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Chapter 06

Internal Analysis

Multiple Choice Questions
 

1. (p. 138) The tendency to accept the status quo and disregard signals that change is needed is called: 
A. Management myopia
B. Environmental awareness
C. Management long-sightedness
D. Subjective management

Difficulty: Medium
Learning Objective: 1
 

2. (p. 140) SWOT analysis’s value and continued use is found in its: 
A. Complexity
B. Difficulty
C. Simplicity
D. Short-sighted nature

Difficulty: Medium
Learning Objective: 1
 

3. (p. 140) What have strategists sought in frameworks besides SWOT for conducting internal analysis? 
A. They have sought to get less detail from other frameworks
B. They have sought that the frameworks be more comprehensive
C. They have sought a less generic framework
D. They have sought to better account for internal factors in light of external factors

Difficulty: Difficult
Learning Objective: 1
 

4. (p. 140) _______ views a firm as a sequential process of value-creating activities. 
A. Resource-based analysis
B. Value chain analysis
C. SWOT analysis
D. Primary internal analysis

Difficulty: Easy
Learning Objective: 2
 

5. (p. 140) Common to all the approaches to internal analysis is: 
A. The use of meaningful standards for comparison in internal analysis
B. The use of external factors of analysis
C. The process point of view
D. Management market myopia

Difficulty: Difficult
Learning Objective: 2
 

6. (p. 140) ________ is a historically popular technique through which managers create a quick overview of a company’s strategic situation—it is based on achieving a sound fit between internal resources and the external situation. 
A. Internal analysis
B. External analysis
C. Value chain analysis
D. SWOT analysis

Difficulty: Medium
Learning Objective: 1
 

7. (p. 140) A(n) ________ is a major favorable situation in a firm’s environment. 
A. Value chain
B. Strength
C. Opportunity
D. Capability

Difficulty: Easy
Learning Objective: 1
 

8. (p. 140) A(n) ______ is a major unfavorable situation in a firm’s environment. 
A. Weakness
B. Core strength
C. Competitive disadvantage
D. Threat

Difficulty: Easy
Learning Objective: 1
 

9. (p. 140) Which of the following is NOT an example of an opportunity for the firm? 
A. Identification of a previously overlooked market segment
B. Improved buyer or supplier relationships
C. Positive changes in regulatory circumstances
D. Strong reputation and image with a key demographic

Difficulty: Medium
Learning Objective: 1
 

10. (p. 141) A(n) ______ is a resource or capability controlled by or available to a firm that gives it an advantage relative to its competitors in meeting the needs of the customers it serves. 
A. Competence
B. Strength
C. Opportunity
D. Competitive advantage

Difficulty: Easy
Learning Objective: 1
 

11. (p. 141) A(n) _______ is a limitation or deficiency in one or more of a firm’s resources or capabilities relative to its competitors that creates a disadvantage in effectively meeting customer needs. 
A. Weakness
B. Threat
C. Competitive limit
D. Marginal resource

Difficulty: Easy
Learning Objective: 1
 

12. (p. 141) Consider e-Pixels, a company that produces miniature digital video cameras that feature easy downloads and uplinks to computers. Which of the following represents a potential strength for the firm? 
A. Brand name
B. Digitalization of most types of media
C. Growing global computer companies with similar technology
D. Limited experience with video technology

Difficulty: Medium
Learning Objective: 1
 

13. (p. 142) According to a SWOT analysis diagram, what strategy does Cell 1 support? 
A. Aggressive
B. Turnaround
C. Defensive
D. Diversification

Difficulty: Difficult
Learning Objective: 1
 

14. (p. 142) The cells on the left side of the SWOT diagram are both characterized by: 
A. Substantial internal strengths
B. Numerous environmental opportunities
C. Critical internal weaknesses
D. Major environmental threats

Difficulty: Difficult
Learning Objective: 1
 

15. (p. 142) Which cell in the SWOT analysis diagram is the most favorable situation? 
A. Cell 1
B. Cell 2
C. Cell 3
D. Cell 4

Difficulty: Medium
Learning Objective: 1
 

16. (p. 142) ________ represents the least favorable situation, with the firm facing major environmental threats from a weak resource position. 
A. Cell 1
B. Cell 2
C. Cell 3
D. Cell 4

Difficulty: Medium
Learning Objective: 1
 

17. (p. 142) Which cell supports a turnaround-oriented strategy? 
A. Cell 2
B. Cell 3
C. Cell 4
D. Cell 1

