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Chapter 04 Evaluating a Company’s Resources, Capabilities, and Competitiveness Answer Key

Multiple Choice Questions

1. In evaluating how well a company's strategy is working, the best place to start is with a

A. SWOT analysis.B. clear view of what that strategy entails.C. value chain analysis.D. competitive strength analysis.E. financial ratio analysis.In evaluating how well a company's strategy is working, the best place to start is with a clear view of what that strategy entails. The first thing to examine is the company's competitive approach.

AACSB: Analytical Thinking

Accessibility: Keyboard NavigationBlooms: Remember

Difficulty: 1 EasyLearning Objective: 04-01 How to take stock of how well a company's strategy is working.

Topic: Organizational Weaknesses

2. Which of the following is NOT one of the six questions that comprise the task of evaluating a company's resources and competitive position?

A. What are the company's most profitable geographic market segments?B. How well is the company's present strategy working?C. How do a company's value chain activities impact its cost structure and customer value proposition?D. Is the company competitively stronger or weaker than key rivals?E. What strategic issues and problems merit front-burner managerial

attention?Evaluating a company's resources and competitive position does not involve the following question: What are the company's most profitable geographic market segments?





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3. Which of the following is NOT an analytical tool for revealing a company's competitiveness and for helping to match the strategy to the company's own particular circumstances?

A. resource and capability analysisB. SWOTC. value chain analysisD. best practice

conceptE. competitive strength analysisA best practice is a method of performing an activity that consistently delivers superior results compared to other approaches and not an analytical tool for revealing a company's competitiveness.





4. The best indicator of how well a company's strategy is working is whether the company is

A. achieving its stated financial objectives, its financial performance equates to the industry average, and market share gains reflect short-term preferences for capacity maximization.

B. attentive to its poor execution in functional areas, business goals are stretch, and the value proposition has a product focus.

C. geared to initiatives designed to build market share and to promote corporate responsibility.D. achieving its stated financial and strategic objectives, its financial performance is better than the

industry average, and it is gaining customers and increasing its market share.E. geared to initiatives to promote corporate social responsibility.The best indicator of how well a company's strategy is working is whether the company is achieving its stated financial and strategic objectives, its financial performance is above the industry average, and it is gaining customers and increasing its market share.




Topic: Benchmarking

5. Key financial ratios that help to indicate how well a company's strategy is working DO NOT include

A. return on stockholders equity.B. gross profit margin.C. working capital.D. market share.E. long-term debt to equity.Market share is an indicator of competitive performance but not a financial ratio.






Topic: Benchmarking

6. Key financial ratios that help to measure a company's profitability DO NOT include

A. inventory turnover.B. return on capital employed.C. net return on assets.D. operating profit margin.E. return on stockholders' equity.Inventory turnover is an indicator of asset utilization activity but not indicator of profitability.




Topic: Benchmarking

7. One important indicator of how well a company's present strategy is working is whether

A. it has more core competencies than close rivals.B. its strategy is built around at least two of the industry's key success factors.C. the company is achieving its financial and strategic objectives and whether it is an above-average

industry performer.D. it is customarily a first-mover in introducing new or improved products (a good sign) or a late-

mover (a bad sign).E. it is subject to weaker competitive forces and pressures than close rivals (a good sign) or stronger

competitive forces and pressures (a bad sign).One important indicator of how well a company's present strategy is working is whether the company is achieving its financial and strategic objectives and whether it is an above-average industry performer.


Accessibility: Keyboard NavigationBlooms: UnderstandDifficulty: 2 Medium

Learning Objective: 04-01 How to take stock of how well a company's strategy is working.Topic: Benchmarking



8. Key "functional" strategies of a company include all of the following EXCEPT

A. R&D, technology, and product design strategies.B. production and information technology and supply chain management strategies.C. human resource and finance strategies.D. sales, marketing, and distribution strategies.E. alliance and partnerships as well as merger and acquisition growth strategies.Key "functional" strategies do not include alliance and partnerships as well as merger and acquisition growth strategies (which form part of the business strategy of the company).




Topic: Types of Functional Strategies

9. A company's resources and capabilities represent

A. the firm's net working capital and related determinants for measuring operating performance and capabilities.

B. the firm's competitive assets that determine its competitiveness and ability to succeed in the marketplace.

C. whether the firm has the industry's most efficient value chain.D. the management's source of funding of new strategic initiatives.E. positive trends with relevant cultural factors related to buyers' choices and product modifications.A company's resources and capabilities represent its competitive assets and are determinants of its competitiveness and ability to succeed in the marketplace.



Difficulty: 2 MediumLearning Objective: 04-02 Why a company's resources and capabilities are centrally important in giving the company a competitive edge

over rivals.Topic: Organizational Weaknesses



10. A powerful tool for sizing up the company's competitive assets and determining whether they can provide the foundation necessary for competitive success in the marketplace is termed

A. VRIN tests.B. SWOT analysis.C. competitive strength analysis.D. financial and asset management analysis.E. value chain analysis.VRIN tests can be a powerful tool for sizing up a company's resources and capabilities. The competitive power of a resource or capability is measured by how many of four specific VRIN tests it can pass. These tests are referred to as the VRIN tests for sustainable competitive advantage—VRIN is a shorthand reminder standing for Valuable, Rare, Inimitable, and Nonsubstitutable. The first two tests determine whether a resource or capability can support a competitive advantage. The last two determine whether the competitive advantage can be sustained.



Difficulty: 1 EasyLearning Objective: 04-02 Why a company's resources and capabilities are centrally important in giving the company a competitive edge


11. The difference between a resource and a capability is

A. a resource is a productive input or competitive asset, whereas a capability is the capacity of the firm to perform some internal activity competently.

B. a resource is a reserve supply or back-up supply function, whereas a capability is the ability to manage the resource function.

C. a resource is a mechanism used for carrying out some responsibility, whereas a capability possesses the ability to monitor the resource.

D. a resource represents the firm's fixed assets, whereas a capability defines whether the firm is competent to perform some function with these assets.

E. a resource represents the firm's human assets, whereas a capability defines the skills and knowledge of these human resources.

The difference between a resource and a capability is that a resource is a productive input or competitive asset, whereas a capability is the capacity of the firm to perform some internal activity competently.







12. A useful way to identify a company's resources is to view them as

A. divided into two main categories, tangible and intangible.B. productive inputs or competitive assets, except human assets and intellectual capital, which are

considered capabilities or competencies.C. physical resources, such as the company's brand, image, and reputation assets.D. an inventory or a collection of the firm's strengths, weaknesses, opportunities, and threats.E. intangible resources such as patents, copyrights, and technological

processes.A useful way to identify a company's resources is to look for them within two main categories: tangible and intangible.





13. A capability of the firm is NOT considered to be

A. the capacity of a firm to competently perform some internal activity.B. referred to as a

competence.C. developed and enabled through the deployment of a company's resources or some combination of its

resources.D. a competitively valuable resource.E. related to the level of resources available.A resource is a competitive asset that is owned or controlled by a company; a capability is the capacity of a company to competently perform some internal activity. Capabilities are developed and enabled through the deployment of a company's available resources.



Learning Objective: 04-02 Why a company's resources and capabilities are centrally important in giving the company a competitive edge over rivals.




14. When strategic managers assess the competitive power of company resources, what matters is

A. whether it helps differentiate a company's product offering from the product offerings of rival firms.

B. whether the resource is really competitively valuable, if it is rare and something competitors lack, how hard it is to copy or imitate, and how easily it can be trumped by the substitute resource strengths and competitive capabilities of rivals.

C. whether customers are aware of the resource and view it positively enough to boost the company's brand name reputation.

D. whether the resource is something rivals are unable to perform, if it is an important differentiating product or service feature, how strongly it contributes to the company's brand image, and if it is the foundation of a cost-based advantage.

E. whether the resource is technology-based or based on superior marketing know-how.The competitive power of a company resources is predicated upon whether the resource is really competitively valuable, if it is rare and something competitors lack, how hard it is to copy or imitate, and how easily it can be trumped by the substitute resource strengths and competitive capabilities of rivals.





15. Tangible resources DO NOT include

A. physical resources.B. financial resources.C. human assets.D. technological assets.E. organizational resources.Tangible resources do not include human assets, because their knowledge and experience can be said to be intangible.







16. Tangible resources include

A. human assets and intellectual capital, which can include the talent of the work force and the creativity and innovativeness of certain personnel.

B. reputational assets, which can include the company's reputation for quality, service, and reliability as well as their reputation for fair dealings with suppliers.

C. relationships such as alliances that provide access to technologies, specialized know-how, or geographic markets.

D. technological assets such as patents, copyrights, and innovation technologies.E. company culture and incentive system, which includes the norms of behavior and business

principles.Tangible resources include technological assets such as patents, copyrights, innovation technologies, production technology, and technological processes.





17. Which one of the following is NOT an intangible resource?

A. human assets and intellectual capitalB. technological assetsC. brand, image, and reputationD. relationshipsE. company cultureTangible resources include technological assets such as patents, copyrights, innovation technologies, production technology, and technological processes.







