Foundations of Strategy By Robert M.Grant – Test Bank

 

 

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Sample Test

Chapter 3

Resources and Capabilities

 

1.    Industry attractiveness is now more important in explaining firms’ profitability than competitive advantage.

@Pages and References: Page 111

1.    T

*b. F

 

2.    Competitive advantage is generally the amount by which one firm’s profitability exceeds another’s in the same industry.

@Pages and References: Page 111

*a. T

1.    F

 

3.    Honda defines itself as a motorbike and automobile company.

@Pages and References: Page 111

1.    T

*b. F

 

4.    It is vital for a business strategist to distinguish between a firm’s resources and its capabilities

@Pages and References: Page 111

*a. T

1.    F

 

5.    Resources are a firm’s productive assets; capabilities are what a firm can do.

@Pages and References: Page 111

*a. T

1.    F

 

6.    Combining several resources may create capabilities that deliver superior profitability

@Pages and References: Page 111

*a. T

1.    F

 

7.    So resources are ultimately more important than capabilities.

@Pages and References: Page 111

1.    T

*b. F

 

8.    The safest way to value a firm’s productive assets for strategic purposes is to use the historic cost book value of its assets.

@Pages and References: Pages 114-116

1.    T

*b. F

 

9.    Human resources are always listed on a firm’s balance sheet.

@Pages and References: Pages 114-116

1.    T

*b. F

 

10.  The value of a brand is the confidence it instils in customers regarding the expected benefits associated with that brand.

@Pages and References: Pages 116-119

*a. T

1.    F

 

11.  Superior capabilities can be acquired and owned by astute firms.

@Pages and References: Pages 131-134

1.    T

*b. F

 

12.  A capability that is needed to win versus competitors is a core competence.

@Pages and References: Pages 137-143

*a. T

1.    F

 

13.  We need to honestly appraise our resources and capabilities in order to maximize our appeal to customers.

@Pages and References: Pages 137-143

1.    T

*b. F

 

14.  Because good companies know their own relative strengths and weaknesses they focus efforts on strengthening the right resources and capabilities.

@Pages and References: Pages 137-143

*a. T

1.    F

 

15.  Remedying strategic weaknesses in capabilities is likely to take several years.

@Pages and References: Pages 143-145

*a. T

1.    F

 

16.  Assembling a great set of resources is the key to getting good results.

@Pages and References: Pages 145-147

1.    T

*b. F

 

17.  A football’s position on a soccer field is path-dependent.

@Pages and References: Pages 147-148

1.    T

*b. F

 

18.  An experienced football coach’s knowledge is path-dependent.

@Pages and References: Pages 147-148

*a. T

1.    F

 

19.  Core rigidities provide the spine that helps firms learn new skills faster.

@Pages and References: Pages 148-150

1.    T

*b. F

 

20.  Dynamic capabilities are useful in fast changing environments.

@Pages and References: Pages 148-150

*a. T

1.    F

 

21.  The internal environment:

@Pages and References: Pages 111-114

1.    Is the structure inside an industry

2.    Has become less important as an explanation of firms’ profitability

*c. Is how a firm’s resources and capabilities are deployed to deliver its business strategy

1.    Can safely be left to the HR Department to manage

 

22.  Prahalad and Hamel’s 1990 paper:

@Pages and References: Pages 111-114

1.    Summarized the main constraints of the external environment

2.    Summarized the strategic positioning school’s point of view

3.    Won that year’s Nobel prize for Economics

*d. Kick-started the modern resource-based view of the firm

 

23.  In fast changing environments:

@Pages and References: Pages 111-114

1.    A firm should focus on its oldest markets

*b. A firm may define itself by its resources and capabilities

1.    Both a and b

2.    Neither a nor b

 

24.  3M is:

@Pages and References: Pages 111-114

1.    A successful group of unrelated businesses

2.    A group of businesses linked by their use of glue-based technologies

3.    A group of businesses with an outstanding ability to develop and launch new Fast Moving Consumer Products

*d. A group of businesses with a core capability to develop and launch new products using adhesives, coatings, and other technologies

 

25.  We can define the following general resources for a firm:

@Pages and References: Pages 114-116

*a. Human, Intangible and Tangible

1.    Tangible, Intaglio and Humane

2.    Humane, Fungible and Tangible

3.    Physical, Financial, and Other Current

 