Difficulty: Difficult
Learning Objective: 1
 

18. (p. 142) Which of the following describes the situation for a firm in Cell 2? 
A. The firm faces several environmental opportunities and has numerous strengths that encourage pursuit of those opportunities
B. The firm faces major environmental threats from a weak resource position
C. The firm has identified several key strengths, but faces an unfavorable environment
D. The firm faces impressive market opportunity, but is constrained by weak internal resources

Difficulty: Difficult
Learning Objective: 1
 

19. (p. 144) What makes SWOT analysis susceptible to key limitations? 
A. Its narrow focus on external factors
B. Its broad conceptual approach
C. Its vastly limited applicability
D. Its portrayal of the essence of sound strategy formulation

Difficulty: Easy
Learning Objective: 1
 

20. (p. 144) Which of the following statements is false? 
A. A SWOT analysis can overemphasize external threats and downplay internal strengths
B. A SWOT analysis can be static and can risk ignoring changing circumstances
C. A strength, as identified by SWOT analysis is not necessarily a source of competitive advantage
D. A SWOT analysis can overemphasize a single strength or element of strategy

Difficulty: Medium
Learning Objective: 1
 

21. (p. 145) Which of the following statements is true? 

A. Astrength is not always a source of competitive advantage
B. Strengths are synonymous with competitive advantage
C. Every company resource or capability is a strength and leads to competitive advantage
D. Strengths are always inimitable

Difficulty: Easy
Learning Objective: 1
 

22. (p. 145) A perspective in which business is seen as a chain of activities that transforms inputs into outputs that customers value is called: 
A. Value chain
B. Value chain analysis
C. Resource-base
D. Process division

Difficulty: Medium
Learning Objective: 2
 

23. (p. 145) Which of the following is NOT an example of a basic source from which customer value is derived? 
A. Activities that differentiate the product
B. Activities that lower its cost
C. Activities that add to product complexity
D. Activities that meet the customer’s need more quickly

Difficulty: Easy
Learning Objective: 2
 

24. (p. 145) Value chain analysis takes a: 
A. Process point of view
B. Functional point of view
C. Horizontal point of view
D. Corporate point of view

Difficulty: Medium
Learning Objective: 2
 

25. (p. 145) Which method of internal analysis disaggregates the business into sets of activities that occur within the business, starting with inputs and finishing with the firm’s products and after-service sales? 
A. Resource-based view
B. Value chain analysis
C. SWOT analysis
D. Porter’s generic strategies

Difficulty: Easy
Learning Objective: 2
 

26. (p. 146) Which of the following is an example of a primary activity in the typical firm? 
A. Human resources management
B. Research, technology and systems development
C. General administration
D. Logistics

Difficulty: Medium
Learning Objective: 2
 

27. (p. 146) Which of the following is an example of support activities in the typical firm? 
A. Operations
B. Procurement
C. Marketing and sales
D. Service

Difficulty: Medium
Learning Objective: 2
 

28. (p. 146) Those activities in a firm that are involved in the physical creation of the product, marketing and transfer to the buyer and after-sales support are called: 
A. Operational activities
B. Support activities
C. Secondary activities
D. Primary activities

Difficulty: Easy
Learning Objective: 2
 

29. (p. 148) The initial step in value chain analysis is to: 
A. Allocate costs to different activities within the value chain
B. Identify the firm’s strengths and weaknesses
C. Divide a company’s operations into specific activities or processes
D. Identify the firm’s key resources and capabilities

Difficulty: Easy
Learning Objective: 2
 

30. (p. 148) In VCA, which method of cost accounting is preferred? 
A. Activity-based cost accounting
B. Value-based cost accounting
C. Traditional cost accounting
D. Financial cost accounting

Difficulty: Medium
Learning Objective: 2
 

31. (p. 149) Which of the following is usually true about a firm’s value chain? 
A. Scrutinizing a firm’s value chain may bring attention to several sources of differentiation advantage relative to competitors
B. Scrutinizing a firm’s value chain does not usually reveal cost advantages or disadvantages
C. Scrutinizing the firm’s value chain can minimize the activities that are critical to buyer satisfaction
D. Analysis of the firm’s value chain can lead a firm to limit its market success

Difficulty: Medium
Learning Objective: 2
 

32. (p. 151) Which of the following considerations is critical at the examination stage of the value chain analysis? 
A. All primary activities differentiate the firm
B. The managers’ choice of activities to be examined influences the mission statement of the firm
C. The nature of value chains and the relative importance of the activities within them are standard across industries
D. The relative importance of value activities can vary by a company’s position in a broader value system that includes the value chains of its upstream suppliers and downstream customers or partners

