1. Internal analysis is concerned with identifying a company's opportunities and threats.

False
2. Together with an analysis of the company's external environment, internal analysis gives managers the information they need to
choose the business model and strategies that will enable their company to attain a sustained competitive advantage. True
3. Distinctive competencies are firm-specific strengths that allow a company to differentiate its products and achieve substantially lower
costs than its rivals. True
4. Tangible resources include experiential knowledge and technological know-how. False
5. The more a resource is firm-specific and difficult to imitate, the more likely a company holding that resource is said to have a
distinctive competency. True
6. The price a company charges for a good or service is typically more than the utility placed on that good or service by the customer.
False
7. At the heart of any company's business model is the combination of congruent strategies aimed at creating distinctive competencies
that differentiate its products and result in a lower cost structure. True
8. When a company has differentiated products, they have less pricing options. False
9. Lucy is an entrepreneur who is interested in opening her own bakery. She is concerned with obtaining money for equipment for the
bakery such as ovens, pots and pans, and display cabinets. Lucy is trying to obtain intangible resources for her business. False
10. The building blocks of competitive advantage are turnover, quantity, and profitability. False
11. Employee productivity is a common measure of efficiency. True
12. Unfortunately, quality-as-excellence and quality-as-reliability are concepts that apply to goods but not services. False
13. The importance of reliability in building competitive advantage has increased dramatically over the past decade. True
14. Nene works in a factory where she picks crab meat from crabs. She is paid per day based upon the number of pounds of crab meat
that she picks. Nene’s daily number of pounds of crab meat can be referred to as her productivity. True
15. In the fashion industry, the time required to take a new product from design inception to placement in a retail store is known as
customer response time. True
16. A value chain is a sequence of activities for transforming inputs into outputs that are valued by customers. True
17. At Adam's bicycle repair shop, the primary value chain activity of production occurs each time a customer's bicycle is repaired. True
18. The primary activities of the value chain include the design, creation, and delivery of the product, the product's marketing, and its
support and after-sales service. True
19. If a company's profitability is higher than the industry average, it has a competitive advantage. True
20. A company's profitability depends on the value customers place on the company's products. True
21. The more utility a company creates for its customers; the more flexibility it has in determining prices. True
22. Imitating a company's capabilities tends to be more difficult than imitating its tangible and intangible resources. True
23. Patents typically provide the greatest barrier to imitation. False
24. Absorptive capacity refers to the ability of an enterprise to identify, value, assimilate, and use new knowledge. True
25. The ability of established competitors to imitate the competitive advantage of a rival is not limited by factors such as existing strategic
commitments and low absorptive capacity. False
26. IBMs investment in mainframe computers, that proved disadvantageous when the market shifted to smaller personal computers, is
an example of a prior strategic commitment. True
27. Benchmarking is a practice in which a company's performance is compared against that of competitors and the historic performance
of the company itself. True
28. The Icarus paradox suggests that those factors that led to a company's success will continue in the future because the competitors
cannot imitate them. False
29. The most successful firms are those that constantly learn and upgrade their distinctive competencies. True
30. Texas Instruments achieved early success through engineering excellence. But thereafter, they became so obsessed with engineering
that they lost sight of market realities. This is an example of the Icarus Paradox. True
31. Capabilities refer to a company's:
a. manufacturing equipment. b. reputation. c. skills at using resources effectively. d. competitors who are capable of offering greater
variety of products. e. patents, copyrights, and trademarks.
32. Which of the following is not true regarding a company's distinctive competencies?
a. They represent the unique strengths of the company. b. They refer to company strengths that competitors cannot easily match or
imitate. c. They form the bedrock of a company's strategy. d. They can be based in any of the value creation functions of the company.
e. They are shared by many firms in an industry.
33. Resources:
a. are only the tangible assets available to a company. b. can be both tangible and intangible. c. is harder for a company to copy than
capabilities are. d. does not include patents, copyrights, and trademarks. e. is considered valuable only if they increase a company's
costs.
34. Competitive advantage is based on:
a. distinctive competencies. b. the Icarus paradox. c. higher cost structure. d. prior strategic commitments. e. barriers to change in a
company.
35. Competitive advantage typically leads to:
a. a defective business model. b. average profitability within an industry. c. superior profitability. d. the Icarus paradox. e. barriers to
changes in the organization.
36. Which of the following is true of the impact of high product quality on competitive advantage?
a. It decreases the utility of the products. b. It lowers unit costs of the products. c. It adversely affects employee productivity. d. It limits
the company's ability to differentiate its products. e. It increases the need for after sales services.
37. The intellectual property of an organization is a(n):
a. tangible resource. b. strategic commitment. c. tangible capability. d. barrier to change. e. intangible resource.
