Ch. 4 & 5 Flashcards
Which of the following were resources and capabilities that helped Five Guys gain a competitive advantage and develop into a successful restaurant chain?
Carefully choosing the supplier of the potatoes for their fries
Focusing on such details as store layout and design
The core competencies of a business are generated by the interaction of ______.
resources and capabilities
A core competency can help a company achieve which of the following?
to offer products of comparable value at lower cost than rivals can
to create higher value for the consumer to differentiate its products and services
Which of the following are examples of resources for a firm?
cash
intellectual property buildings
Which of the following statements are true about the capabilities of a firm?
They concern the deployment of resources.
They include managerial skills. They include organizational skills.
Which of the following best describes the core competency of the Five Guys Burgers and Fries company?
Making high-quality burgers without limiting costs
What are the distinct and fine-grained business processes that enable firms to add incremental value by transforming inputs into goods and services?
Activities
What do the best firms in an industry seek to identify and manage on an ongoing basis as sources to respond to their external environment?
resources
capabilities core competencies
True or false: Core competencies should be continuously improved so that the firm can acquire or maintain a competitive advantage.
True
A(n) ______ is a unique strength, embedded deep within a firm, that is critical to gaining and sustaining competitive advantage.
Core competency
The resource-based view classifies all resources as ______.
Tangible or intangible
Unlike capabilities, resources can be both ______
Tangible or intangible
Capital, land, buildings, and plants are examples of ______ resources.
Tangible
The organizational and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically are called ______.
capabilities
______ do not have physical attributes.
Intangeble resources
Which are examples of activities that create value?
invoicing a customer
taking an order from a customer making a physical delivery of a product
Why is competitive advantage more likely to spring from intangible rather than tangible assets?
Tangible assets can be bought on the open market.
In a highly competitive industry, what are the likely consequences of a firm neglecting its current core competencies?
Competitors will gain market share.
Competitors will outperform the firm by creating competitive advantage. Competitors will develop equivalent or superior skills.
According to the resource-based view of a firm, what are defined as any asset, capability, or competency that a firm can draw upon when formulating and implementing strategy?
resources
The resource-based model views resources as ______.
the main driver of firm performance
According to the resource-based model, a firm is assumed to be a unique bundle of resources, capabilities, and competencies.
True
______ resources have physical attributes and are visible.
tangible
What critical assumption comes from the insight that bundles of resources differ across firms?
resource heterogeneity
A firm’s culture, brand equity, and intellectual property are examples of ______.
intagible resources
What does the concept of resource immobility imply?
that reproducing the set resources from another company is difficult
that resource differences between firms can last a long time
______ has a greater chance of arising from intangible resources than from tangible resources.
Competitive advantage
Using the “resource-based view” helps firms ______.
gain or maintain competitive advantage
Which of the following are considered resources under the resource-based view of the firm?
Assets
Competencies Capabilities
Resource ______ and resource ______ are the key assumptions behind the resource-based model of the firm.
heterogeneity; immobility
Which of the following identifies the resources that can lead to a competitive advantage?
VRIO framework
Which of the following is true according to the assumption of resource heterogeneity?
Resource bundles vary from company to company.
______ refers to the assumptions that resources tend to be “sticky” and do not move easily from firm to firm.
Resource immobility
A resource is considered ______ if it helps a firm to deal with an external threat.
Valuable
In the resource-based model, ______ is possible if all firms have access to the same resources and capabilities, which means that any competitive advantage acquired by a firm will be brief.
perfect competition
A resource is ______ if the number of firms that possess it is less than the number of firms required to reach a state of perfect competition.
rare
According to the resource-based view of a firm, what are defined as any asset, capability, or competency that a firm can draw upon when formulating and implementing strategy?
resources
If a firm’s resource is valuable, rare, costly to imitate, and the firm is organized to exploit it, this resource is a______.
Core competency
The ______ is a theoretical model that explains and predicts what resource attributes underpin competitive advantage. It identifies which types of resources are key to firm performance.