Difficulty: Medium
Learning Objective: 2
 

33. (p. 151) It is especially important that managers take into account their level of ________ when comparing their cost structure for activities on their value chain with those of key competitors. 
A. Competition
B. Horizontal integration
C. Vertical integration
D. Concentric diversification

Difficulty: Difficult
Learning Objective: 2
 

34. (p. 153) The _______ is a new perspective on understanding a firm’s success based on how well the firm uses its internal resources. 
A. Resource-based view
B. Value chain view
C. Corporate view
D. Functional view

Difficulty: Easy
Learning Objective: 3
 

35. (p. 153) What is the underlying premise of the resource-based view? 
A. Firms generally have very similar capabilities stemming from almost identical resources
B. Imitation of resources is the best way to achieve competitive advantages
C. Firms differ in fundamental ways because each firm possesses a unique bundle of resources
D. Firms’ intangible resources can be very difficult to imitate

Difficulty: Difficult
Learning Objective: 3
 

36. (p. 154) Which of the following is NOT a basic resource for any firm? 
A. Tangible assets
B. Core outputs
C. Intangible assets
D. Organizational capabilities

Difficulty: Medium
Learning Objective: 3
 

37. (p. 154) The most easily identified assets, often found on a firm’s balance sheet, are called: 
A. Intangible assets
B. Tangible assets
C. Capabilities
D. Competencies

Difficulty: Easy
Learning Objective: 3
 

38. (p. 154) Which of the following is NOT an example of an intangible asset? 
A. Financial resources
B. Brand names
C. Company reputation
D. Organizational morale

Difficulty: Medium
Learning Objective: 3
 

39. (p. 156) Which of the following is NOT one of the RBV guidelines? 
A. Resources are more valuable when they are critical to being able to meet a customer’s need better than other alternatives
B. Resources are more valuable when they are non-durable
C. Resources are most valuable when they are scarce
D. Resources are most valuable when they drive a key portion of overall profits

Difficulty: Medium
Learning Objective: 3
 

40. (p. 156) Consider Company A, a financial services company specializing in small business issues, whose location is in a shopping mall in the suburbs and Company B, a similar business, whose location is downtown between a successful law firm and a courthouse. Company A’s comparative success can be best attributed to which RBV guideline? 
A. Resource are more valuable when they are scarce
B. Resources are more valuable when they are durable
C. Resources are more valuable when they are scarce
D. Resources are more valuable when they are critical to being able to meet a customer’s need better than other alternatives

Difficulty: Difficult
Learning Objective: 3
 

41. (p. 156) The availability of substitutes affects which of the RBV guidelines? 
A. Resources are more valuable when they are scarce
B. Resources are more valuable when they are durable
C. Resource are more valuable when they are scarce
D. Resources are more valuable when they are critical to being able to meet a customer’s need better than other alternatives

Difficulty: Difficult
Learning Objective: 3
 

42. (p. 157) _______ help the firm create resource scarcity by making resources hard to imitate. 
A. Resource bundles
B. Capabilities
C. Isolating mechanisms
D. Tangible resources

Difficulty: Medium
Learning Objective: 3
 

43. (p. 157) Which of the following is NOT an example of an isolating mechanism? 
A. Physically unique resources
B. Capital ambiguity
C. Path-dependent resources
D. Economic deterrence

Difficulty: Medium
Learning Objective: 3
 

44. (p. 157) ________ are very difficult to imitate because of the difficult, sometimes complicated path another firm must follow to create the resource. 
A. Path-dependent resources
B. Physically unique resources
C. Economic resources
D. Ambiguous resources

Difficulty: Easy
Learning Objective: 3
 

45. (p. 158) Which of the following involves large capital investments in capacity to provide products or services in a given market that are scale sensitive? 
A. Path-dependence
B. Casual ambiguity
C. Physical uniqueness
D. Economic deterrence

Difficulty: Easy
Learning Objective: 3
 

46. (p. 157) Brand loyalty, employee satisfaction and a reputation for fairness are items that: 
A. Are easy to imitate
B. Can be imitated, but may not be
C. Cannot be imitated
D. Are difficult to imitate

Difficulty: Medium
Learning Objective: 3
 

47. (p. 159) Which of the following statements is true? 
A. The faster a resource depreciates, the more valuable it is
B. The slower a resource depreciates, the more valuable it is
C. The larger a resource or asset, the more slowly it depreciates
D. Intangible assets can have their depletion measures easily

