Question 1

A firm's formal reporting structure is a description of who in an organization reports to whom and is often embedded in a firm's organizational chart.

Accepted Answer

A formal reporting structure defines the hierarchy of authority and outlines the lines of communication within the organization. It is usually depicted in an organizational chart.

Question 2

In general, imitation can occur in one of two ways: direct duplication or substitution.

Accepted Answer

Direct duplication involves copying the exact behavior or action of the model, while substitution involves replacing some elements of the behavior or action with different components while still maintaining the overall pattern or structure of the original behavior or action.

Question 3

If a resource or capability is valuable and rare but not costly to imitate, exploiting this resource will generate a sustainable competitive advantage for a firm.

Accepted Answer

If a resource or capability is not costly to imitate, then other firms in the industry can easily replicate it, leading to a loss of the competitive advantage. Therefore, for a sustainable competitive advantage, a resource or capability should be valuable, rare, and costly to imitate.

Question 4

________ in the RBV are defined as the tangible and intangible assets that a firm controls that it can use to conceive and implement its strategies.

Accepted Answer

Resources in the RBV refer to the assets that a firm controls, such as physical resources (e.g. equipment, facilities), financial resources (e.g. cash, credit lines), human resources (e.g. employees, managers), and intangible resources (e.g. patents, brand reputation). These resources can provide the foundation for a firm's capabilities, which allow it to conceive and implement its strategies. Management controls and compensation policies may be important for leveraging these resources, but they are not the resources themselves.

Question 5

Compensation policies are the ways that firms pay employees, and such policies create incentives for employees to behave in certain ways.

Accepted Answer

Compensation policies can include salary, bonuses, stock options, and other benefits. The way that these are structured can create incentives for employees to work harder, perform better, or stay with the company. For example, a salesperson who receives a commission on each sale may be motivated to sell more products, while a manager who receives a bonus for meeting certain performance goals may be motivated to improve the performance of their team.

Question 6

The interpersonal relations among managers in a firm, a firm's culture, and a firm's reputation among suppliers and customers can all act to make a firm's resources and capabilities socially complex.

Accepted Answer

Interpersonal relations, organizational culture, and reputation can all affect how resources and capabilities are leveraged, making them socially complex.

Question 7

Tacit cooperation is only a viable strategy when an industry is perfectly competitive.

Accepted Answer

Tacit cooperation involves informal agreements between competitors to limit competition or coordinate behavior. This is illegal in many countries under antitrust laws. Therefore, it is not a viable strategy in any industry. Even in perfectly competitive industries, tacit cooperation would lead to inefficiencies and higher prices for consumers.

Question 8

Any actions that a firm takes that have the effect of reducing the level of rivalry in an industry that also do not require firms in an industry to negotiate with each other can be thought of as explicit cooperation.

Accepted Answer

Explicit cooperation involves direct communication and negotiation between firms, such as forming cartels, whereas actions reducing rivalry without negotiation are considered implicit or tacit cooperation.

Question 9

Decisions made by other firms given the strategic choices of a particular firm define the nature of the competitive dynamics that exist in an industry.

Accepted Answer

The decisions made by other firms in response to a particular firm's strategic choices have a significant impact on the competitive dynamics in that industry. This is because competitors often react strategically to each other's moves, and these reactions can shape the overall competitive landscape within an industry. As such, understanding the competitive dynamics in an industry requires considering the strategic choices made by all firms, not just a single firm's decision-making.

Question 10

One reason a firm may not respond to another firm's competitive advantage is because it does not have the resources or capabilities to do so.

Accepted Answer

If a firm lacks the necessary resources or capabilities to respond to a competitor's advantage, it may not be able to effectively compete and may choose to focus on other areas where it has a better chance of success.

Question 11

If there is a conflict between the resources a firm controls and the firm's organization, the resources should be changed.

Accepted Answer

If there is a conflict between the resources a firm controls and the firm's organization, it is usually more appropriate to change the organization to better align with the available resources. Resources are valuable assets for a firm, and it is important to utilize them effectively in order to achieve organizational goals. Changing resources without considering organizational structure and strategy can lead to suboptimal outcomes.

Question 12

Whenever the sources for competitive advantage are widely diffused across people, locations, and processes in a firm, those sources will be costly to imitate.

Accepted Answer

When sources of competitive advantage are widely diffused across various aspects of a firm, it becomes difficult and costly for competitors to replicate or imitate those sources. This is because they would have to invest significant resources in adopting the same strategies, developing similar processes, and hiring the right people. As a result, the competitive advantage of the original firm is likely to be sustained over a longer period of time.

Question 13

Most technological developments in an industry are diffused throughout firms in that industry in a relatively brief period of time, but only if the technology in question has not been patented.

Accepted Answer

Most technological developments in an industry may not necessarily be diffused throughout firms in that industry even if the technology is not patented. Factors such as high costs of adoption, lack of information, and the reluctance to change can all slow down the diffusion of technology.

Question 14

If all a firm does is create value in the same way as its competitors, the best performance it can ever expect to gain is competitive parity.

Accepted Answer

If a firm is not able to create unique value or differentiate itself from its competitors, it will be competing solely on price and features, leading to competitive parity. Ultimately, this means that the firm will have a difficult time gaining a competitive advantage and may struggle to achieve superior performance over time.

Question 15

When tacit cooperation has the effect of reducing supply and increasing prices, it is known as tacit collusion.

Accepted Answer

Tacit collusion refers to a situation where firms cooperate with each other, without formally agreeing to do so, with the aim of reducing output and increasing prices. This type of cooperation is often difficult to detect and can lead to anticompetitive outcomes for consumers.

Question 16

For Southwest Airlines, competitive advantage falls into two big categories: financial decisions made by Southwest and Southwest's approach to managing people.

Accepted Answer

The answer of For Southwest Airlines, competitive advantage falls into...

Question 17

A sustained competitive advantage can be competed away by strategic imitation if competing firms face an important cost disadvantage in duplicating a successful firm's valuable resources.

Accepted Answer

A sustained competitive advantage cannot be easily competed away by strategic imitation, even if competing firms face a cost disadvantage in duplicating valuable resources. This is because a firm's competitive advantage is not just the sum of its resources, but also the way in which these resources are integrated and used. Competitors may not be able to replicate the firm's unique combination of resources, capabilities, and organizational processes that form the basis of its competitive advantage. Therefore, strategic imitation is often risky and may not lead to the same level of success as the original firm.

Question 18

In the end, competitive advantage is so important to a firm's success, it must remain the sole property of senior management.

Accepted Answer

While competitive advantage is important, it is not solely the property of senior management. It is the result of a company's combined efforts and resources, including those of employees and other stakeholders. A firm's success depends on leveraging everyone's strengths and talents, not just those of senior management.

Question 19

The ability of firms to acquire, develop, and use resources often depends upon their place in time and space, and firms that do not have space-and-time-dependent resources face a significant cost disadvantage in obtaining and developing them.

Accepted Answer

The statement is true. The resources that firms acquire, develop, and use often depend on their location and the time they operate in, and firms without such resources may have to incur significant costs to obtain and develop them.

Question 20

A process is said to be path dependent when imitating firms are not able to understand the relationship between the resources and capabilities controlled by a firm and that firm's competitive advantage.

Accepted Answer

A process is path dependent when the outcomes are influenced by the historical path taken, not when firms cannot understand the relationship between resources, capabilities, and competitive advantage.

Quiz 3: Evaluating a Firms Internal Capabilities