38. Donna can make a chair for about $100, she charges customers $150 to buy the chair, and customers perceive that the chair is worth
$225. In this case, the consumer surplus is:
a. $50. b. $75. c. $125. d. $150. e. $225.
39. Anna bakes cookies for about $10 per batch, she charges customers $15 to a batch, and customers perceive that the cookies are worth
$25 per batch. Anna's profit margin is:
a. $5. b. $7.5. c. $10. d. $15. e. $25.
40. Kodak possesses the leading imaging technology. This technology has allowed the company to differentiate its products from those
offered by rivals. Imaging technology is Kodak's:
a. distinctive competence. b. profit. c. support activity. d. value chain. e. retired product.
41. The simplest measure of efficiency is:
a. the amount of money the company has to work with in the short term. b. the ratio of revenues divided by invested capital. c. the net
profit expressed as a percentage of sales. d. the total costs of producing products. e. the quantity of inputs that it takes to produce a
given output.
42. One of the basic building blocks of competitive advantage is:
a. quantity. b. logistics. c. variety. d. distribution. e. innovation.
43. Efficiency is:
a. defined as the time it takes to produce a product. b. the quantity of inputs required to produce an output. c. independent of customers'
perception of a product's value. d. measured by looking at a product's price. e. lower when the output is high-quality.
44. Customer response time is:
a. the time taken for value to be placed on a company's products by customers. b. the time taken for development of a new process for
producing products and delivering them to customers. c. the time taken for given inputs to be converted into an output. d. the time taken
for development of products that have superior attributes to existing products. e. the time taken for a good to be delivered or a service
to be performed.
45. The concept of quality applies to: a. all products produced by
a firm. b. products consumers believe to be high-quality; not low-quality. c. only those products of a firm popular among a large customer
base. d. custom-made products only. e. only those products that have been redesigned.
46. Which of the following is an important attribute for a product from a quality-as-reliability perspective?
a. Styling b. Aesthetic appeal c. Level of after-sale service d. Features e. Performance
47. Intel’s invention of the microprocessor in the early 1970s, Cisco’s development of the router for routing data over the Internet in the
mid-1980s, and Apple’s development of the iPod, iPhone, and iPad in the 2000s can be referred to as innovations.
a. process b. product c. customer d. sector e. absorptive
48. Innovation refers to the act of:
a. seeking patent protection for new products. b. creating new products and processes. c. measuring time taken for a service to be
provided. d. measuring the output produced by an employee. e. identifying and satisfying the needs of a customer.
49. Which of the following best describes product innovation?
a. Transforming a quantity of inputs into a given output b. Identifying and satisfying a customer's needs c. Creating products that have
superior attributes than existing products. d. Developing a new process that focuses on quantity rather than quality. e. Measuring the
quantity of outputs produced per employee.
50. Which primary activity in the value chain is concerned with the design of products and production processes?
a. Research and development b. Marketing and sales c. Materials management d. Production e. Company infrastructure
51. Using the value chain model, which of the following primary activities is performed first, as inputs are transformed into outputs?
a. Research and development b. Marketing and sales c. Human resources d. Production e. Service and support
52. Using the value chain model, which of the following primary activities is performed last, as inputs are transformed into outputs?
a. Research and development b. Marketing and sales c. Service and support d. Production e. Human resources
53. Ford Motors developed the Explorer sports utility vehicle, the number I selling sports utility vehicle in the United States, based on
an extensive study of customer preferences. Which value chain activity of Ford conducted those studies?
a. Research and development b. Human resources c. Materials management d. Marketing and sales e. Company infrastructure
54. Mike works as a corporate trainer, teaching new employees how to perform manufacturing tasks. In which value chain activity does
Mike work?
a. Research and development b. Human resources c. Materials management d. Production e. Company infrastructure
55. Cost accountants are responsible for gathering and monitoring data used for controlling the organization's costs. In which value
chain activity do cost accountants work?
a. Research and development b. Human resources c. Materials management d. Marketing and sales e. Company infrastructure
56. Which of the following support activities in the value chain refers to the transmission of physical materials from procurement through
production and into distribution?
a. Human resources b. Information systems c. Research and Development d. Logistics e. Operations
57. consists of the electronic systems for managing inventory, tracking sales, pricing products, selling products, and dealing with
customer service inquiries.
a. Information systems b. Logistics c. Barriers to imitation d. Benchmark e. Materials management
58. Research and development activities are concerned with:
a. design of products. b. distribution of goods. c. customer services. d. analyzing financial performance. e. marketing of products.