VRIO framework
A firm trying to compete with the leading firm in a competitive industry can try to negate the leading firm’s competitive advantage through which of the following?
direct imitation
substitution
What critical assumption comes from the insight that bundles of resources differ across firms?
resource heterogeneity
In order to be successful, a firm must have a resource that is valuable, rare, costly to imitate, and the firm must ______.
be organized to capture value
Which of the following are situations in which a resource is considered valuable?
The resource helps the firm increase its economic value creation (V-C).
The resource helps a firm exploit an external opportunity.
Groupon’s ______ was temporary since its resource was neither rare nor costly to imitate.
competitive advantage
According to the VRIO framework, in order for a firm to gain a temporary competitive advantage, a resource must be at least both ______.
rare and valuable
Which of the following can help a firm extend its competitive advantage?
better expectations of future resource value
path dependence
intellectual property protection
According to the VRIO framework, a rare resource is ______ if firms that do not possess the resource are unable to develop or buy the resource at a comparable cost.
costly to imitate
Isolating mechanisms are considered to be ______.
barriers to imitation
Javier, the owner of Javier’s Tacos, has noticed that residents of his town are flocking to a new taco truck in increasing numbers. After doing some research, Javier learns that consumers enjoy the food truck because almost all the taco ingredients are locally sourced. Javier decides to add locally sourced ingredients to his menu. This is an example of ______.
direct imitation
Susan is a consultant for a grocery store chain that wants to open several new stores in the St. Louis area. She has selected several sites for the company to consider based in part on projected population growth near those sites. What isolating mechanism does this best illustrate?
better expectations of future resource value
What should a firm do in order to be organized to capture value?
have a good organizational structure
have good coordinating systems have a rare and valuable resource
Groupon’s initial success was largely due to the company’s Blank______.
first mover advantage
______ describes a process in which the options one faces in the current situation are limited by decisions made in the past.
Path dependence
VRIO resources can lay the foundation of a competitive advantage, no competitive advantage can be sustained indefinitely.
True
Intellectual property protection and social complexity are examples of _____ mechanisms, which help a firm sustain a competitive advantage.
isolating
Time compression diseconomies occur when a firm ______.
attempts to reach an outcome in a reduced amount of time
Better expectations of future resource value ______ a firm’s competitive advantage.
positively impact
If the problem with a business strategy results in causal ambiguity, managers will ______.
have a difficult time developing a theory to deal with the problem
______ suggests that sometimes even random events may have a large impacts on an outcome.
Path dependence
Understanding the cause and effect of a strategy may help managers avoid ______.
Casual ambiguity
Which of the following can help a firm extend its competitive advantage?
path dependence
intellectual property protection better expectations of future resource value
“Time compression diseconomies” refers to the concept that Blank______.
attempting to get a good outcome in less time tends to be ineffective
The interaction of the many individual systems in the operation of a company often leads to causal ambiguity because of ______.
social complexity
The concept of social complexity suggests that ______.
social and business systems that work for one firm may be hard to imitate because of complex interactions between these systems
______ describes a situation where the cause and effect of a phenomenon are not readily apparent.
Causal ambiguity
Which isolating mechanism provides a competitive advantage for a successful company when the source of that company’s success is difficult to specify?
causal ambiguity
Which isolating mechanism is set up to legally prevent companies from copying products that give a firm a competitive advantage?
intellectual property protection
VRIO resources can lay the foundation of a competitive advantage, no competitive advantage can be sustained indefinitely.
