FINAL ROUND

​ ​ ​ ​ ​ ​ Which of the following is an example of a firm's capabilities?

• routine activities performed in the firm, like physical delivery of products

• specific tasks involved in the invoicing of customers

• assets such as plant and machinery owned by the firm

• skills involved in training and managing a workforce

Answer explanation

Capabilities are the organizational and managerial skills necessary to orchestrate a diverse set of resources and to deploy them strategically. A firm's capabilities include skills involved in training and managing a workforce.

The auditor of a public company is assessing the value of all the intangible assets owned by the company. Which of the following would most likely be included in this assessment?

• the company's headquarters

• the company's brand equity

• the company's cash reserves

• the company's plant and equipment

Answer explanation

Intangible resources have no physical attributes and thus are invisible. Examples of intangible resources are a firm's culture, its knowledge, brand equity, reputation, and intellectual property.

In a perfectly competitive industry structure

• resource immobility is high.

• resource heterogeneity is high.

• any competitive advantage that one firm has will be short-lived.

• competitors cannot quickly acquire resources used by the current market leader.

Answer explanation

The critical assumptions of the resource-based model are fundamentally different from the way in which a firm is viewed in the perfectly competitive industry structure. In perfect competition, all firms have access to the same resources and capabilities, ensuring that any advantage that one firm has will be short-lived.

In the context of the VRIO framework, a resource is said to be valuable if it

• allows a firm to take advantage of an external opportunity.

• helps a firm increase its costs but lower its prices.

• results in a perfectly competitive industry structure.

• leads to competitive parity within an industry.

Answer explanation

In the context of the VRIO framework, a resource is said to be valuable if it allows a firm to take advantage of an external opportunity and/or neutralize an external threat. A resource is valuable if it helps a firm increase the perceived value of its product or service in the eyes of consumers, either by adding attractive features, or by lowering price because the resource helps the firm lower its costs.

Onivo Auto Inc. has been the leader in low-cost and fuel-efficient engine technology for many years. It has been able to sustain its competitive advantage primarily because of its highly efficient automobile engines, which competitors have been unable to develop or buy at a reasonable price. In the context of the VRIO framework, which of the following resource attributes most likely underpins Onivo's competitive advantage?

• The resource is easy to replicate.

• The resource is costly to imitate.

• The resource neutralizes external opportunities.

• The resource decreases the perceived value of its products.

Answer explanation

The resource attribute that most likely underpins Onivo's competitive advantage is that it is costly to imitate. A resource is costly to imitate if firms that do not possess the resource are unable to develop or buy the resource at a reasonable price.

Using the _______, managers can see how competitive advantage flows from a firm's distinct set of activities.

• resource-based view

• VRIO framework

• value chain analysis

• SWOT analysis

Answer explanation

Although the resource-based view of the firm helps to identify the integrated set of resources and capabilities that are the building blocks of core competencies, the value chain perspective enables managers to see how competitive advantage flows from the firm's distinct set of activities.

In the context of SWOT analysis, a firm can develop a defensive strategic option primarily by

• maximizing an external strength to exploit an internal opportunity.

• eliminating an internal weakness to mitigate an external threat.

• leveraging an external opportunity to overcome an internal threat.

• using an internal strength to exploit an external opportunity.

Answer explanation

In the context of SWOT analysis, strengths and weaknesses are internal to an organization, whereas opportunities and threats are external to the organization. A firm can develop a defensive strategic option primarily by eliminating an internal weakness to mitigate an external threat.