59. The term value chain refers to the idea that a company is:
a. one of a series of units that comprise an industry segment. b. the producer of a series of customer-valued products that are linked
together. c. a series of activities that transform inputs into products that customers value. d. one of a series of economic functions. e.
a collection of various products and their attributes.
60. Ray, a toymaker, knits a stuffed unicorn for Belle. Which function of the value chain is illustrated in this scenario?
a. Marketing b. Distribution c. Research d. Production e. Sales
61. The ratio of net profit to invested capital is known as:
a. return on invested capital. b. return on sales. c. capital turnover. d. cost of goods sold. e. sales, general, and administrative expenses.
62. One of the most widely used measures of financial performance is:
a. return on invested capital. b. net profit margin. c. share value. d. net sales. e. productivity.
63. Which of the following determines the cost of goods sold?
a. The balance sheet b. The financial position statement c. The cash budget d. The income statement e. The overhead expense statement
64. Ted is an accountant at ABC Company. He calculates the difference between total revenues and total costs before tax. Ted calculates
the:
a. net profit. b. capital turnover. c. cost of goods sold. d. return on sales. e. invested capital.
65. Which of the following factors does not determine the durability of a company's competitive advantage?
a. Barriers to imitation b. Apathy in an industry c. Capability of competitors d. General level of dynamism in the industry e. The rate
of product innovation in an industry
66. Factors that make it difficult for a competitor to copy a company’s distinctive competencies are known as:
a. barriers to imitation. b. marketing know-how. c. technological know-how. d. support activities. e. capabilities.
67. A company's competitive advantage is more durable when:
a. barriers to imitation are low and there are few capable competitors. b. barriers to imitation are high and there are many capable
competitors. c. barriers to imitation are high and the industry is stable. d. the industry is stable and there are many capable competitors.
e. the industry is stable and barriers to imitation are low.
68. A company's competitive advantage will not endure for long when that competitive advantage can be:
a. quickly or easily duplicated by other companies. b. protected by patents. c. protected by significant barriers to imitation. d. shared
with other companies in the industry. e. shielded by copyrights.
69. Industry dynamism refers to:
a. the gradual erosion of a company's customer base over time. b. shifts in product profitability. c. a rapidly changing industry
environment. d. increasing per-unit costs. e. a company's difficulty in changing its strategies and structure.
70. According to Ghernawat, a strategic commitment is:
a. the factor that make it difficult for a competitor to copy a company’s distinctive competencies. b. the time that it takes for a good to
be delivered or a service to be performed. c. the set of activities related to the design, creation, and delivery of the product, its marketing,
and its support and after-sales service. d. the collection nonphysical entities such as brand names, company reputation, experiential
knowledge, and intellectual property, including patents, copyrights, and trademarks. e. a company’s dedication to developing a
particular set of resources and capabilities.
71. The argument states that companies find it hard to change their strategies and structures to adapt to changing competitive conditions.
a. inertia. b. imitation. c. barriers to mobility. d. lack of resources. e. lack of capabilities.
72. Kim's Apparel was a very popular clothing store. It made huge profits during the first two years of its establishment. However, the
company failed to keep up with the changing needs of the customers and eventually had to be closed down. Which of the following
concepts does the scenario illustrate?
a. Cycle time b. Customer defection c. Icarus paradox d. Distinctive competency e. Diseconomies of scale
73. Dale's methods of fitting horseshoes save time and money for his employer at the local ranch. However, when Dale suggests that
everyone use his method, his boss, Cedric, says, "No. That's not the way we've always done it around here." Cedric's resistance to change
illustrates:
a. organizational inertia. b. prior strategic commitments. c. barriers to mobility. d. lack of distinctive competencies. e. the Icarus
paradox.
74. Benchmarking can be defined as the practice of:
a. monitoring activities related to the design, creation, and delivery of a product, its marketing, and its support and after-sales service.
b. developing products that are new to the world or have superior attributes to existing products in the market. c. measuring the time that
it takes for a good to be delivered or a service to be performed. d. measuring a company against the products, practices, and services
of some of its most efficient global competitors. e. analyzing the financial position of a company and creating the income statements
and the balance sheets.
75. When Rollie's car wash began to lose business to rivals, Rollie read publications for car wash owners to learn the best practices in
the industry. Then she implemented the best practices. Rollie is using benchmarking to improve her car wash.
76. Which of the following is not a way that companies can avoid failure?
a. Benchmarking b. Continuous learning c. Developing distinctive competencies d. Exploiting luck e. Following rigid business
processes
77. The Icarus paradox suggests that:
a. companies should stick to a narrowly defined line of products. b. better-than-average profitability is an elusive goal. c. companies
may become myopic and lose sight of market realities. d. companies often pursue too many strategies at once. e. companies should
change strategies before strategies need changing.