True
______ describes a situation in which different social and business systems interact with each other.
Social complexity
Enterprise Machinists is always improving upon its core competencies by training its machinists constantly so that they are equipped to deal with technological changes and advancements. Based on this information, this is an example of which concept?
dynamic capabilities
The culture of Zappos is hard to imitate because it consists of numerous, diverse interactions among its employees, processes, procedures, and norms, that create which of the following?
social complexity
Dynamic capabilities are most relevant in ______.
changing markets
If the problem with a business strategy results in causal ambiguity, managers will ______.
have a difficult time developing a theory to deal with the problem
According to the dynamic capabilities perspective, competitive advantage stems from a firm’s ability to ______.
agilely transform its resource base
Which of the following are intangible resources that can be protected as intellectual property?
trademarks
copyrights trade secrets
How are intangible resource stocks acquired?
through investments over time in intangible resources
Which of the following can help a firm extend its competitive advantage?
better expectations of future resource value
path dependence intellectual property protection
What are actions that strategic leaders of a company can take to increase their firm’s intangible resource stocks?
retain key employees
promote in-house recertification programs make ongoing investments in company resources
For a firm to sustain any competitive advantage over time, the fit between its internal strengths and external environment needs to be Blank______.
dynamic
The two types of value chains are value chains, which are ____ vertical value chains, and ______ value chains, which are horizontal value chains.
Blank 1: industry
Blank 2: firm
A firm’s dynamic capabilities allow it to respond agilely to market changes, as well as to ______.
create market changes
The value chain describes ______ of a firm.
internal activities
The ______ perspective is a model that emphasizes a firm’s ability to modify and leverage its resource base in a way that enables it to sustain competitive advantage in a constantly changing environment.
dynamic capabilities
Competitive advantage is gained in the value chain through which of the following types of activities?
support
primary
______ are the firm’s level of investments to maintain or build a resource.
Resource flows
Marketing, sales, and distribution are ______ activities in a firm’s value chain.
Primary
What can cause an outflow of intangible resource stocks from a firm?
turnover of employees
forgetting knowledge
Accounting and finance are ______ activities in a firm’s value chain.
support
What are the two types of value chains?
industry value chains
firm value chains
While the ______ clarifies a firm’s core competencies, the ______ helps leaders understand how competitive advantage arises from the firm’s unique activities.
resource-based view; value chain perspective
The ______ describes the internal activities a firm engages in when transforming inputs into outputs.
value-chain
What are the characteristics of a strategic activity system as it applies to firms?
It is socially complex.
It consists of interconnected activities. It is causally ambiguous.
The internal activities of a firm that for transforming inputs into outputs _______consist of activities, which add value directly, and _______activities, which add value indirectly.
Blank 1: primary or primary activities
Blank 2: support, supports, supporting, supportive, or support activities
True or false: To maintain a competitive advantage, a strategic activity system needs to change over time.
true
Primary activities include which of the following?
operations
supply chain management
A customized strategy that considers the unique resources of the company while considering the external environment creates ______.
a strategic fit between them
In contrast to primary activities, support activities add value______, but are necessary to sustain primary activities.
indirectly
The purpose of a SWOT analysis is to =_____.
form a strategy that is tailored to the firm’s unique strengths and weaknesses and the opportunities and threats in its environment
According to the value chain perspective, ______ are located in the network that connects different, but related activities within a firm.
core competencies
When strategizing about possible competitive advantages, a major advantage of the SWOT analysis is that it allows managers to simultaneously consider ______.
internal and external factors
A firm’s network of interconnected activities is referred to a strategic activity system because activities that are interconnected are very difficult for competitors to copy effectively.
True
What insights gained from a SWOT analysis would lead McDonald’s to consider developing healthier food items for its menu?
a growing health consciousness among customers
What are ways that firms should change their strategic activity systems to maintain a dynamic competitive advantage?
upgrading activities so that they do not become obsolete
removing activities that no longer serve a purpose adding new activities
Strategic leaders use internal and external analyses in tandem to create a customized fit between a company’s ______.
internal resources and external environment
In order to avoid making costly mistakes due to the potential shortcomings of the SWOT analysis, a manager should ______.
take results from the SWOT analysis with “a grain of salt”
Identify the framework that allows managers to synthesize insights obtained from internal and external analysis.