18. The two approaches that can make the process of uncovering and identifying a firm's capabilities more systematic are

A. resources assessment and the functional approach.B. strengths valuations and weaknesses estimations.C. sustainability resource allocation and resource bundling.D. cross-functional analysis and collaborative resource methodology.E. financial statement analysis and management support analysis.There are two approaches that can make the process of uncovering and identifying a firm's capabilities more systematic. The first method takes the completed listing of a firm's resources as its starting point. The second method of identifying a firm's capabilities takes a functional approach.





19. A company that lacks a stand-alone resource that is competitively powerful may attempt to develop a competitive advantage through

A. improved employee training programs, new marketing promotions, or technological enhancements to production processes.

B. the development of a new business strategy that draws upon existing resource strengths.C. extensive strategic planning and resource identification sessions involving managers at all levels of

the organization.D. bundled resources that enable superior performance of cross-functional capabilities that can be

leveraged to support its business model and strategy.E. devising clever approaches to turning resource weaknesses into resource

strengths.If management determines that the company doesn't possess a resource that independently passes all four VRIN tests with high marks, it may have a bundle of resources that can pass the tests.


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Difficulty: 3 HardLearning Objective: 04-02 Why a company's resources and capabilities are centrally important in giving the company a competitive edge




20. Organizational capabilities are virtually always

A. knowledge-based, residing in people and in the company's intellectual capital, or in organizational processes and systems, which embody tacit knowledge.

B. more complex than resources and are exercised only through key personnel.C. require constant evaluation to ensure cooperative support from

management.D. easier and less challenging to categorize than resources because there are fewer to be concerned

about.E. reflective of the industry's driving forces.Virtually all organizational capabilities are knowledge-based, residing in people and in a company's intellectual capital, or in organizational processes and systems, which embody tacit knowledge.





21. A linked and closely integrated set of competitive assets centered around one or more cross-functional capabilities is termed

A. organizational assets.B. a resource bundle.C. a resource capability.D. functional method compilation.E. an integrated asset advantage.A resource bundle is a linked and closely integrated set of competitive assets centered.







22. A sustainable competitive advantage is gained when a company

A. has durable competitive assets that are central to its strategy and superior to those of rival firms.B. has sufficient resources to expedite its strategy.C. realizes its inherent weaknesses are transformable to

advantages.D. can stand out relative to rivals because of resource utilization.E. has resources in well-populated geographical

locations.When a company has competitive assets that are central to its strategy and superior to those of rival firms, and durable despite the best efforts of competitors to overcome it, then the company is said to have a sustainable competitive advantage.




over rivals.Topic: Competitive Advantage

23. The four tests of a resource's competitive power are often referred to as the

A. SCIR test, which asks if a resource is sustainable, competitive, internalized, and reproducible.B. competitive advantage sustainable method test.C. reliability resources simulation.D. VRIN test, which asks if a resource is valuable, rare, inimitable, and non-substitutable.E. organizational capability metric analysis.The four tests of a resource's competitive power are often referred to as the VRIN test, which asks if a resource is valuable, rare, inimitable, and non-substitutable.







24. The spotlight in analyzing a company's resources, internal circumstances, and competitiveness includes such questions/concerns as

A. whether the company is located all over the globe.B. whether the company's key success factors are more dominant than the key success factors of close

rivals.C. whether the company has the industry's most efficient and effective value chain.D. what the company's resource strengths and weaknesses are in relation to the market opportunities

and external threats.E. what new acquisitions the company would be well advised to make in order to strengthen its

financial performance and overall balance sheet position.The spotlight in analyzing a company's resources, internal circumstances, and competitiveness includes such questions/concerns as what are the company's resource strengths and weaknesses in relation to the market opportunities and external threats.





25. Which of the following is NOT pertinent in identifying a company's present strategy?

A. the key functional strategies (R&D, supply chain management, production, sales and marketing, HR, and finance) a company is employing

B. management's planned, proactive moves to outcompete rivals (via better product design, improved quality or service, wider product lines, and so on)

C. the company's mission, strategic objectives, and financial objectivesD. moves to respond and react to changing conditions in the macro-environment and in industry and

competitive conditionsE. the strategic role of its collaborative partnerships and strategic alliances with othersThe company's mission, strategic objectives, and financial objectives are not pertinent in identifying a company's present strategy.






26. The best quantitative evidence of whether a company's present strategy is working well is

A. whether the company has more competitive assets than it does competitive liabilities.B. whether the company is in the industry's best strategic group.C. the caliber of results the strategy is producing, specifically whether the company is achieving its

financial and strategic objectives and whether it is an above-average industry performer.D. whether the company has a shorter value chain than close rivals.E. whether the company is in the Fortune 500.The best quantitative evidence of whether a company's present strategy is working well is the caliber of results the strategy is producing, specifically whether the company is achieving its financial and strategic objectives and whether it is an above-average industry performer.




27. Which of the following is NOT a reliable measure of how well a company's current strategy is working?

A. whether the company's sales are growing faster, slower, or about the same pace as the industry as a whole, thus resulting in a rising, falling, or stable market share

B. whether it has a larger number of competitive assets than competitive liabilities and whether it has a superior quality product

C. the firm's image and reputation with its customersD. whether its profit margins are rising or falling and how large its margins are relative to those of its

rivalsE. evidence of improvement in internal processes such as defect rate, order fulfillment, delivery times,

days of inventory, and employee productivityIt is not relevant whether a company has a larger number of competitive assets than competitive liabilities or whether it has a superior quality product in order to reliably conclude that a company's current strategy is working well.






28. A resource of a firm is considered to be

A. a market opportunity.B. an environmental threat.C. the capacity of a firm to competently perform some internal activity.D. a competitive deficiency.E. deployed to develop and enable a firm's capabilities.A resource is a competitive asset that is owned or controlled by a company; a capability is the capacity of a company to competently perform some internal activity. Capabilities are developed and enabled through the deployment of a company's available resources.




29. How are a company's organizational capabilities developed and enabled?

A. by strengthening the traditions that company executives are committed to maintainingB. through deployment of a company's resources or some combination of its resourcesC. by talking openly about the problems of the present company and determining how new behaviors

will improve performanceD. by shifting from decentralized to centralized decision-makingE. by urging company personnel to search outside the company for work practices and operating

approaches that may be an improvement over what the company is presently doingOrganizational capabilities are developed through the use of resources and draw on some combination of the firm's resources as they are exercised.







30. The BEST example of a company resource is

A. having higher earnings per share and a higher return on shareholders' equity investment than key rivals.

B. being totally self-sufficient such that the company does not have to rely in any way on key suppliers, partnerships with outsiders, or strategic alliances.

C. having proven technological expertise and an ability to churn out new and improved products on a regular basis.

D. having a larger number of competitive assets than competitive liabilities.E. having more built-in key success factors than rivals.Are source is a productive input or competitive asset that is owned or controlled by the firm. Firms have many different types of resources at their disposal that vary not only in kind but in quality as well. Some are of a higher quality than others, and some are more competitively valuable, having greater potential to give a firm a competitive advantage over its rivals.





31. Which of the following is NOT a good example of a company's resources?

A. more intellectual capital and better e-commerce capabilities than rivalsB. fruitful partnerships or alliances with suppliers that reduce costs and/or enhance product quality and

performanceC. having higher earnings per share and a higher stock price than key rivalsD. a well-known brand name and enjoying the confidence of

customersE. a lower-cost value chain than rivalsAre source is a productive input or competitive asset that is owned or controlled by the firm. Having higher earnings per share and a higher stock price than key rivals cannot be a good example of a company's resources.


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32. If a company doesn't possess standalone resource strengths capable of contributing to competitive advantage,

A. all potential for competitive advantage is lost.B. it is unlikely to survive in the marketplace and should exit the industry.C. it may have a bundle of resources that can be leveraged to develop a distinctive

competence.D. it is virtually blocked from using offensive strategies and must rely on defensive strategies.E. its best strategic option is to revamp its value chain in hopes of creating stronger competitive

capabilities.If a company doesn't possess standalone resource strengths capable of contributing to competitive advantage, it can benefit from a bundle of resources that can be leveraged to develop a distinctive competence. Resource bundles can sometimes pass the four tests of a resource's competitive power even when the individual components of the resource bundle cannot.





33. Resource and capability analysis is designed to

A. ascertain the internal marketplace of non-distinct divisions of the company.B. ascertain which of a company's resources and capabilities are competitively valuable.C. stimulate demand for a product.D. ascertain to what extent a competitor can sustain a competitive advantage.E. stimulate economic growth for companies within the industry.Resource and capability analysis is designed to ascertain which of a company's resources and capabilities are competitively valuable, so that they can provide the foundation necessary for competitive success in the marketplace.







34. Resource and capability analysis is achieved by

A. probing the caliber of a firm's competitive assets relative to those of rival firms.

B. attaining price stability.C. analyzing only internal strengths and weaknesses through a matrix comparison model.D. cost-benefit analysis of the company's core product sales.E. performing resource-specific activities within the organization to allocate available capital.Resource and capability analysis is achieved by probing the caliber of a firm's competitive assets relative to those of rival firms.





