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Chapter 04 Internal Analysis: Resources, Capabilities, and Core Competencies

Multiple Choice Questions 1. Nike has come a long way from its humble beginnings. It has been able to outperform adidas in sales and become the undisputed leader in the athletic shoe and apparel industry. Which of the following statements accurately explains one of the main reasons for Nike's success?

A. It stopped spending money on celebrity endorsements and started restricting its expenditure for sponsoring only track and field sports stars. B. It made the unorthodox move to spend basically its entire budget for a specific sport on a single star athlete. C. It spread its marketing budget more widely. D. It focused on sponsoring future athletic superstars who embodied a likely success story. 2. _____ are best described as unique strengths, embedded deep within a firm, that allow a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost.

A. Resource leverages B. Core competencies C. Capital gains D. Equity reserves

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3. Dandelions Max is a consumer electronics company. It has acquired an edge over its competitors through its ability to provide breakthrough technology at the lowest price in the market. This advantage of Dandelions Max best exemplifies a _____.

A. marku p B. resource flow C. capital gain D. core competency 4. Organizational and managerial skills that find their expression in a company's structure, routines, and culture are referred to as _____.

A. tangible resources B. reserve s C. capital gains D. capabiliti es 5. Amazon.com's ability to provide the largest selection of items online, combined with superior IT systems and customer service, can be referred to as its _____.

A. equity reserve B. economic equity C. core competency D. capital gain 6. Which of the following is an example of a firm's resources?

A. Routine activities like order taking and invoicing customers, performed in a firm B. Assistance available from the government in the form of rules and regulations C. Assets such as land and building owned by a firm D. Liabilities such as bills payables and shortterm debts

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7. The management of a company is assessing the value of all the tangible resources the company owns. Which of the following will be included in this assessment?

A. The company's copyrights B. The company's brand equity C. The company's patents D. The company's machinery 8. Which of the following is an example of a firm's intangible resources?

A. The firm's cash at bank B. The firm's finished goods inventory C. The firm's organizational culture D. The firm's land and building 9. True Sync Inc. is a software company, which has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of True Sync Inc. will best enable it to gain and sustain a competitive advantage?

A. The resources of the company that are mobile B. The capital raised by the company from its shareholders C. The expertise acquired by the employees in the company D. The headquarters owned by the company 10. Which of the following statements accurately brings out the difference between tangible and intangible resources?

A. Tangible resources contribute to a company's competitive advantage, whereas intangible resources fail to do the same. B. Tangible assets can be bought on the open market, whereas intangible assets cannot be easily purchased. C. Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily. D. Tangible assets are difficult to imitate, whereas intangible assets can be easily replicated.

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11. GN Corp. and BC Inc. are two competing firms in the same industry. GN Corp.'s tangible assets are valued at $15 billion and its intangible assets are valued at $35 billion. BC Inc.'s tangible assets are valued at $5 billion and its intangible assets are valued at $45 billion. What can be concluded from this information?

A. It is easier to buy intangible assets with cash than tangible assets. B. It is likely that BC Inc. is better enabled than GN Corp. to gain and sustain a competitive advantage. C. It takes longer time to build tangible assets than intangible assets. D. There is no resource heterogeneity between the two firms, BC Inc. and GN Corp. as they operate in the same industry. 12. Coral Think Inc. is a new company in the publishing industry. It 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 Coral Think Inc. to acquire using its capital?

A. Invento ry B. Tools and equipment C. Land and building D. Brand name 13. Intangible assets add great value to a firm primarily because the firm's:

A. reputation and brand equity are accumulated quickly and can be leveraged easily. B. knowledge and culture take time to develop and are generally difficult to imitate. C. tangible assets require a higher degree of capital than its intangible assets. D. capabilities are by nature typically tangible.

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14. True Home Inc., Super Cart Inc., and Daily Things 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. Which of the following is an implication of the market condition indicated in this scenario?

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. 15. The resource-based view of a firm assumes that the:

A. resources of firms are highly scarce and hence the government interferes to ensure equal distribution. B. resources of firms are highly exhaustible and hence they cannot contribute to their competitive advantage. C. resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another. D. resource bundles of firms competing in the same industry tend to be highly mobile, moving easily from firm to firm. 16. 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 where One Electro Inc. lacks. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?

A. Resource equality B. Resource heterogeneity C. Resource mobility D. Resource maturity

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17. As a result of _____, a critical assumption in the resource-based model of a firm, the resource differences that exist between firms are difficult to replicate.

A. resource immobility B. resource homogeneity C. resource perishability D. resource equality 18. Maroon Inc. is a leading international apparel company. Competitors across the globe have failed to imitate Maroon Inc.'s production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Maroon 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 perishability C. Resource equality D. Resource immobility 19. 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. B. firm will have a sustained competitive advantage because of its unique resources. 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.

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20. 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. 21. 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 Machine Inc. will soon be lost. B. The resource heterogeneity of Trust Machine Inc. is low within the industry. C. The resources of Trust Machine Inc. are difficult to replicate or imitate. D. The environment in which Trust Machine Inc. operates is closest to perfect competition. 22. 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. 23. 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. 4-7 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

24. 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. 25. 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. 26. Onyx 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 Onyx Tech Inc. to increase its profitability by lowering its production costs. Thus, Onyx's competency in designing and manufacturing microprocessors will be considered a(n) _____ resource in the VRIO framework.

A. valuabl e B. inexhaustib le C. tangibl e D. perishab le

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27. 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. 28. 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 29. 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.

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30. 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. inexhaustib le B. rar e C. intangib le D. virtu al 31. Connect Plus Cellular is a leading mobile network operator. Since most of the resources used by Connect Plus Cellular is 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 Connect Plus 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. tangibl e B. mobil e C. imperishab le D. rar e 32. TrueCandy Inc., a confectionery manufacturing company, lost its competitive advantage when its strategy of placing kiosks at prominent locations throughout the state was followed by most of its competitors. In this scenario, TrueCandy Inc.'s loss of competitive advantage can be primarily attributed to _____.

A. resource immobility B. knowledge diffusion C. divergent production D. technology convergence

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33. When the knowledge of a valuable and rare resource diffuses throughout an industry, the:

A. firms in the industry will be better positioned to achieve competitive parity. B. ability to sustain a competitive advantage will be restricted to one firm. C. mobility and homogeneity of the resource will decrease. D. structure of the industry will no longer be perfectly competitive. 34. The "diagonal assembly system" was a production system pioneered by the automobile company Mova. During the period when diagonal assembly system was a rare resource, Mova was able to gain a temporary competitive advantage. Once competitors became aware of this unique competency and started applying it as an industry standard, Mova was unable to sustain its competitive advantage. This loss of Mova's competitive advantage can be attributed to _____.

A. divergent production B. resource immobility C. knowledge diffusion D. resource ambiguity 35. 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. nonsubstitutable.

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36. 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. 37. 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. 38. Sarah has recently started a restaurant in a commercial area where there are many other established restaurants and popular fast food chains. Sarah 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. Sarah 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 Sarah's business?

A. The investments made by Sarah 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 Sarah, which reduces cost of operations

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39. 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 40. True Moto Corp. (TMC) is a leading automobile company. The company has been able to sustain its competitive advantage p...