26.  To value a firm’s tangible resources:

@Pages and References: Page 116

1.    We should take the historic cost book value

2.    We must update historic cost assets to current cost (modern replacement cost) assets

*c. We need to know how they could be used optimally

1.    This is a specialist task for professional accountants

 

27.  Companies’ “book values” are generally much less than their stock market valuations because:

@Pages and References: Page 116-119

1.    Auditors tend to err on the conservative side

*b. Accountants are generally required by accounting standards to ignore the value of brands and all other reputational assets

1.    To be on the safe side accountants tend to undervalue brand values

2.    Accountants and marketing experts have different methods of valuing brands

 

28.  Brand values are a:

@Pages and References: Page 116-119

1.    Type of tangible resource

*b. Type of intangible resource

1.    Type of synergistic resource

2.    Type of sustainable resource

 

29.  Organizational culture is:

@Pages and References: Page 119-120

1.    The way a firm is organized

2.    A firm’s deeply held values, traditions and social norms

3.    A firm’s deeply held values, traditions and social norms

*d. Answers b and c

 

30.  Spending money raising market perceptions of Hyundai’s brand was:

@Pages and References: Page 121

*a. A worthwhile investment in intangible resources

1.    A worthwhile investment in human resources

2.    Eventually recognized in the balance sheet

3.    A waste of money

 

31.  The difference between a capability and a competence is:

@Pages and References: Page 120

1.    A competence is core to a firm’s operations

2.    A capability is necessary to survive, but a competence is essential to thrive

3.    A competence is necessary to survive, but a capability is essential to thrive

*d. No difference in this textbook where they are taken as interchangeable

 

32.  Threshold capabilities enable a firm to do what every firm in its industry must do. Distinctive or core competences:

@Pages and References: Page 120

*a. Enable it to earn higher profits or greater market share than its competitors in the same industry

1.    Are its unique selling point

2.    Are those product features that stop non-customers from buying the product

3.    Are captured in logos, trademarks etc.

 

33.  Apple and 3M’s ability to develop genuinely new products are:

@Pages and References: Page 129

1.    Part of their corporate structures

2.    Due entirely to their unique corporate cultures

3.    Lucky coincidences

*d. One of their core operational capabilities

 

34.  Because marketing is a threshold capability for Hyundai:

@Pages and References: Pages 124-125

1.    They learned all the vital lessons early on

*b. To counter their earlier poor image they have had to catch up their rivals’ capabilities

1.    They do not need to pay it significant attention

2.    They now excel at marketing

 

35.  Porter’s firm value chain can be used to:

@Pages and References: Pages 126-127

1.    Estimate the value added at each stage of a good’s production and distribution

2.    Show the after-tax profit generated by each part of the firm

3.    Show the pre-tax profit generated by each part of the firm

*d. Map out a firm’s main activities into threshold and distinctive capabilities

 

36.  Human Resource capabilities:

@Pages and References: Pages 126-127

*a. Include the skills to train and develop people

1.    Are generally a firm’s greatest resource

2.    Are the distinctive capability of most automobile makers

3.    Answer b and c

 

37.  A capability requires:

@Pages and References: Pages 128-130

1.    Many unique resources

2.    Just one unique resource

3.    No unique resources

*d. Individuals to coordinate with each other, and some capital or technology, to achieve a valuable transformation to goods or services

 

38.  A process is:

@Pages and References: Pages 128-130

1.    What suspects endure in court rooms

2.    A long line of people performing one activity

*c. A sequence of coordinated actions that performs a task

1.    The chain of command above an employee

 

39.  In most small firms a process which is not usually routinized is:

@Pages and References: Pages 128-130

1.    The sales process

2.    The end-of-month accounting process

*c. The staff disciplinary proceedings process

1.    The process for getting debtors to pay up

 

40.  When firms develop organizational routines they are:

@Pages and References: Pages 128-130

1.    Seeking to liven up boring production manuals

*b. Learning by doing

1.    In the mature stage of an industry’s life cycle

2.    In the declining stage of an industry’s life cycle

 

41.  The hierarchy of capabilities refers to:

@Pages and References: Pages 128-130

*a. How capabilities to do market research time-effectively and buy advertising cost-effectively, belong under marketing capabilities