35. When a company has become proficient in modifying, upgrading, or deepening the company's resources and capabilities in response to its changing environment and market opportunities, it is called

A. a dynamic capability.B. a core competence.C. a distinct competence.D. a strategic assessment.E. a benchmarking exercise.A dynamic capability is the ability to modify, deepen, or reconfigure the company's existing resources and capabilities in response to its changing environment or market opportunities.





36. A company that has competitive assets that are central to its company strategy and superior to those of rival firms creates a

A. long-term derivative strategy.B. cash flow feasibility analysis.C. competitive advantage over other companies.D. resource deployment strategic plan.E. cost underestimation and benefit overestimation.When a company has competitive assets that are central to its strategy and superior to those of rival firms, it can create a competitive advantage.







37. The competitive power of a company resource strength or competitive capability hinges on all of the following EXCEPT

A. how hard it is for competitors to copy.B. whether it is rare and something rivals lack.C. whether it is really competitively valuable and has the potential to contribute to a competitive

advantage.D. whether it is nonsubstitutable.E. whether it is readily available for rivals to adopt.The competitive power of a company resource strength or competitive capability hinges on whether it is rare and not whether it is available in plenty and common among firms.



Difficulty: 1 EasyLearning Objective: 04-03 How to assess the company's strengths and weaknesses in light of market opportunities and external threats.

Topic: Competitive Advantage

38. What two factors inhibit the ability of rivals to imitate a firm's most valuable resources and capabilities?

A. social ambiguity and causal uncertaintyB. social simplicity and causal complexityC. collective complexity and causal ambiguityD. social complexity and causal ambiguityE. social simplicity and causal uncertaintySocial complexity and causal ambiguity are two factors that inhibit the ability of rivals to imitate firm's most valuable resources and capabilities.







39. A competitively valuable resource or capability is a company's

A. enabling foundation of its business model.B. equally valuable substitute resource providing a competitive advantage.C. assessment of the availability of superior substitutes.D. unsurpassed worker productivity and product

quality.E. unique piecework incentive system, providing a competitive advantage.An indicator of a valuable and effective resource is whether it can enable the company to strengthen its business model by improving its customer value proposition and/or profit formula.





40. Imitation by rivals is most challenging when

A. resources are unique.B. resources must be built over time.C. capabilities reflect a high level of social complexity and causal ambiguity.D. resources and capabilities require a high level of capital investment.E. resources are primarily intangible.The more difficult, expensive, time consuming, and complex it is for a rival to imitate a company's resource or capability, the more likely it is that resource or capability can provide a sustainable competitive advantage.







41. For a particular company resource/capability to have real competitive power and perhaps qualify as a basis for competitive advantage, it should

A. be hard to copy, be rare and something rivals lack, be competitively valuable, and not be easily trumped by substitute resource strengths possessed by rivals.

B. be something that a company does internally rather than in collaborative arrangements with outsiders.

C. be patentable.D. bean industry key success factor and occupy a prime position in the company's value chain.E. have the potential for lowering the firm's unit costs.The VRIN tests for sustainable competitive advantage ask whether a resource is Valuable, Rare, Inimitable, and Nonsubstitutable.





42. The competitive power of a company's resource strength is NOT measured by which one of the following tests?

A. Is the resource rare and something rivals lack?B. Is the resource strength something that a company has internally rather than in collaborative

arrangements with outsiders?C. Is the resource strength easily trumped by the substitute resources/capabilities of

rivals?D. Is the resource strength hard to copy?E. Is the resource strength competitively valuable, having the potential to contribute to a competitive

advantage?The VRIN tests for sustainable competitive advantage ask whether a resource is Valuable, Rare, Inimitable, and Nonsubstitutable.







43. A company requires a dynamically evolving portfolio of resources and capabilities to

A. assist the strategic planning team in overall direction.B. sustain complex manufacturing systems as a strategic recall.C. sustain its competitiveness and help drive improvements in its performance.D. sustain benefits of high market share as an interest in growth strategies.E. transform knowledge into a management style supporting competition in a globally diverse world.Resources and capabilities must be continually strengthened and nurtured to sustain their competitive power. By incorporating these activities into their routine managerial functions, they gain the experience necessary to be able to do them consistently well.





44. Which of the following is NOT an example of a company's dynamic capability?

A. a capacity to improve existing resources and capabilitiesB. upgrades to R&D resources to drive product innovationC. a capacity to add new resources and capabilities to the competitive asset portfolioD. an ability to replace degraded resources with acquired

capabilitiesE. an ability to keep antiquated resources by disregarding innovative capabilitiesAn ability to keep antiquated resources by disregarding innovative capabilities is not an example of a company's dynamic capability. A dynamic capability is an ongoing capacity of a company to modify its existing resources and capabilities or create new ones.





45. A dynamic capability is the

A. ongoing capacity to modify existing resources and capabilities to create new ones.B. improvement evaluation process for eliminating waste in the firm.C. functional and operating resources management process.D. ongoing capability to understand and establish a commitment to resource alignment.E. improvement evaluation process for repurposing waste in the firm.A dynamic capability is an ongoing capacity of a company to modify its existing resources and capabilities or create new ones.







46. Identifying and assessing a company's resource strengths and weaknesses and its external opportunities and threats is called a

A. SWOT analysis.B. competitive asset/liability analysis.C. competitive positioning analysis.D. strategic resource assessment.E. company resource mapping.SWOT analysis is a simple but powerful tool for sizing up a company's strengths and weaknesses, its market opportunities, and the external threats to its future well-being.




Topic: Competitive Environment

47. A first-rate SWOT analysis

A. is a way to measure whether a company's value chain is longer or shorter than the chains of key rivals.

B. is a tool for benchmarking whether a firm's strategy is closely matched to industry key success factors.

C. reveals whether a company is competitively stronger than its closest rivals.D. provides a good basis for crafting a strategy.E. identifies the reasons a company's strategy is or is not working very well.A first-rate SWOT analysis provides the basis for crafting a strategy that capitalizes on the company's strengths, aims squarely at capturing the company's best opportunities, and defends against the threats to its well-being.







48. Which one of the following is NOT part of conducting a SWOT analysis?

A. identifying a company's resource strengths and competitive capabilitiesB. benchmarking the company's resource strengths and competitive capabilities against industry key

success factorsC. identifying a company's market opportunitiesD. drawing conclusions about the company's overall business situationE. matching the company's strategy to its resource strengths and market opportunities, correcting

problematic weaknesses, and defending against worrisome threatsA first-rate SWOT analysis sizes up a company's internal strengths and competitive deficiencies, its market opportunities, and the external threats to its future well-being. Benchmarking a company's resource strengths and competitive capabilities against industry key success factors can be accomplished via a competitive strength assessment.



Learning Objective: 04-03 How to assess the company's strengths and weaknesses in light of market opportunities and external threats.Topic: Competitive Environment

49. SWOT analysis is a simple but powerful tool for

A. gauging whether a company has a cost-competitive value chain.

B. sizing up a company's resources and capabilities, strengths and deficiencies, its market opportunities, and the external threats to its future well-being.

C. evaluating whether a company is in the most appropriate strategic group.D. determining a company's competitive strength vis-à-vis close rivals.E. identifying the market segments in which a company is strongly positioned and weakly positioned.SWOT analysis is a simple but powerful tool for sizing up a company's strengths and weaknesses, its market opportunities, and the external threats to its future well-being.







50. A company's strengths are important because they

A. pave the way for establishing a low-cost advantage over rivals.

B. represent the quality of its competitive assets that enhance its competitiveness in the marketplace.C. provide extra muscle in helping lengthen the company's value chain.D. give it competitive protection against the industry's driving forces.E. provide extra organizational muscle in turning a core competence into a key success factor.A strength is something a company is good at doing or an attribute that enhances its competitiveness in the marketplace. A company's strengths depend on the quality of its resources and capabilities.




51. When an activity becomes something a company has learned to perform proficiently and capably, the company is said to have a

A. competence.

B. competitive advantage over rivals.C. key value chain proficiency.D. distinctive capability.E. resource advantage.A competence is an activity that a company has learned to perform with proficiency—a capability, in other words.




Topic: Organizational Strengths

52. When a company has a proficiency in performing a strategically and competitively important value chain activity better than its rivals, it is said to have a

A. company competence.B. core competence.C. distinctive competence.D. key value chain proficiency.E. competitive advantage over rivals.A distinctive competence is a competitively important activity that a company performs better than its rivals—it thus represents a competitively superior internal strength.


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Blooms: UnderstandDifficulty: 1 Easy

Learning Objective: 04-03 How to assess the company's strengths and weaknesses in light of market opportunities and external threats.Topic: Organizational Strengths

53. The difference between a core competence and a distinctive competence is that

A. a distinctive competence refers to a company's strongest resource or competitive capability, whereas a core competence refers to a company's lowest-cost and most efficiently executed value-chain activity.

B. a core competence usually resides in a company's base of intellectual capital, whereas a distinctive competence stems from the superiority of a company's physical and tangible assets.

C. a core competence is a competitively and strategically relevant activity that a firm performs well compared to its other activities, whereas a distinctive competence is a competitively relevant activity a firm performs well compared to other rival firms.

