every capability is a core competence.

Question 28

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

Question 29

GE was effective in developing its human capital, but failed in transferring that knowledge throughout the organization.

Question 30

Judgment is the capability of making successful decisions when no obviously correct model or rule is available or when relevant data are unreliable or incomplete.

Question 31

Core competencies are the activities a company performs especially well compared with competitors and through which the firm adds unique value to its goods and services.

Question 32

Resources are bundled to create capabilities which in turn are the source of core competencies which are then the basis of competitive advantages.

Question 33

Only capabilities that are valuable, common, costly to imitate, and substitutable can be strategic capabilities.

Question 34

Trademarks and copyrights are examples of a firm's tangible resources.

Question 35

Coca-Cola's brand name is a tangible source of competitive advantage for the company.

Question 36

The more core competencies a firm has, the more likely it is to generate a sustained competitive advantage.

Question 37

Capabilities are often developed in specific functional areas such as manufacturing, R&D, and marketing.

Question 38

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

Question 39

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

Question 40

The executive leadership program at GE helped managers develop capabilities to deal with uncertainty, complexity, and intraorganizational conflict.

Question 41

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

Question 42

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

Question 43

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 44

One benefit of outsourcing is that it allows a firm to focus on those few value chain activities where it can produce the greatest value.

Question 45

Ryanair's unique capability is that it has been able to significantly cut costs but remain popular with its customers.

Question 46

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

Question 47

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

Question 48

Firms should outsource only activities where they can create the most value or where they are at an advantage compared to competitors.

Question 49

The essential purpose of the value chain is to create additional value without incurring significant costs while doing so and to capture the value that has been created.

Question 50

Capabilities may be costly to imitate if they are causally ambiguous or socially complex.

Question 51

Of Southwest Airline's competitors, Ryanair has been the most successful at imitating Southwest's low-cost strategy.

Question 52

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

Question 53

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

Question 54

The Internet has changed many aspects of the value chain for a broad range of firms.

Question 55

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

Question 56

An important capability of Ryanair is its excellent customer service, caring staff, and policy of having no hidden charges.

Question 57

At the conclusion of the internal analysis, firms must identify their strengths and weaknesses in resources, capabilities, and core competencies.

Question 58

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

Question 59

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

Question 60

If a core competence is emphasized when it is no longer competitively relevant, it can become a core rigidity.

Question 61

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 62

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 63

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 U.S.
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 64

Which event played a role in the loss of Apple's innovative abilities some years ago?

A) The downturn in the economy.
B) The departure of Steve Jobs as CEO.
C) Increased competition from Dell.
D) Having no resources to perform R&D.

Question 65

The overall lesson from the Strategic Focus about GE's capabilities was the importance of _________as a core competence

A) financial resources
B) physical resources
C) human resources
D) brand name and reputation

Question 66

____ 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 67

As discussed in the Strategic Focus, GE's executive leadership program helped managers develop capabilities to deal with all of the following EXCEPT

A) uncertainty.
B) complexity.
C) powerful buyers.
D) intraorganizational conflict.

Question 68

The key to maintaining competitive advantage and earning above-average returns over the long run is to effectively manage current core competencies

A) in a way that uniquely bundles and leverages the firm's existing resources.
B) and develop a continuous stream of new competitive advantages.
C) and imitate the core competencies of successful competitors.
D) in order to preserve and enhance them against the firm's competitors.

Question 69

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 70

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 71

Internal analysis enables a firm to determine what the firm

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

Question 72

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 73

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 74

According to the Opening case, Apple's strong financial performance in poor economic times is largely credited to its ____________.

A) financial resources.
B) innovation capabilities.
C) attractive external environment.
D) brand name.

Question 75

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 76

____ of organizational decisions fail.

A) Few
B) About one-quarter
C) About half
D) Most

Question 77

Value consists of

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

Question 78

The proper matching of what a firm can do with what it might do allows the firm to

A) balance the internal characteristics of the firm with the characteristics of the external environment.
B) overcome the rigidity and inertia resulting from a history of success.
C) develop its vision, pursue its mission, and select and implement its strategies.
D) develop core competencies based on human knowledge.

Question 79

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 80

____ is/are the source of a firm's ____, which is/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