1.    How capabilities are made up of processes that use resources to achieve a desired result

2.    How the CEO should have more capabilities than the CFO, the COO etc.

3.    How core capabilities are more valuable than threshold capabilities

 

42.  Resources and capabilities can generate higher profits

@Pages and References: Pages 131-134

1.    If competition is fierce

*b. If the competitive advantage they generate is sustained for some years

1.    Only if governments allow firms to share resources

2.    Only where cartels are effectively allowed

 

43.  To stop rivals acquiring a core resource or capability:

@Pages and References: Pages 131-134

1.    Is foolish: a firm cannot stop its rivals from doing things they want to

*b. Firms need to make that resource or capability immobile

1.    Firms must use patents and the full array of legal protections

2.    Everyone involved in this activity must be paid higher than the rivals could pay

 

44.  Tight complex organizational routines:

@Pages and References: Pages 131-134

1.    Are based on unique corporate structures

2.    Can be copied if rivals hire the right employees

*c. Are complex capabilities that are hard for rivals to replicate

1.    Answers a and c

 

45.  Hyundai overcame the most difficult competitive advantages held by the incumbent automakers by:

@Pages and References: Pages 131-134

1.    Recruiting experts from other auto companies

2.    Benchmarking the key capabilities needed to succeed, then making clear commitments to achieve them

3.    Making long term financial and business commitments to the auto industry

*d. All of the above

 

46.  Superior capabilities are often traced to staff skills and efforts

@Pages and References: Pages 134-136

1.    So pay is key: pay the highest rates and the best talents will walk into your firm

2.    You need to pay a good market rate to attract and retain top talent

3.    Having the right corporate culture and being set the right challenges motivates good staff

*d. Answers b and c

 

47.  A good dealership network is a key capability for an automaker

@Pages and References: Pages 136-137

*a. No: dealerships can be independent, or bought and sold, so they are a network of resources in which Hyundai has invested heavily

1.    So building a global dealership network was Hyundai’s first substantial global move

2.    They are also assets against which firms can borrow

3.    Answers b and c

 

48.  Firms try to develop resources and capabilities to:

@Pages and References: Pages 137-143

1.    Maximize attractiveness to our customers

*b. Create sustainable competitive advantage

1.    Maximize current profit rates

2.    Attract the best employees

 

49.  We need to appraise our resources and capabilities against:

@Pages and References: Pages 137-143

1.    Our past record; we must continually improve

2.    The best firms around the world, no matter in what country, market or industry

*c. Our competitors’ resources and capabilities

1.    The best that our competitors might attain in the future

 

50.  A capability that is “needed to play” is:

@Pages and References: Pages 137-143

1.    A threshold resource

2.    A unique resource

*c. A threshold competence

1.    A core competence

 

51.  In the automobile industry resources such as brand strength:

@Pages and References: Pages 137-143

1.    Are common enough; pick one, then use it

2.    Can be bought – look at Jaguar (three owners in the last ten years)

*c. Cannot be easily acquired

1.    Answers a and b

 

52.  Internal appraisal of a company’s capabilities against the best competitors:

@Pages and References: Pages 137-143

1.    Cannot be done; only external appraisal is valid

2.    Can be done using discussion of past successes and failures

3.    Can be done using external benchmarking

*d. Answers b and c

 

53.  The final appraisal of the strengths and weaknesses of a firm’s resources & capabilities:

@Pages and References: Pages 137-143

1.    Is a quantitative appraisal by an objective outside body

*b. Requires insight and understanding of a firm’s industry, and its position within the industry

1.    Requires artistic flair and creative questioning

2.    Requires detailed knowledge of business strategy theory, and all its intellectual roots

 

54.  BMW’s core competence is its ability to integrate:

@Pages and References: Pages 137-143

*a. World-class engineering, design excellence and effective marketing

1.    World-class engineering, design excellence and knowledge of global markets

2.    World-class engineering, design excellence and products for every luxury market

3.    World-class products, design excellence and products for every luxury market

 

55.  Truly successful firms:

@Pages and References: Pages 137-143

1.    Are told their strengths and weaknesses by external experts

*b. Are honest enough to recognize their own true strengths and weaknesses themselves