D. a core competence represents a resource strength, whereas a distinctive competence is achieved by having more resource strengths than rival companies.

E. a core competence usually resides in a company's technology and physical assets, whereas a distinctive competence usually resides in a company's know-how, expertise, and intellectual capital.

Core competence is an activity that a company performs proficiently and that is also central to its strategy and competitive success. A distinctive competence is a competitively important activity that a company performs better than its rivals—it thus represents a competitively superior internal strength.




54. A core competence

A. detracts from a company's arsenal of competitive capabilities and competitive assets and is not a resource strength considered to be genuine.

B. is typically results-based, residing in a company's tangible physical assets on the balance sheet.C. is often grounded in a single department's set of knowledge and expertise.D. is an activity that a firm performs proficiently that is also central to its strategy and competitive

success.E. is a proficiently performed external activity.A core competence is a proficiently performed internal activity that is central to a company's strategy and competitiveness.






55. A core competence

A. is a more competitively valuable strength than a competence because of the key role the activities play in the company's strategy.

B. typically has competitive value, the amount of which is reflected in the physical and tangible assets on a company's balance sheet.

C. usually is grounded in the technological expertise of a particular department or work group.D. is more difficult for rivals to copy than a distinctive competence.E. refers to a company's lowest-cost and most efficiently executed value-chain activity.A core competence is a proficiently performed internal activity that is central to a company's strategy and competitiveness.




56. Which of the following is NOT an example of an external threat to a company's future profitability?

A. lack of a distinctive competenceB. potential of a hostile takeoverC. adverse changes in foreign exchange ratesD. unfavorable demographic shiftsE. introduction of restrictive trade policies in countries where the company does businessLack of a distinctive competence is considered a weakness, not an external threat. All of the other responses are external threats.



Difficulty: 2 MediumLearning Objective: 04-03 How to assess the company's strengths and weaknesses in light of market opportunities and external threats.


57. When a company performs a particular competitively important activity truly well in comparison to its rivals, it is said to have a

A. company competence.B. strategic resource.C. distinctive competence.D. core competence.E. key success

factor.A distinctive competence is a competitively important activity that a company performs better than its rivals—it thus represents a competitively superior internal strength.


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Blooms: RememberDifficulty: 2 Medium


58. Which of the following does NOT represent a potential core competence?

A. skills in manufacturing a high-quality product at a low costB. know-how in creating and operating systems for cost-efficient supply chain managementC. the capability to fill customer orders accurately and swiftlyD. having a sprawling factoryE. the capability to speed new or next-generation products to the marketplaceA core competence is a proficiently performed internal activity that is central to a company's strategy and competitiveness.





59. Which of the following is NOT accurate as concerns a distinctive competence?

A. A distinctive competence is a competitively important activity that a company performs better than its rivals.

B. A distinctive competence is typically less restrictive for rivals to copy than a core competence.C. A distinctive competence can be a basis for sustainable competitive advantage.D. A distinctive competence qualifies as a superior internal strength.E. A distinctive competence enables delivering stand-out value to customers (in the form of lower

prices, better product performance, or superior service).A distinctive competence is a competitively important activity that a company performs better than its rivals—it thus represents a competitively superior internal strength.







60. Which of the following most accurately reflect a company's resource strengths?

A. its core competencies, competitive capabilities, and valuable intangible assetsB. sizes of its unit sales, revenues, and market share vis-à-vis those of key

rivalsC. sizes of its profit margins and return on investment vis-à-vis those of key rivalsD. whether it has more primary activities in its value chain than close rivals and a better overall value

chain than these rivalsE. whether it has a more profitable business model than close rivalsResource strengths typically factored into a SWOT analysis include core competencies, competitive capabilities, and valuable intangible assets.





61. A company resource weakness or competitive deficiency

A. represents a problem that needs to be turned into a strength because weaknesses prevent a firm from being a winner in the marketplace.

B. causes the company to fall into a lower strategic group than it otherwise could compete in.C. prevents a company from having a distinctive competence.D. is something a company lacks or does poorly (in comparison to rivals) or a condition that puts it at a

disadvantage in the marketplace.E. usually stems from having a missing link or links in the industry value chain.Competitive weaknesses are those that that make the company vulnerable to rivals, hold down profitability, or disqualify it from pursuing an attractive opportunity.



Learning Objective: 04-03 How to assess the company's strengths and weaknesses in light of market opportunities and external threats.Topic: Organizational Weaknesses



62. The external market opportunities which are MOST relevant to a company are the ones that

A. can increase market share.B. are reinforced by the overall business strategy and reflect the business model.C. match up well with the firm's competitive assets, offer the best prospects for growth and

profitability, and present the most potential for competitive advantage.D. qualify to correct its internal weaknesses and resource deficiencies.E. are relevant for defending against the external threats to its well-being.The market opportunities most relevant to a company are those that match up well with the company's competitive assets, offer the best prospects for growth and profitability, and present the most potential for competitive advantage.




63. The market opportunities most relevant to a low cost provider of mobile phones are those that

A. offer the best prospects for growth and profitability in emerging markets.B. provide a strong defense against threats to the company's profitability.C. embrace the most potential for product innovation.D. provide differentiation features to take market share away from close rivals.E. hold the most potential to reduce dropped calls.The market opportunities most relevant to a low cost provider in the mobile phone industry are likely to be in emerging markets where competition is based on product price, not features, that is, those opportunities that match up well with the company's competitive assets, offer the best prospects for growth and profitability, and present the most potential for competitive advantage.



Difficulty: 3 HardLearning Objective: 04-03 How to assess the company's strengths and weaknesses in light of market opportunities and external threats.


64. Which of the following is NOT an example of an external threat to a company's future profitability?

A. the lack of a distinctive competence

B. new legislation that entails burdensome and costly government regulationsC. slowdowns in market growthD. more intense competitive pressuresE. the introduction of restrictive trade policies in countries where the company does businessThe lack of a distinctive competence is a weakness and not an external threat to a company's future profitability.







65. Which of the following is NOT an example of a threat to a company's future profitability and well-being?

A. the likely entry of potent new competitorsB. the lack of a well-known brand name with which to attract new customers and help retain existing

customersC. shifts in buyer needs and tastes away from the industry's productD. costly new regulatory requirementsE. growing bargaining power on the part of the company's major customers and major

suppliersThe lack of a well-known brand name with which to attract new customers and help retain existing customers is a weakness and not an external threat to a company's future profitability and well-being.





66. External threats may pose various degrees of adversity upon the company and can surface from many sources and examples, EXCEPT for

A. the advent of cheaper or better technologies.B. the entry of lower-cost foreign competitors and restrictive foreign trade policies.C. new burdensome regulations.D. higher overall unit costs relative to those of key competitors.E. rising prices on key inputs (such as energy costs).Higher overall unit costs relative to those of key competitors is a weakness and not an external threat to a company's future profitability and well-being.







67. The payoff of doing a thorough SWOT analysis is

A. identifying whether the company's value chain is cost-effective vis-à-vis the value chains of rivals.

B. helping strategy-makers benchmark the company's resource strengths against industry key success factors.

C. enabling a company to assess its overall competitive position relative to its key rivals.D. revealing whether a company's market share, measures of profitability, and sales compare favorably

or unfavorably vis-à-vis key competitors.E. assisting strategy-makers in crafting a strategy that is well-matched to the company's resources and

capabilities, its market opportunities, and the external threats to its future well-being.SWOT analysis is a simple but powerful tool for sizing up a company's strengths and weaknesses, its market opportunities, and the external threats to its future well-being. Basing a company's strategy on its most competitively valuable strengths gives the company its best chance for market success.




68. In doing SWOT analysis, which of the following is NOT an example of a potential resource weakness or competitive deficiency that a company may have?

A. less productive R&D efforts than rivalsB. having a single, unified functional strategy instead of several distinct functional strategiesC. lack of a strong brand image and reputation (as compared to rivals)D. higher overall unit costs relative to rivalsE. too narrow a product line relative to rivalsHaving a single, unified functional strategy instead of several distinct functional strategies is neither a competitive nor a resource weakness. All of the other choices are examples of potential resource or competitive weaknesses relative to rivals.

AACSB: Reflective Thinking

Accessibility: Keyboard NavigationBlooms: Apply





69. In doing SWOT analysis and trying to identify a company's market opportunities, which of the following is NOT an example of a potential market opportunity for a company?

A. serving additional customer groups or market segmentsB. growing buyer preferences for substitutes for the industry's productC. acquiring rival firms or companies with attractive technological expertise or capabilitiesD. expanding into new geographic marketsE. demographic trends that favor increased repeat purchases and/or higher volume purchases of the

company's productGrowing buyer preferences for substitutes for the industry's product is a potential external threat and not a potential market opportunity. All of the other choices are examples of potential market opportunities in a company's competitive environment.