SWOT analysis
One of the most popular tools used by firms to evaluate their current situation and future prospects is the ______.
SWOT analysis
Which statements correctly describe the ESG criteria?
They evaluate firms on standards that go beyond financial results.
They include environmental, social, and governmental aspects.
Which insights gained from a SWOT analysis could lead McDonald’s to open new restaurants in China?
McDonalds’ financial strength and brand name.
Growth in emerging economies and market share decline in developed economies.
The economic system in which the owners of shares in a public company are the company’s legal owners and the providers of risk capital is called
shareholder capitalism
True or false: To maintain a competitive advantage, a strategic activity system needs to change over time.
True
Milton Friedman’s conclusion that the primary objective of the firm is to maximize profit rests on which three fundamental assumptions?
The primary goal of society should be individual freedom.
Managers are agents of shareholders. Free markets are perfectly efficient.
The SWOT analysis should be used with caution because Blank______.
opportunities can be threats and strengths can be weaknesses
Place the levels of hierarchy within a public stock company in order, with the highest level at the top.
- state charter 2. shareholders. 3 board of directors 4. management 5. employees
In performing a SWOT analysis to generate insights from external and internal analysis, internal strengths and weaknesses can be determined by applying ______ and external strengths can be evaluated in part by applying ______.
the VRIO framework; PESTEL
A public stock company is considered by law to be an entity with legal rights and obligations. This is known as ______.
legal personality
each description ESG criteria dimension.
environmental- working to address climate change and other sustainability goals
social- pursuing policies that promote diversity, equity, health and safety, human rights, and inclusion
governance- addressing factors related to business ethics, legal compliance, transparency, shareholder democracy, and board independence
Narrowly defining public stock companies in terms of financial performance can lead to ______.
black swan events
What is shareholder capitalism?
an economic system in which the owners of shares in a public company are the company’s legal owners and the providers of risk capital
Our understanding of the firm’s purpose has shifted over time. Place the views of the firm’s purpose in historical order, with the most recent view at the top.
- creating shared value 2. Pursuing corporate social responsibility 3. maximizing profits
What is meant by the statement that company managers are agents of shareholders?
Managers are hired to run the day-to-day business even though stockholders own the enterprise.
What is a public stock company’s top level of hierarchy?
the state charter
Social consequences of business activities, including pollution, energy loss, and dangerous accidents, are known as _____.
externalities
What are the four characteristics of a public stock company that make it an attractive corporate form?
limited liability for investors
transferability of investor ownership separation of ownership and management control legal personality
Under the shared value creation framework, which of the following strategic actions would fail to connect economic and societal needs?
focusing exclusively on maximizing returns for shareholders
Many strategy scholars argue that the value of public stock companies is too narrowly defined in terms of ______, leading to scandals and economic crises.
financial performance
Optics Incorporated, a publicly traded eyewear business, places profits ahead of all other performance metrics. This practice does which of the following?
conforms to the traditional notion of shareholder capitalism
fails to take into account the idea of corporate social responsibility
What are the three defining problems faced by capitalism today according to strategy scholar Rebecca Henderson?
beleaguered institutions
economic inequality climate change
Which of the following are standard performance dimensions for a company?
a firm’s accounting metrics
how much economic value a firm generates how much shareholder value a firm creates
Which of the following correctly describe the information used for comparing the performance of public companies based on accounting profitability?
The information is derived from such data as income statements and balance sheets.
The information is filed in a 10-K report. The relative performance is evaluated using standardized financial metrics.
The shared value creation framework encourages managers to focus on which of the following needs?
economic and social
Which of the following are among the most commonly used metrics for comparing the performance of different companies?
return on revenue
return on assets return on equity return on invested capital
In order to reconcile economic and social needs within the shared value creation network, managers need to focus on which of the following?
expanding value chains to include NGOs and other organizations committed to social goals
creating new regional clusters and business centers making products affordable for the poorest socioeconomic groups in order to improve standards of living
Which of the following are considered off-balance sheet items?
operating leases
pension obligations
The idea of corporate social responsibility (CSR) suggests that a firm’s obligations should ______.
exceed the traditional imperative to increase profits
Which of the following are true of a firm’s book value?