1.    Obtain confirmation of their strengths and weaknesses from outside experts

2.    Answers b and c

 

56.  Unsuccessful firms:

@Pages and References: Pages 137-143

1.    Don’t know their own strengths and weaknesses

2.    Don’t know where to invest their efforts and resources in remedying weaknesses

*c. Are arrogant about current capabilities, relying on past glories

1.    Can fall into a, b or c

 

57.  Outsourcing to specialists can help a firm:

@Pages and References: Pages 145-147

1.    Reduce unnecessary costs

2.    Increase control over a key production process

*c. Reduce a relative weakness in its capabilities

1.    Improve launch times for new products

 

58.  Path dependence is:

@Pages and References: Pages 147-148

*a. Where you are today, with all your knowledge, being a result of how you got here

1.    The opposite: you could have got to today’s position a hundred different ways

2.    Total reliance on one’s own history

3.    A way of planning the careers of future CEOs

 

59.  Early experiences for some major oil companies:

@Pages and References: Pages 147-148

1.    Dictate their current positions

*b. Mean some of their modern core competences show path dependency

1.    Are irrelevant to current corporate cultures

2.    Are indelibly printed on older staff’s minds

 

60.  Core rigidities can:

@Pages and References: Pages 148-149

1.    And must be eliminated by a new CEO

2.    Be the necessary obverse of core capabilities

3.    Inhibit firms’ ability to develop new capabilities

*d. Answers b and c

 

61.  Dynamic capabilities:

@Pages and References: Pages 148-149

*a. Are the capacity to learn new capabilities

1.    Can be acquired through ‘reverse takeovers’

2.    Develop rapidly in some industries, then die

3.    Answers b and c

 

62.  Acquiring a firm with similar products but sales in new markets is one of the easier ways to:

@Pages and References: Pages 148-149

1.    Acquire new capabilities or strengthen old ones

2.    Extend current capabilities into new markets

3.    Destroy vital capabilities, if key staff in the acquired firm soon leave

*d. Answers b and c

 

63.  Alliances are a way to develop new capabilities that:

@Pages and References: Pages 148-149

1.    Is less permanent than an acquisition/merger

2.    Is cheaper than an acquisition or merger

3.    Will guarantee competitive advantage

*d. Answers a and b

 

64.  The point of ‘resource leveraging’ is to:

@Pages and References: Pages 148-149

1.    Use all a firm’s resources more efficiently

2.    Reduce the money tied up in working capital

*c. Limit the range of new capabilities a firm is trying to develop at one time

1.    Answers b and c

 

65.  Some firms introduce products into specific countries in a sequence:

@Pages and References: Pages 148-149

1.    To provide sales for outmoded products

2.    To progressively develop workforce capabilities

3.    To please local politicians

*d. All of the above

 

66.  The question “What does a firm need to survive competition?”:

@Pages and References: Pages 137-143

1.    Can be addressed through a careful analysis of competitors using all possible means, even at the edge of legality and ethics

2.    Can be addressed by studying very carefully the two largest rivals in the industry

*c. Requires an understanding of the current and future basis of competition specific to the industry

1.    Can never be answered clearly, because competitors will not divulge what they are doing

 

67.  The value to managers of understanding key success factors is:

@Pages and References: Pages 137-143

1.    Self-evident

2.    Legitimate because it is accepted by the academic world

3.    In question because some important academics disagree with it

*d. Generally accepted by the corporate, consulting and academic worlds, but as with most business concepts and models, there are always some detractors

 

68.  An industry “direct modelling of profitability” is defined in the text as:

@Pages and References: Pages 137-143

1.    The identification of the drivers of a firm’s relative profitability within an industry

2.    The statistical modeling of the profit as determined by several variables, using multiple regression analysis

3.    The comparative modeling of one industry versus another industry

*d. Setting up a model of industry profitability from the interaction of the Five Forces

 

69.  One useful way to analyse the drivers of a firm’s relative profitability is:

@Pages and References: Pages 137-143

*a. To disaggregate return on capital employed into component ratios that point to the main underlying drivers of profitability

1.    To disaggregate assets into component parts that point to the main drivers of profitability

2.    To undertake a benchmarking study to compare a firm’s profitability with that of its rivals

3.    To conduct a survey of managers to ask what they think are the reasons why their firm is profitable