70. Which of the following is NOT something that can be gleaned from a company's SWOT?

A. how to improve a company's strategy by using company strengths and capabilities as cornerstones for its strategy

B. which market opportunities are best suited to a company's strengths and capabilitiesC. which resource weaknesses and deficiencies need to be corrected so as to better enable the pursuit of

important market opportunities and to better defend against certain external threatsD. how to turn a core competence into a distinctive competenceE. whether any of the company's resource strengths can be used to help lessen the impact of external

threatsHow to turn a core competence into a distinctive competence is not something that can be gleaned from a company's SWOT.







71. The two most important parts of SWOT analysis are

A. pinpointing the company's competitive assets and pinpointing its competitive liabilities.B. identifying the company's resource strengths and identifying the company's best market

opportunities.C. identifying the external threats to a company's future profitability and pinpointing how many market

opportunities it has.D. drawing conclusions from the SWOT listings about the company's overall situation and translating

these conclusions into strategic actions to better match the company's strategy to its resource strengths and market opportunities, correct the important weaknesses, and defend against external threats.

E. making accurate lists of the company's strengths, weaknesses, opportunities, and threats and then using these lists as a basis for ascertaining how well the company's strategy is working.

A first-rate SWOT analysis sizes up a company's internal strengths and competitive deficiencies, its market opportunities, and the external threats to its future well-being. Simply listing a company's strengths, weaknesses, opportunities, and threats is not enough; the payoff from SWOT analysis comes from the conclusions about a company's situation and the implications for strategy improvement that flow from the four lists.





72. One of the most telling signs of whether a company's market position is strong or precarious is

A. whether its product is strongly or weakly differentiated from rivals.B. whether its prices and costs are competitive with those of key rivals.C. whether it has a lower stock price than key rivals.D. the opinions of buyers regarding which seller has the best product quality and customer

service.E. whether it is in a bigger or smaller strategic group than its closest rivals.For managers, the key is to keep close track of how cost effectively the company can deliver value to customers relative to its competitors. If it can deliver the same amount of value with lower expenditures (or more value at the same cost), it will maintain a competitive edge.



Learning Objective: 04-04 How a company's value chain activities can affect the company's cost structure and customer value proposition.Topic: Benchmarking



73. Two analytical tools useful in determining whether a company's prices and costs are competitive are

A. SWOT analysis and key success factor analysis.

B. SWOT analysis and benchmarking.C. value chain analysis and benchmarking.D. competitive position assessment and competitive strength assessment.E. driving forces analysis and SWOT analysis.Two analytic tools are particularly useful in determining whether a company's costs and customer value proposition are competitive: value chain analysis and benchmarking.



Difficulty: 1 EasyLearning Objective: 04-04 How a company's value chain activities can affect the company's cost structure and customer value proposition.

Topic: Benchmarking

74. The three main areas in the value chain where significant differences in the costs of competing firms can occur include

A. age of plants and equipment, number of employees, and advertising costs.B. operating-level activities, functional area activities, and line of business activities.C. the nature and makeup of their own internal operations, the activities performed by suppliers, and

the activities performed by wholesale distribution and retailing allies.D. human resource activities (particularly labor costs), vertical integration activities, and strategic

partnership activities.E. variable cost activities, fixed cost activities, and administrative activities.A company's cost competitiveness depends not only on the costs of internally performed activities (its own value chain) but also on costs in the value chains of its suppliers and distribution channel allies.



Difficulty: 3 HardLearning Objective: 04-04 How a company's value chain activities can affect the company's cost structure and customer value proposition.

Topic: Benchmarking



75. Identifying the primary and secondary activities that comprise a company's value chain

A. indicates whether a company's resource strengths will ultimately translate into greater value for shareholders.

B. reveals whether a company's resource strengths are well-matched to the industry's key success factors.

C. is the first step in understanding a company's cost structure (since each activity in the value chain gives rise to costs).

D. is called benchmarking.E. is called resource value analysis.Given its focus on value-creating activities, value chain analysis is an ideal tool for examining how a company delivers on its customer value proposition. It permits a deep look at the company's cost structure and ability to offer low prices.




76. A much-used and potent managerial tool for determining whether a company performs particular functions or activities in a manner that represents "the best practice" when both cost and effectiveness are taken into account is

A. competitive strength analysis.B. activity-based costing.C. resource cost mapping.D. SWOT analysis.E. benchmarking.Activity-based costing is an accounting system that is used to evaluate a company's cost-competitiveness and determine the costs of each primary and support activity comprising a company's value chain, to thereby reveal the nature and makeup of a company's internal cost structure. This technique is one tool that can be used to meet the objectives of benchmarking, which are to identify the best practices in performing an activity and to emulate those best practices when they are possessed by others.




Topic: Benchmarking



77. Activity-based costing is used to evaluate a company's cost-competitiveness and

A. determine whether the value chains of rival companies are similar or different.B. benchmark the costs of primary value chain activities against the costs of the support value chain

activities.C. determine the costs of each primary and support activity comprising a company's value chain and

thereby reveal the nature and makeup of a company's internal cost structure.D. determine the costs of each strategic action a company initiates.E. analyze the costs of each primary activity.Activity-based costing is used to evaluate a company's cost-competitiveness and determine the costs of each primary and support activity comprising a company's value chain and thereby reveal the nature and makeup of a company's internal cost structure.




78. Activity-based costing

A. is an accounting system that assigns a company's expenses to whichever activity in a company's value chain is responsible for creating the cost.

B. involves using benchmarking techniques to develop cost estimates for the value chain activities of each major rival.

C. is a powerful tool for identifying the different pieces of a company's value chain and classifying them as primary activities and support activities.

D. involves determining which value chain activities represent variable costs and which represent fixed costs.

E. is a tool for identifying the activities that cause a company's product to be strongly differentiated from the products of rivals.

Activity-based costing is an accounting system that assigns a company's expenses to whichever activity in a company's value chain is responsible for creating the cost.






79. Costs and price differences among competing companies can have origins in activities performed by

A. the company's internally performed activities (its own value chain) compared to the cost structure of the internally performed activities of rival companies.

B. value chains of the company's suppliers.C. value chains of a company's distributors and retail dealers and forward channel allies.D. the company's internally performed activities (its own value chain), but also on costs in the value

chain of its suppliers and distribution channel allies.E. whether the company has a longer or shorter value chain than its close

rivals.A company's cost competitiveness depends not only on the costs of internally performed activities (its own value chain) but also on costs in the value chains of its suppliers and distribution channel allies.




80. Benchmarking involves

A. comparing how different companies perform various value chain activities and then making cross-company comparisons of the costs and effectiveness of these activities.

B. checking whether a company has achieved more of its financial and strategic objectives over the past five years relative to its direct competitors.

C. studying whether a company's resource strengths are more/less powerful than the resource strengths of rival companies.

D. studying how a company's competitive capabilities stack up against the competitive capabilities of selected companies known to have world-class competitive capabilities.

E. comparing the best practices in one industry against the best practices in another industry.

Benchmarking entails comparing how different companies (and different types of companies) perform various value chain activities—how materials are purchased, how inventories are managed, how products are assembled, how fast the company can get new products to market, how customer orders are filled and shipped—and then making cross-company comparisons of the costs and effectiveness of these activities.



Difficulty: 2 MediumLearning Objective: 04-04 How a company's value chain activities can affect the company's cost structure and customer value proposition.

Topic: Benchmarking



81. Which of the following is NOT one of the objectives of benchmarking?

A. to identify the best practices in performing various value chain activitiesB. to learn how best practice companies achieve lower costs or better results in performing

benchmarked activitiesC. to help construct a company value chain and identify which activities are primary and which are

support activitiesD. to develop cross-company comparisons of the costs of performing specific value chain

activitiesE. to take actions to improve a company's cost competitiveness when benchmarking reveals that its

costs and results of performing an activity are not as good as what other companies have achievedBenchmarking is a potent tool for improving a company's own internal activities that is based on learning how other companies perform them and borrowing their "best practices."




82. Benchmarking provides a company with which of the following?

A. hard evidence of cost competitivenessB. proof of resource

availabilityC. a company strategyD. verification of total cost ownershipE. improvements to internal processesBenchmarking the costs of company activities against those of rivals provides hard evidence of whether a company is cost-competitive.




Topic: Benchmarking

83. The most difficult part of benchmarking is

A. the decision of whether to do it at all.B. how to obtain access to information regarding rivals' practices and costs.C. when to initiate the process.D. what information to utilize in the analysis process.E. when to stop the process and move forward with strategy.The tough part of benchmarking is not whether to do it but, rather, how to gain access to information about other companies' practices and costs.






Topic: Benchmarking

84. Obtaining cost information is a primary difficulty associated with benchmarking. The following are typical sources for collecting information, EXCEPT

A. from published reports, industry research firms, and trade groups.B. from talking to knowledgeable industry leaders.C. from field trips to the facilities of competitors or non-competing firms.D. from independent firms and consulting firms to gather best practices and comparative cost data

without identifying competing firms.E. from the classified government documents.Except for classified documents, all the others are recommended sources for collecting benchmarking information.




Topic: Benchmarking

85. Which of the following areas within a company's total value chain system can managers use to improve efficiency and effectiveness?