Its importance has declined over time.
It captures the historical cost of a firm's assets. It is calculated as costs of assets minus accumulated depreciation.
The firm’s accounting metrics, ability to create shareholder value, and ability to generate economic value tend to be ______.
correlated
In order to be considered a legal owner of a public company, a person or organization must ______.
own at least one share of the company’s stock
Public companies are required by law to release detailed accounting data, which enables______.
comparative analysis of firms
Return on invested capital, return on assets, and return on revenue are examples of the ______ most commonly used in strategic management to conduct direct performance comparisons between different companies.
profitability ratios
Which of the following statements about the disadvantages of the accounting profitability perspective are correct?
Accounting data are historical and therefore backward-looking.
Accounting data focus primarily on tangible assets.
From the view of a shareholder, the measure of competitive advantage that matters most is return on ______.
risk capital
A firm’s actual ______ minus depreciation is called the book value.
costs of assets
According to the efficient-market hypothesis, information about which of the following is embedded in a stock price?
expectations of the firm’s future performance
a firm's current state a firm's past
Which of the following is true about shareholders of a public company?
They can be individuals or organizations.
In order to determine market capitalization, one multiplies which of the following together?
number of outstanding shares
share price
When competitive advantage is assessed from an analysis of publicly available data, a firm measures its ______.
accounting profitability
In their annual filing with the Securities and Exchange Commission, public companies in the United States must report which of the following?
the total return to shareholders
benchmarks
When a firm goes bankrupt, shareholders ______.
cannot recover their risk capital
Which of the following would provide the best benchmark of a computer firm’s performance relative to other high-tech firms?
the NASDAQ computer index
Investors in a company are mostly concerned about the company’s ______.
total return to shareholders
What is one potentially negative outcome that firms face when they deliver higher than expected growth?
Investors will expect a similarly high level of growth in the future.
The Luminarium Corporation has a market capitalization of $100,000,000, and each share is worth $100. How many outstanding shares of Luminarium Corporation are there?
1,000,000
True or false: Stock market valuations are often unreliable due to market fluctuations and are therefore not used to assess competitive advantage.
False
Companies are required to provide ______ to shareholders, which are used in determining a firm’s competitive advantage.
benchmarks
Because external factors create volatility in stock prices, a better measure of a firm’s performance over the long term is the Blank______.
total return to shareholders
When a firm does favorably compared to similar firms, it is said to ______.
outperform
Economic value created is the ______ the cost to produce a product/service and the amount the buyer is willing to pay for it.
difference between
A company’s stock price increases if the company ______.
grows faster than expected
Which statements about stock market valuations are true?
Stock market valuation is equal to the number of outstanding shares multiplied by the share price.
Viewed over the long term, stock market valuation is a useful metric for assessing competitive advantage.
The most a consumer is willing to pay for a product is equivalent to the product’s ______.
total perceived consumer benefits
Which of the following are considered disadvantages of the shareholder value creation approach?
Stock prices are influenced by the psychological mood of investors.
Overall macroeconomic factors have a direct bearing on stock prices. Stock prices can be highly volatile.
If a firm has a successful ______ strategy, its product will have a higher perceived value and the firm will have a competitive advantage over a competitor that creates a product at equal cost but with a lower reservation price.
product differentiation
The difference between the cost of producing a product and the price consumers are willing to pay for that product is known as Blank______.
economic value created
If Tom would have paid $1,000 for a new laptop but was able to purchase one for $800, the $200 he saved is considered his ______.
consumer surplus
When a trade occurs, the consumer and producer both capture ______.
some of the economic value
True or false: Stock market valuations are often unreliable due to market fluctuations and are therefore not used to assess competitive advantage.
false
The subjectively determined maximum amount a customer would pay for a product is its ______ price.
reservation
If Firm A and Firm B both produce a laptop at the same total cost, but the reservation price for Firm A’s laptop is $1,000 and the reservation price for Firm B’s laptop is $1,200, who has the competitive advantage?
