Essentials of Strategic Management
Evaluating a Company’s Resources, Capabilities, and Competitiveness – CH4

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1    
Evaluating a company’s resources and capabilities and competitive strength relative to its rivals using VRIN Tests does not include developing answers to which one of the following questions?
    A)
Is the resource or capability rare?
    B)
How good is the company’s value chain?
    C)
Is the resource or capability competitively valuable?
    D)
Is the resource or capability inimitable or hard to copy?
    E)
Is the resource or capability non-substitutable, or is it vulnerable to the threat of substitution from different types of resources and capabilities?
    

 
2    
Which one of the following is not a good indicator of how well a company’s present strategy is working?
    A)
Whether it is achieving its stated financial and strategic objectives.
    B)
Whether it is an above-average industry performer.
    C)
Whether the firm’s sales and earnings are increasing or decreasing.
    D)
Whether the company’s resource strengths and competitive capabilities outnumber its resource weaknesses and competitive vulnerabilities.
    E)
The rate at which new customers are acquired and whether the company’s overall financial strength is improving or on the decline.
    

 
3    
Which one of the following groups of characteristics is least likely to represent valuable company resources or competitive capabilities?
    A)
Physical resources — state-of-the-art manufacturing plants and equipment, efficient distribution facilities, attractive real estate locations, or ownership of valuable natural resource deposits.
    B)
Larger workforce, longer time in business, lower profit margins, and smaller capital investment spend than rivals.
    C)
Intangible resources such as a well-known brand name.
    D)
Organizational resources — information and communication systems (servers, workstations, etc.), proven quality control systems, and strong network of distributors or retail dealers.
    E)
Company culture — the norms of behavior, business principles, and ingrained beliefs within the company.
    

 
4    
Which of the following statements is false?
    A)
A dynamic capability is the ability to modify, deepen, or reconfigure the company’s existing resources and capabilities in response to changes in the environment or market.
    B)
A company’s internal strengths should always serve as the basis for its strategy.
    C)
Managers must look toward ing competitive weaknesses that make the company vulnerable, dampen profitability, or disqualify it from pursuing an attractive opportunity.
    D)
Managers need to keep close track of how cost effectively the company can deliver value to customers relative to its competitors.
    E)
None of the above.
    

 
5    
Which of the following statements about market opportunity is ?
    A)
Market opportunity is a big factor in shaping a company’s strategy.
    B)
Depending on the prevailing circumstances, a company’s opportunities can be plentiful or scarce and can range from wildly attractive to unsuitable.
    C)
In evaluating the attractiveness of a company’s market opportunities, managers have to guard against viewing every industry opportunity as a suitable opportunity.
    D)
Answers A and B.
    E)
All of these.
    

 
6    
A company that is at a disadvantage in the marketplace because it lacks competitively valuable resources possessed by rivals _______________
    A)
should adopt a new competitive strategy that might better match the circumstances of the marketplace.
    B)
should abandon strategy elements that have caused its weakness in the marketplace.
    C)
should undertake efforts to develop a distinctive competence.
    D)
is virtually blockaded from using offensive strategies and must rely on defensive strategies.
    E)
nearly always is relegated to a trailing position in the industry.
    

 
7    
A core competence _______________
    A)
is a more durable company resource than a “distinctive competence.”
    B)
usually resides in a company’s technology and physical assets (state-of-the-art plants and equipment, attractive real estate locations, modern distribution facilities, and so on) whereas a company competence usually resides in a company’s human assets.
    C)
is a capability that passes the “competitively valuable” test.
    D)
is usually tied closely to the caliber of a company’s manufacturing capability and/or its proprietary technology and know-how.
    E)
is better suited to helping a company defend against external threats than in pursuing external market opportunities.
    

 
8    
A distinctive competence _______________
    A)
is a more important competitive asset than a core competence.
    B)
is a competitively valuable capability that is performed with a very high level of proficiency.
    C)
resides in people and in a company’s intellectual capital and not in its assets on the balance sheet.
    D)
is knowledge-based.
    E)
All of the above.
    

 
9    
SWOT analysis _______________
    A)
is a simple but powerful tool for sizing up a company’s internal strengths and competitive deficiencies, its market opportunities, and the external threats to its future well-being.
    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)
examines the company’s cost position activity by activity.
    E)
is a competitive intelligence tool that discloses rivals’ key weaknesses.
    

 
10    
The industry or market opportunities that are most relevant to a company and those that its strategy should aim at capturing include _______________
    A)
opportunities that are well-matched to the company’s competitive capabilities and resource strengths.
    B)
opportunities that the company has the financial resources to pursue.
    C)
opportunities that offer important avenues for growth.
    D)
opportunities where the company has the greatest potential for competitive advantage.
    E)
All of the above.
    

 
11    
Which of the following is not an example of an external threat to a company’s future business prospects (see Table 4.2)?
    A)
Mounting intensity of competition among industry rivals and costly new regulatory requirements.
    B)
Having a weaker brand image than rivals and a smaller network of retailer dealers than rivals.
    C)
Shifts in buyer needs and preferences away from using the industry’s product.
    D)
Vulnerability to unfavorable industry driving forces and adverse demographic changes that are likely to curtail demand for the industry’s product.
    E)
Growing bargaining power on the part of customers and/or suppliers.
    