A. a company's own internal activity segments, the suppliers' part, and the forward (distribution) channel portion of the value chain system

B. a company's reinforced activities identified as efficiency measures for improved effectivenessC. only the internal activity segmentsD. only the suppliers' partE. only the distributors' channel portionThere are three main areas in a company's total value chain system where company managers can try to improve its efficiency and effectiveness in delivering customer value: (1) a company's own internal activities, (2) suppliers' part of the value chain system, and (3) the forward-channel portion of the value chain system.




Topic: Benchmarking



86. An option for NOT remedying an internal cost disadvantage includes

A. investing in productivity-enhancing, cost-saving technological improvements.B. redesigning the product or some of its components to facilitate speedier and more economical

manufacture or assembly.C. implementing the use of best practices throughout the company, particularly for high-cost activities.D. eliminating some cost-producing activities altogether by revamping the value chain.E. performing activities in the same way as done earlier.Performing activities as done earlier is not an option for remedying an internal cost disadvantage. Managers can pursue any of several strategic approaches to reduce the costs of internally performed value chain activities and improve a company's cost competitiveness.




87. Which of the following is NOT a good option for trying to remedy high internal costs vis-à-vis rivals' firms?

A. finding ways to detour around activities or items where costs are high

B. redesigning the product or some of its components to permit more economical manufacture or assembly

C. implementing aggressive strategic resource mapping to permit across-the-board cost reductionD. outsourcing high-cost activities to vendors or contractors who can perform them more economicallyE. relocating high-cost activities (like manufacturing) to geographic areas (like China or Latin America

or Eastern Europe) where they can be performed more cheaplyManagers can implement best practices throughout the company, particularly for high-cost activities. They can redesign the product and/or some of its components to eliminate high-cost components or facilitate speedier and more economical manufacture or assembly. They can relocate high-cost activities (such as manufacturing) to geographic areas where they can be performed more cheaply or outsource activities to lower-cost vendors or contractors.






88. A company's strategic options for remedying cost disadvantages in internally performed value chain activities do NOT include

A. revamping its value chain to eliminate or bypass some cost-producing activities (particularly low value-added activities).

B. implementing the use of best practices, particularly for high-cost activities.C. investing in productivity-enhancing, cost-saving technological improvements.D. switching to activity-based costing.E. outsourcing the performance of high-cost activities to vendors that can perform them more cheaply.Managers can implement best practices throughout the company, particularly for high-cost activities. They can redesign the product and/or some of its components to eliminate high-cost components or facilitate speedier and more economical manufacture or assembly. They can relocate high-cost activities (such as manufacturing) to geographic areas where they can be performed more cheaply or outsource activities to lower-cost vendors or contractors.




89. The options for remedying a supplier-related cost disadvantage include

A. pressuring suppliers for more favorable prices, switching to lower-priced substitute inputs, and collaborating closely to identify mutual cost-saving opportunities.

B. instituting forward vertical integration.C. shifting into the production of substitute products.D. shifting from a low-cost leadership strategy to a differentiation or focus strategy.E. cutting selling prices and trying to win a bigger market share.Supplier-related cost disadvantages can be attacked by pressuring suppliers for lower prices, switching to lower-priced substitute inputs, and collaborating closely with suppliers to identify mutual cost-saving opportunities.




Topic: Benchmarking



90. Which of the following is NOT an option for remedying a supplier-related cost disadvantage?

A. Integrate backward into the business of high-cost suppliers in an effort to reduce the costs of the items being purchased.

B. Negotiate more favorable prices with suppliers.

C. Collaborate closely with suppliers to identify mutual cost-saving opportunities.D. Switch to lower-priced substitute inputs.E. Persuade forward channel allies to implement best

practices.Supplier-related cost disadvantages can be attacked by pressuring suppliers for lower prices, switching to lower-priced substitute inputs, and collaborating closely with suppliers to identify mutual cost-saving opportunities.




Topic: Benchmarking

91. Which of the following is NOT an option for remedying a cost disadvantage associated with activities performed by forward channel allies (wholesale distributors and retail dealers)?

A. changing to a more economical distribution strategy such as putting more emphasis on cheaper distribution channels (perhaps direct sales via the Internet) or perhaps integrating forward into company-owned retail outlets

B. enhancing differentiation through activities such as cooperative advertising at the forward end of the value chain

C. pressuring distributors/dealers and other forward-channel allies to reduce their costs and markupsD. insisting on across-the-board cost cuts in all value chain activities—those performed by suppliers,

those performed in-house, and those performed by distributors/dealersE. collaborating with forward channel allies to identify win-win opportunities to reduce

costsInsisting on across-the-board cost cuts in ALL value chain activities is not an option for remedying a cost disadvantage associated with activities performed by forward channel allies (wholesale distributors and retail dealers).




Topic: Benchmarking



92. The means to enhance differentiation through activities at the forward end of the value chain system do NOT include

A. engaging in cooperative advertising and promotions.B. creating exclusive arrangements with downstream sellers or other mechanisms that increase their

incentives for enhanced-delivery customer value.C. creating and enforcing standards for downstream activities.D. assisting in training channel partners in business practices.E. enhancing cost-reducing activities with defensive functionality designed to create

incentives.The means to enhancing differentiation through activities at the forward end of the value chain system include (1) engaging in cooperative advertising and promotions with forward allies (dealers, distributors, retailers, etc.), (2) creating exclusive arrangements with downstream sellers or utilizing other mechanisms that increase their incentives to enhance delivered customer value, and (3) creating and enforcing standards for downstream activities and assisting in training channel partners in business practices.




Topic: Benchmarking

93. A company's value-creating activities can offer a competitive advantage in one of two ways

A. contribute to greater efficiency and lower costs and provide a basis for differentiation.B. contribute expense savings and enhance product exclusivity.C. reduce cost disadvantages and market price

anomalies.D. contribute customer experience value and conserve operating

functionality.E. contribute to competitive assets and discontinue distinctive competencies.A company's value-creating activities can offer a competitive advantage in one of two ways: contribute to greater efficiency and lower costs and provide a basis for differentiation.






94. For a company to translate its performance of value chain activities into competitive advantage, it must

A. undertake ongoing and persistent efforts to be cost-efficient and develop differentiation advantages.

B. have more core competencies than rivals.C. have at least three distinctive competencies.D. have competencies that allow it to produce the highest-quality product in the industry.E. have more competitive assets than competitive liabilities.A company's value-creating activities can offer a competitive advantage in one of two ways: contribute to greater efficiency and lower costs and provide a basis for differentiation.





95. To build a competitive advantage by out-managing rivals in performing value chain activities, a company must

A. position itself in the industry's more favorably situated strategic group.B. develop resource strengths that will enable it to pursue the industry's most attractive opportunities.C. develop core competencies and maybe a distinctive competence that rivals don't have or can't quite

match and that are instrumental in helping it deliver attractive value to customers.D. outsource all of its value chain activities to world-class vendors and suppliers.E. eliminate its resource weaknesses.To build a competitive advantage by out-managing rivals in performing value chain activities, a company must develop core competencies and maybe a distinctive competence that rivals don't have or can't quite match and that are instrumental in helping it deliver attractive value to customers or else be more cost-efficient in how it performs value chain activities such that it has a low-cost advantage.



Learning Objective: 04-04 How a company's value chain activities can affect the company's cost structure and customer value proposition.Topic: Competitive Advantage



96. When companies engage in value-creating activities, they do so by

A. focusing on exploiting a company's best-executed operating strategy.B. concentrating on efficient performance of the company's primary value chain activities.C. concentrating on minimizing the costs associated with the design of a product or service.D. drawing on specific company resources and capabilities that underlie and enable the activity.E. focusing on working with forward-channel allies to develop capabilities to outmatch the capabilities

of rivals.When companies engage in value-creating activities, they do so by drawing on specific company resources and capabilities that underlie and enable the activity.




97. The road to competitive advantage begins with management's efforts to

A. build organizational expertise in performing certain competitively important value chain activities.B. understand the value chain activities providing opportunity for growth.C. build value-creating activities all along the value chain.D. ensure superiority over rivals in performing even unimportant tasks and activities extremely well.E. maintain the existing chain of activities to lower costs.The road to competitive advantage begins with management efforts to build organizational expertise in performing certain competitively important value chain activities.





98. The value of doing competitive strength assessment is to

A. determine how competitively powerful the company's core competencies are.B. learn if the company's market opportunities are better than those of its rivals.C. learn whether a company has a distinctive competence.D. learn how the company ranks relative to rivals on each of the important factors that determine

market success and ascertain whether the company has a net competitive advantage or disadvantage vis-à-vis key rivals.

E. determine whether a company's resource strengths are sufficient to allow it to earn bigger profits than rivals.

The value of doing competitive strength assessment is to learn how the company ranks relative to rivals on each of the important factors that determine market success and ascertain whether the company has a net competitive advantage or disadvantage vis-à-vis key rivals.





Learning Objective: 04-05 How a comprehensive evaluation of a company's competitive situation can assist managers in making critical decisions about their next strategic moves.