Firm b
For a product that has a large economic value, a firm can choose to charge the same price as competitors in order to ______.
gain market share
To determine a product’s producer surplus, which of the following must be compared?
total cost of production
price charged
Which of the following would be labeled variable costs by a computer manufacturer?
display screens
hard drives
Economic value creation is calculated as ______.
the sum of consumer and producer surplus
Opportunity costs refer to the value of what could have been gained had a person pursued ______.
an alternative use of available resources
Which statements about stock market valuations are true?
Stock market valuation is equal to the number of outstanding shares multiplied by the share price.
Viewed over the long term, stock market valuation is a useful metric for assessing competitive advantage.
Achieving competitive advantage means maximizing the difference between which two of the following?
consumers’ willingness to pay
the cost to produce the good or service
To measure firm-level competitive advantage, a company must ______.
estimate the economic value created for all products and services offered by the firm
The money a firm spends to set up a sales website can be considered a ______ cost.
fixed
When a person decides to quit their job and start a company, the salary that person gave up when quitting can be considered ______.
an opportunity cost
True or false: Stock market valuations are often unreliable due to market fluctuations and are therefore not used to assess competitive advantage.
false
Which of the following are among the standard dimensions for measuring competitive advantage?
shareholder value
accounting profitability economic value
The subjectively determined maximum amount a customer would pay for a product is its ______ price.
reservation
The balanced scorecard framework draws from which of the following?
from multiple internal and external performance metrics
Which statements about the disadvantages of the value creation perspective are true?
For large firms, it is difficult to estimate the economic value created for all products and services offered by the firm.
The value that a consumer places on a good can vary according to how the consumer feels at a particular moment. It is difficult to determine the value that consumers place on a given good.
At 3M, one strategic objective that has been implemented is that 30% of revenues must be obtained from new product introductions. This is an objective that would arise as an answer to which of the following balanced scored questions?
How do we create value?
The balanced scorecard framework enables managers to do which of the following?
translate the strategic vision into operational goals
implement feedback and organizational learning communicate and link the strategic vision
A balanced scorecard is a tool for strategy _____
implemenation
Which of the following frameworks work to provide a more holistic perspective on firm performance?
Blank 1: profits or profit
Blank 2: people or persons
Blank 3: planet
The balanced scorecard approach helps managers balance ______ goals.
financial and strategic
What type of strategy can be pursued by a firm over the long term that allows it to be profitable without negatively affecting the planet or people?
a sustainable strategy
Which of the following are the key questions for understanding the balanced scorecard?
How do customers view us?
What core competencies do we need? How do shareholders view us? How do we create value?
In order to ensure that a firm is implementing the triple-bottom-line approach successfully, managers must ______.
audit the company’s results in fulfilling its social and ecological obligations
Which of the following are offered by a balanced scorecard?
operational measures on customer satisfaction
common financial metrics measures of internal processes
For a balanced scorecard to be effective, managers must do which of the following?
formulate an effective strategy for achieving competitive advantage
manage objectives according to the balanced-scorecard approach translate their strategy into measurable objectives
Which of the following dimensions make up the triple bottom line?
ecological
economic social
True or false: The best measure of competitive advantage can be found in the performance of specific departments.
false
Which of the following is true about a sustainable strategy for a business?
It is a strategy that can be pursued over time without harmful effects on people or the environment.
According to______ theory, a firm exists within an interconnected network of constituencies, both inside and outside the organization, and the firm is responsible to these constituencies.
stakeholder capitalism
Which of the following performance dimensions matter in judging the effectiveness of a firm’s strategy?
qualitative
quantitative