Difficulty: Medium
Learning Objective: 3
 

48. (p. 159) In the increasingly hypercompetitive global economy today, distinctive competencies and competitive advantages: 
A. Are commonplace
B. Are a prerequisite to being in business for the short-term
C. Are particularly durable
D. Can fade quickly

Difficulty: Difficult
Learning Objective: 3
 

49. (p. 159) Which of the following illustrates what it means to utilize a functional perspective? 
A. Looking at different functional areas of the firm, disaggregating tangible and intangible assets as well as organizational capabilities that are present, can begin to uncover important value-building resources that deserve further analysis
B. Dividing categories by function into more specific competencies can allow a more measurable assessment
C. Taking a creative look at what competencies the firm possesses (or has the potential to possess) can help identify sources of competitive advantage
D. The value chain approach can uncover organizational capabilities, activities and processes that are potential sources of competitive advantage

Difficulty: Difficult
Learning Objective: 4
 

50. (p. 159) Which of the following combinations provides the best sources of competitive advantage? 
A. Resources/capabilities that are scarce, durable and sustainable
B. Resources/capabilities that are central to meeting a customer need better than other alternatives and are inimitable
C. Resources/capabilities that are durable, scarce and appropriable to the firm
D. Resources/capabilities that are directly appropriable to the firm, inimitable, durable and meet customer needs better than other alternatives

Difficulty: Medium
Learning Objective: 3
 

51. (p. 162) When a strategist uses the firm’s historical experience as a basis for evaluating internal factors, he or she is performing a: 
A. Comparison with key competitors
B. Comparison with success factors in the industry
C. Comparison with past performance
D. Comparison with industry benchmarks

Difficulty: Easy
Learning Objective: 4
 

52. (p. 162) A manager’s assessment of whether a certain internal factor–like financial capacity–is a strength or weakness will be most strongly influenced by: 
A. The relative strength of other factors
B. The factor’s flexibility within the organization
C. The manager’s experience in connection with that factor
D. The manger’s perception of that factor in other firms

Difficulty: Medium
Learning Objective: 4
 

53. (p. 162) Using historical experience as a basis for identifying strengths and weaknesses can be likened to: 
A. Market myopia
B. Tunnel vision
C. Management myopia
D. Benchmarking

Difficulty: Medium
Learning Objective: 4
 

54. (p. 162) The differences in internal resources among companies in the same industry: 
A. Can become relative strengths or weaknesses depending on the strategy a firm chooses
B. Almost always result in competitive advantages based on relative strengths or weaknesses
C. Arise from benchmarking
D. Are easily observed and relative strengths are easily imitated

Difficulty: Medium
Learning Objective: 4
 

55. (p. 162) _______ is a method of comparing the way a company performs a specific activity with a competitor, potential competitor or company doing the same thing. 
A. Benchmarking
B. Imitating
C. Value chain analysis
D. Vertical integration

Difficulty: Easy
Learning Objective: 4
 

56. (p. 162) Company X’s principal strength is its inbound and outbound logistics system; its relative weakness, however is after-sales service. Its competitor, Company Y, however is often plagued with lagging shipments and an inflexible distribution setup. Company Y remains successful because it maintains a fully staffed service department and as a result the company is known for its dependable service. _______ allows them to identify ways to build on relative strengths and avoid dependence on capabilities at which the other firm excels. 
A. Industry comparison
B. Benchmarking
C. Past performance comparison
D. Disaggregating

Difficulty: Medium
Learning Objective: 4
 

57. (p. 163) _______ involve(s) identifying the factors associate with successful participation in a given industry. 
A. The resource-based view
B. Value chain analysis
C. Industry analysis
D. Porter’s generic strategies

Difficulty: Easy
Learning Objective: 4
 

58. (p. 163) Which of the following is a useful framework against which to examine a firm’s potential strengths and weaknesses in a given industry? 
A. Isolating mechanisms
B. The value chain
C. Organizational capabilities
D. Porter’s five forces

Difficulty: Medium
Learning Objective: 4
 

59. (p. 163) A company producing toilet paper, tissues and other consumer paper goods can work to establish the right product lines, with reasonable sales volumes, profit margins and growth potential in order to generate: 
A. Supplier power to face massive buyer power in retail customers
B. Buyer power for the end-consumers
C. Supplier power for the retail chains
D. Regional advantages over buyers

Difficulty: Hard
Learning Objective: 4
 

60. (p. 165) ________ is one way to identify success factors against which executives can evaluate their firm’s competencies relative to its key product or products. 
A. Corporate strategy
B. Product life cycle
C. Diversification
D. Agglomeration

Difficulty: Easy
Learning Objective: 4