Topic: Benchmarking

99. Understanding where the company is competitive requires

A. determining whether a company has a cost-effective value chain.B. developing quantitative strength ratings for the company and key rivals on each industry key

success factor and each pivotal resource, capability, and value chain activity.C. identifying a company's core competencies and distinctive competencies (if any).D. analyzing whether a company is well positioned to gain market share and be the industry's profit

leader.E. developing quantitative measures of a company's chances for future profitability.Understanding where the company is competitive requires developing quantitative strength ratings for the company and key rivals on each industry key success factor and each pivotal resource, capability, and value chain activity.



Difficulty: 2 MediumLearning Objective: 04-05 How a comprehensive evaluation of a company's competitive situation can assist managers in making critical

decisions about their next strategic moves.Topic: Benchmarking

100. Assigning a weight to each measure of competitive strength assessment is generally analytically superior because

A. a weighted ranking identifies which competitive advantages are most powerful.B. an unweighted ranking doesn't discriminate between companies with high and low market shares.C. it singles out which competitor has the most competitively potent core competencies.D. weighting each company's overall competitive strength by its percentage share of total industry

profits produces a more accurate measure of its true competitive strength.E. all of the various measures of competitive strength are not equally important.All of the various measures of competitive strength are not equally important, and depend on their competitive clout in the marketplace. That is the reason why weights are assigned to each of the measures of competitive strength based on their perceived importance.




Topic: Benchmarking



101. Competitive strength can be determined by assigning measures based on perceived importance because

A. it provides a more accurate assessment of the strength of competitive forces.

B. it eliminates the bias introduced for those firms having large market shares.C. the different measures of competitive strength are unlikely to be equally important.D. the results provide a more reliable measure of what competitive moves rivals are likely to make

next.E. weighting each company's overall competitive strength by the size of its market share produces a

more accurate measure of its true competitive strength.All of the various measures of competitive strength are not equally important, and depend on their competitive clout in the marketplace. That is the reason why weights are assigned to each of the measures of competitive strength based on their perceived importance.




Topic: Benchmarking

102. In a weighted competitive strength assessment, the sum of importance weights should add up to

A. 100 percent.B. 1.00.C. 10.D. 100.E. 1000.In a weighted competitive strength assessment, the sum of importance weights should add up to 1.00.




Topic: Benchmarking



103. In a weighted competitive strength analysis, each strength measure is assigned a weight based on

A. its percentage share of total industry revenues.B. its percentage share of total industry losses.C. its perceived importance in determining a company's competitive success in the marketplace.D. its percentage share of total industry profits.E. what it takes to provide better analytical balance between the companies with high ratings and the

companies with low ratings and thus get the sum of the weights to add up to 1.0.Step 1 in doing a competitive strength assessment is to make a list of the industry's key success factors and other telling measures of competitive strength or weakness (6 to 10 measures usually suffice). Step 2 is to assign weights to each of the measures of competitive strength based on their perceived importance.




Topic: Benchmarking

104. Calculating competitive strength ratings for a company and its rivals using the industry's most telling measures of competitive strength or weakness

A. is a way of determining which competitor has the highest overall competitive advantage in the marketplace and which competitor is faced with the lowest overall competitive disadvantage.

B. is the most reliable indicator of which industry member has the highest overall product quality.C. is a powerful way of revealing which competitors are in the best and worst strategic

groups.D. is the most reliable indicator of which industry member has the lowest overall costs and is the low-

cost leader.E. pinpoints which industry rivals are most insulated from the industry's driving forces.High-weighted competitive strength ratings signal a strong competitive position and possession of competitive advantage; low ratings signal a weak position and competitive disadvantage.




Topic: Benchmarking



105. Quantitative measures of a company's competitive strength

A. signal which competitor has the most distinctive competencies and which competitor has the fewest.B. provide useful indicators of how a company compares against key rivals, factor by factor and

capability by capability—thus indicating whether the company has a net overall competitive advantage or disadvantage against each rival.

C. reveal which competitors are in the best and worst strategic groups.D. show which industry rival has the best overall market opportunities and which competitor has the

poorest market opportunities.E. pinpoint which industry rival is subject to the least amount of competitive pressures from the five

competitive forces.High-weighted competitive strength ratings signal a strong competitive position and possession of competitive advantage; low ratings signal the opposite.




Topic: Benchmarking

106. The company with the highest rating on a given measure has an implied competitive edge on that specific measure, with the size of its edge

A. providing the company with an overall net competitive score that is reduced by the weighted measure.

B. signaling a weak position and competitive disadvantage.C. reflecting the difference between its weighted rating and rivals' weighted ratings.D. reflecting an area of potential improvement in order to achieve a sustainable competitive advantage.E. requiring reevaluation of the weighted

measure.The company with the highest rating on a given measure has an implied competitive edge on that measure, with the size of its edge reflected in the difference between its weighted rating and rivals' weighted ratings.




Topic: Benchmarking



107. Calculating competitive strength ratings for a company and comparing them against strength ratings for its key competitors helps indicate

A. which weaknesses and vulnerabilities of competitors the company might be able to attack successfully.

B. which competitors are in profitable strategic groups and which competitors are in unprofitable strategic groups.

C. which competitors are employing offensive strategies and which competitors are employing defensive strategies.

D. which competitors are likely to make money and which are likely to lose money in the years ahead.E. what the industry's key success factors are.When a company has important competitive strengths in areas where one or more rivals are weak, it makes sense to consider offensive moves to exploit rivals' competitive weaknesses.




Topic: Benchmarking

108. A company's competitive strength scores pinpoint its strengths and weaknesses against rivals and

A. suggest the company use its strengths to exploit its own competitive liabilities.B. point directly to the kinds of offensive/defensive actions it can use to exploit its competitive

strengths and reduce its competitive liabilities.C. point directly to the company to use its weaknesses as offensive moves to challenge rivals'

weaknesses.D. suggest receptivity for astute companies to drive their operating practices if the strength scores are

very low.E. point directly to accepting the competitive strength scores on face value.In addition to showing how competitively strong or weak a company is relative to rivals, the strength ratings provide guidelines for designing wise offensive and defensive strategies.




Topic: Benchmarking



109. Which one of the following is NOT something that can be learned from doing a competitive strength assessment?

A. factors on which a company is competitively strongest and weakest vis-à-vis key rivalsB. whether a company should correct its weaknesses by adopting best practices and/or revamping the

makeup of its value chainC. which of the rated companies is competitively strongest and what size competitive advantage it

enjoysD. whether a company has a net competitive advantage or a net competitive disadvantage relative to

key rivals (with the size of the advantage/disadvantage being indicated by the differences among the companies' competitive strength scores)

E. which rival company is competitively weakest and the areas where it is most vulnerable to competitive attack

Competitive strength scores provide useful conclusions about a company's competitive situation, including the cost-effectiveness of its value chain, as shown in the example provided in the chapter. Moreover, the strength rating provides guidance in all areas above except regarding whether or not a company should shore up its weaknesses by adopting best practices and/or revamping the makeup of its value chain.


Accessibility: Keyboard NavigationBlooms: Create

Difficulty: 3 HardLearning Objective: 04-05 How a comprehensive evaluation of a company's competitive situation can assist managers in making critical

decisions about their next strategic moves.Topic: Benchmarking

110. Identifying the strategic issues a company faces and compiling a "worry list" of problems and roadblocks is an important component of company situation analysis because

A. without a precise fix on what problems/issues a company confronts, managers cannot know what the industry's key success factors are.

B. the "worry list" sets the management agenda for taking actions to improve the company's performance and business outlook.

C. without a precise fix on what problems/roadblocks a company confronts, managers are less clear about what value chain activities to benchmark.

D. these issues and obstacles must be cleared before management can focus clearly on what is the best strategy for the company to pursue.

E. the "worry list" helps company managers clarify their thinking about how best to modify the company's value chain.

Pinpointing the precise things that management needs to worry about sets the agenda for deciding what actions to take next to improve the company's performance and business outlook.




Topic: Strategic Management



111. Which of the following is NOT part of the task of identifying the strategic issues and problems that merit front-burner managerial attention?

A. analyzing the company's external environmentB. evaluating the company's own resources and competitive positionC. surveying a company's board members, managers, select employees, and key investors regarding

what strategic issues they think the company facesD. developing a "worry list" of "how to…," "whether to…," and "what to do about…"E. assessing what challenges the company must overcome to be financially and competitively

successful in the years aheadSurveying a company's board members, managers, select employees, and key investors regarding what strategic issues they think the company faces is not part of the task of identifying the strategic issues and problems that merit front-burner managerial attention.



Difficulty: 1 EasyLearning Objective: 04-05 How a comprehensive evaluation of a company's competitive situation can assist managers in making critical

decisions about their next strategic moves.Topic: Strategic Management

112. Which of the following is NOT accurate as concerns the task of identifying the strategic issues and problems that merit front-burner managerial attention?

A. It entails drawing upon the results and conclusions from analyzing the company's external environment.

B. It entails drawing on the results and conclusions from evaluating the company's own resources and competitive position.

C. It entails developing a "worry list" of "how to…," "whether to…," and "what to do about…".D. Identifying the strategic issues and problems that the company faces is the first thing that company

managers need to do before starting to analyze the company's internal and external environment.E. Developing a list of issues and problems that management need to address (and to resolve) should

always precede deciding upon a strategy and what actions to take to improve the company's position and prospects.