 
12    
Which of the following analytical tools are particularly useful for determining whether a company’s prices and costs are competitive?
    A)
SWOT analysis, strategy assessment, activity-based costing analysis, and key success factor analysis.
    B)
SWOT analysis, competitive strength assessment, best practices analysis, and value chain analysis.
    C)
Value chain analysis and benchmarking.
    D)
Competitive position assessment, competitive strength assessment, strategic group mapping, SWOT analysis, and value chain analysis.
    E)
SWOT analysis, best practices analysis, activity-based costing analysis, and competitive strength assessment.
    

 
13    
A company’s value chain consists of _______________
    A)
the activities a company performs in converting its resource weaknesses into resource strengths.
    B)
the collection of activities it performs in the course of designing, producing, marketing, delivering, and supporting its product or service.
    C)
those activities a company performs that represent “best practices.”
    D)
the activities that a company performs in developing a distinctive competence.
    E)
the activities that represent a company’s competencies, core competencies, distinctive competencies, and competitive capabilities.
    

 
14    
Benchmarking _______________
    A)
is inherently unethical if it involves companies that are direct competitors because it involves gathering competitively sensitive information about the operations and costs of rivals.
    B)
is not a valid tool for measuring the cost-effectiveness of an activity unless it is restricted to companies in the same industry.
    C)
entails comparing how different companies perform various value chain activities and then making cross-company comparisons of the costs of these activities.
    D)
loses much of its managerial usefulness if it is done with the aid of third-party organizations.
    E)
entails calculating the costs of performing each of the primary and related support activities in a company’s value chain.
    

 
15    
A company’s cost competitiveness is largely a function of _______________
    A)
whether it does a good enough job of benchmarking its value chain activities against the value chains of competitors so that it knows exactly how low to drive its costs to be cost-competitive.
    B)
how efficiently it manages its internally performed value chain activities and the costs in the value chains of its suppliers and forward channel allies.
    C)
whether it does a better job of building its resource strengths more cost effectively than rivals.
    D)
whether it possesses more core competencies and competitive capabilities than rivals.
    E)
how closely its internally performed activities are linked to the activities performed by suppliers and to the activities performed by forward channel allies.
    

 
16    
Strategic actions to reduce the costs of internally performed value chain activities and improve a company’s cost competitiveness _______________
    A)
can aim at lowering costs (1) in the suppliers’ part of the industry value chain, (2) in a company’s own internally performed activities, and/or (3) in the forward channel portion of the value chain.
    B)
work best when they aim at lowering the costs of performing those tasks and activities where the company has core competencies and distinctive competencies.
    C)
work best when aimed at increasing the amount of the company’s low-cost competitive assets and decreasing the amount of its high-cost competitive assets.
    D)
are likely to be most effective when they are aimed at lowering the costs of the value chain activities that a company performs internally.
    E)
are most likely to be successful when they involve efforts to concentrate more company resources and talents on those value chain activities where the company already has the lowest costs.
    

 
17    
Strategic actions to eliminate an internal cost disadvantage include _______________
    A)
implementing the use of best practices.
    B)
trying to eliminate some cost-producing activities by revamping the value chain.
    C)
outsourcing high-cost activities to vendors capable of performing the activity more cheaply.
    D)
investing in productivity-enhancing, cost-saving technology.
    E)
All of these.
    

 
18    
The options for attacking the high costs of items purchased from suppliers does not include which one of the following?
    A)
Pressuring suppliers for more favorable prices.
    B)
Integrating backward into the business of high-cost suppliers and making the item in-house so as to better control the cost.
    C)
Switching to lower priced substitute inputs.
    D)
Raising prices to customers (so as to cover the high costs).
    E)
Collaborating closely with suppliers to identify mutual cost-saving opportunities.
    

 
19    
Which one of the following is not something that can be learned from doing a competitive strength assessment?
    A)
Identifying the competitive factors where a company is strongest and weakest vis-à-vis key rivals and the kinds of offensive/defensive actions the company can use to exploit its competitive strengths and reduce its competitive vulnerabilities.
    B)
The extent to which a company’s customer value proposition is superior to its rivals.
    C)
Which of the rated companies is competitively strongest and what size competitive advantage it enjoys.
    D)
Whether a company has a net competitive advantage or a net competitive disadvantage relative to key rivals (as 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.
    

 
20    
Identifying the strategic issues that company managers need to address _______________
    A)
involves using the results of both industry and competitive analysis and evaluations of the company’s internal situation using the VRIN tests.
    B)
is facilitated by analysis of the company’s cost structure and customer value proposition relative to its rivals.
    C)
sets the agenda for deciding what actions to take next to improve the company’s performance and business outlook.
    D)
entails locking in on what challenges the company has to overcome in order to be financially and competitively successful in the years ahead.
    E)
All of the above.