Identifying the strategic issues and problems that the company faces is not the first thing that company managers need to do before starting to analyze the company's internal and external environment.



Difficulty: 1 EasyLearning Objective: 04-05 How a comprehensive evaluation of a company's competitive situation can assist managers in making critical

decisions about their next strategic moves.Topic: Strategic Management

Essay Questions



113. Identify the six questions to consider in evaluating a company's ability to compete successfully against market rivals.

The six questions are as follows:

1. How well is the company's present strategy working?2. What are the company's most important resources and capabilities, and will they give the company a lasting competitive advantage over rival companies?3. What are the company's strengths and weaknesses in relation to the market opportunities and external threats?4. How do a company's value chain activities impact its cost structure and customer value proposition?5. Is the company competitively stronger or weaker than key rivals?6. What strategic issues and problems merit front-burner managerial attention?




114. Identify at least three indicators of whether a company's present strategy is working well.

The three best indicators of how well a company's strategy is working are (1) whether the company is achieving its stated financial and strategic objectives, (2) whether its financial performance is above the industry average, and (3) whether it is gaining customers and increasing its market share.




115. A distinctive competence represents competitively superior resource strength. True or false? Explain your answer.

True. A distinctive competence is a competitively important activity that a company performs better than its rivals—it thus represents a competitively superior internal strength. It can enable a company to deliver standout value to customers (in the form of lower prices, better product performance, or superior service).


Blooms: UnderstandDifficulty: 2 Medium




116. Why do a company's core competencies matter in crafting strategy?

A core competence is a proficiently performed internal activity that is central to a company's strategy and competitiveness. A core competence is a more competitively valuable strength than a competence because of the activity's key role in the company's strategy and the contribution it makes to the company's market success and profitability. Often, core competencies can be leveraged to create new markets or new product demand, as the engine behind a company's growth.




117. What are the four tests that should be used to measure the competitive power of a company's resource strengths?

The VRIN tests for sustainable competitive advantage ask whether a resource is Valuable, Rare, Inimitable, and Nonsubstitutable as follows:

• Is the resource or capability competitively Valuable?• Is the resource or capability Rare—is it something rivals lack?• Is the resource or capability Inimitable—is it hard to copy?• Is the resource or capability Nonsubstitutable—is it invulnerable to the threat of substitution from different types of resources and capabilities?





118. A company lacking stand-alone resource strength should focus on bundling several resource strengths into a core competence. True or false? Explain and support your answer.

True. Cross-functional capabilities draw on a number of different kinds of resources and are multidimensional in nature—they spring from the effective collaboration among people with different types of expertise working in different organizational units. A resource bundle is a linked and closely integrated set of competitive assets centered around one or more cross functional capabilities. Resource bundles can sometimes pass the VRIN tests of a resource's competitive power even when the individual components of the resource bundle cannot. They fulfill an important strategic objective as it imparts a potential for attractive and long-lived profitability.


Blooms: UnderstandDifficulty: 3 Hard

Learning Objective: 04-02 Why a company's resources and capabilities are centrally important in giving the company a competitive edge




119. In conducting a SWOT analysis, is it enough to simply compile lists of the company's strengths, weaknesses, opportunities, and threats? Why or why not?

Simply making lists of a company's strengths, weaknesses, opportunities, and threats is not enough; the payoff from SWOT analysis comes from the conclusions about a company's situation and the implications for strategy improvement that flow from the four lists. The objective of SWOT analysis is to translate the diagnosis of the company's situation into actions for improving the company's strategy and business prospects.




120. Draw a typical company value chain and briefly explain why the proficiency with which a firm performs the activities comprising its value chain matters.

A representative company value chain has the following primary activities:

• Supply Chain Management• Operations• Distribution• Sales and Marketing• Service

Support Activities comprise of:

• Product R and D, Technology, and Systems Development• Human Resource Management• General Administration

A company's value chain identifies the primary activities and related support activities that create customer value. With its focus on value-creating activities, the value chain is an ideal tool for examining the workings of a company's customer value proposition and business model. Value chain analysis facilitates a comparison of how rivals, activity by activity, deliver value to customers. Accurately assessing a company's competitiveness entails scrutinizing the nature and costs of value chain activities throughout the entire value chain system for delivering its products or services to end-use customers.






121. What is meant by the term "best practices"? Why does it matter whether a company utilizes "best practices" in performing the activities comprising its value chain?

A best practice is a method of performing an activity that consistently delivers superior results compared to other approaches. Benchmarking is a potent tool for improving a company's own internal activities that is based on learning how other companies perform them and borrowing their "best practices." Best practices thus lead the path to operating excellence with respect to value chain activities.




122. Assume a firm is at a cost disadvantage with rivals because its internal costs are higher than rivals. Identify three strategic moves that it can make to restore cost parity.

To improve a company's cost competitiveness, managers can implement best practices throughout the company, particularly for high-cost activities. They can redesign the product and/or some of its components to eliminate high-cost components or facilitate speedier and more economical manufacture or assembly. They can relocate high-cost activities (such as manufacturing) to geographic areas where they can be performed more cheaply or outsource activities to lower-cost vendors or contractors.




123. Assume a firm is at a cost disadvantage with rivals because of higher supplier-related costs than key rivals. Identify three strategic moves that it can make to restore cost parity.

Supplier-related cost disadvantages can be attacked by pressuring suppliers for lower prices, switching to lower-priced substitute inputs, and collaborating closely with suppliers to identify mutual cost-saving opportunities.






124. What are the three main approaches to rectifying a weakness in a company's customer value proposition?

The three moves to achieve better cost competitiveness in the forward portion of the industry value chain are as follows:

1. Pressure distributors, dealers, and other forward-channel allies to reduce their costs and markups.2. Collaborate with them to identify win-win opportunities to reduce costs.3. Change to a more economical distribution strategy, including switching to cheaper distribution channels (selling direct via the Internet) or integrating forward into company-owned retail outlets.

Rectifying a weakness in a company's customer value proposition can include one or more of the following three approaches: (1) implement the use of best practices throughout the company, particularly for activities that are important for creating customer value—product design, product quality, or customer service; (2) adopt best practices for marketing, brand management, and customer relationship management to improve brand image and customer loyalty; and (3) reallocate resources to activities having a significant impact on value delivered to customers—larger R&D budgets, new state-of-the-art production facilities, new distribution centers, modernized service centers, or enhanced budgets for marketing campaigns.




125. Explain why a weighted competitive strength assessment is important.

Industry and competitive analyses reveal the key success factors and competitive forces that separate industry winners from losers. Benchmarking data and scouting key competitors provide a basis for judging rivals' competitive strength on several factors such as cost, key product attributes, customer service, image and reputation, financial strength, technological skills, distribution capability, and other factors. Resource and capability analysis reveals which of these are competitively important, given the external situation, and whether the company's competitive advantages are sustainable. Weights are assigned to each of the measures of competitive strength based on their perceived importance. High-weighted competitive strength ratings signal a strong competitive position and possession of competitive advantage; low ratings signal a weak position and competitive disadvantage. In addition to showing how competitively strong or weak a company is relative to rivals, the strength ratings provide guidelines for designing wise offensive and defensive strategies. Based on these ratings, a clear picture emerges on exactly what strategic and competitive challenges confront the company, which of the company's competitive shortcomings need fixing, and what specific problems merit company managers' front-burner attention.




Topic: BenchmarkingTopic: Strategic Management



126. In determining the various strategic issues that a company needs to address, managers need to consider BOTH the results of its analysis of the company's external environment and the results of its evaluation of the company's resources and competitive position. True or false? Explain and defend your answer.

True. Managers need to draw on the results of both industry analysis and the evaluations of the company's internal situation. The task here is to get a clear fix on exactly what strategic and competitive challenges confront the company, which of the company's competitive shortcomings need fixing, and what specific problems merit company managers' front-burner attention. Pinpointing the precise things that management needs to worry about sets the agenda for deciding what actions to take next to improve the company's performance and business outlook.





127. Why is it important for company managers to develop a "worry list" of strategic issues and problems that they need to address and resolve? What should they consider to develop this list?

Compiling a "worry list" of problems creates an agenda of strategic issues that merit prompt managerial attention. Pinpointing the precise things that management needs to worry about sets the agenda for identifying the specific issues and problems that the management needs to address to improve the company's performance and business outlook. The "worry list" of issues and problems that have to be wrestled with can include such things as how to stave off market challenges from new foreign competitors, how to combat the price discounting of rivals, how to reduce the company's high costs, how to sustain the company's present rate of growth in light of slowing buyer demand, whether to correct the company's competitive deficiencies by acquiring a rival company with the missing strengths, whether to expand into foreign markets, whether to reposition the company and move to a different strategic group, what to do about growing buyer interest in substitute products, and what to do to combat the aging demographics of the company's customer base.







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clemsonaphistudy.weebly.com · Web viewVRIN tests can be a powerful tool for sizing up a company's resources and capabilities. The competitive power of a resource or capability is