MBA 705 CH 8&9 EXAM QUESTIONS WITH
CORRECT ANSWERS
Capital-Labor Substitution - ANSWER An organization's ability to substitute
labor for capital or vice versa as production increases.
Experience Curve - ANSWER The reduction in per-unit costs that occur as an
organization gains experience producing a product or service. It's based on
three underlying concepts: (1) learning, (2) economies of scale, and (3) capital-
labor substitution possibilities
Functional Strategies - ANSWER The strategies pursued by each functional area
of a business unit, such as marketing, finance, or production.
Human Capital - ANSWER The sum of the capabilities of individuals in an
organization.
Just-In-Time (JIT) Inventory System - ANSWER An inventory system, popularized
by the Japanese, in which suppliers deliver parts just at the time they are
needed by the buying organization to use in its production process.
Knowledge Management - ANSWER People and their skills and abilities (i.e.,
knowledge capital) represent the only resource that cannot readily be
reproduced by a firm's competitors. Knowledge capital must be effectively
leveraged if high-performing firms are to remain as such over the long term.
Learning - ANSWER The increased efficiency that occurs when an employee
performs a task repeatedly.
Process R & D - ANSWER R & D activities that seek to reduce the costs of
operations and make them more efficient.
Product/Service R & D - ANSWER R & D activities directed toward improvements
or innovations in the quality or uniqueness of a company's outputs.
Total Quality Management (TQM) - ANSWER A broad-based program designed to
improve product and service quality and to increase customer satisfaction by
incorporating a holistic commitment to quality as seen through the eyes of the
customer.
Blue Ocean Strategy - ANSWER A growth strategy contingent on inventing or
discovering a new industry or industry segment that creates new demand.
,Capabilities - ANSWER A firm's skills at coordinating and leveraging resources
to create value.
Gap Analysis - ANSWER Identifying the distance between a firm's current
position and its desired position with regard to an internal weakness. All things
equal, it is desirable to take action to close the gap, especially when the gap
leaves a firm vulnerable to external threats in its environment.
Human Resources (HR) - ANSWER The experience, capabilities, knowledge,
skills, and judgment of the firm's employees.
Organizational Resources - ANSWER The firm's systems and processes,
including its strategies at various levels, structure, and culture.
Physical Resources - ANSWER An organization's plant and equipment,
geographic locations, access to raw materials, distribution network, and
technology.
Strategy Level-Strategy Complexity (SLSC) Matrix - ANSWER A tool for
evaluating strategic alternatives that considers the organizational level of the
alternative and the degree of strategic complexity.
SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis - ANSWER
An analysis intended to match the firm's strengths and weaknesses (the S and W
in the acronym) with the opportunities and threats (the O and T) posed by the
environment.
SW/OT Matrix - ANSWER A tool for generating alternative courses of action by
identifying relevant combinations of internal characteristics (i.e., strengths and
weaknesses) and external forces (i.e., opportunities and threats).
Value Chain - ANSWER A useful tool for analyzing a firm's strengths and
weaknesses and understanding how they might translate into competitive
advantage or disadvantage. This describes the activities that comprise the
economic performance and capabilities of the firm.
VRIO (Valuable, Rare, Inimitable, and Organization) Framework - ANSWER A
tool for assessing the competitive quality of a firm's resources by examining
value, rarity, imitability, and organization.
VRIO Rare - ANSWER Controlled by one or a few entities. If only valuable and
this, competitive advantage exists but is likely to be temporary.
VRIO Inimitable - ANSWER Costly for rivals to duplicate. If valuable, rare, and
this, the firm has the potential for long-term competitive advantage.
,The first step in the strategy formulation process is the SW/OT matrix.
True or False? - ANSWER False
Organizational strengths are derived from earlier assessment of the
environment.
True or False? - ANSWER False
An organization's weaknesses are derived from its set of resources.
True or False? - ANSWER True
Organizational resources include the experience, capabilities, knowledge,
skills, and judgment of all the firm's employees.
True or False? - ANSWER False
Physical resources include the firm's systems and processes, including its
strategies, structure, culture, financial base, research and development,
marketing, information systems, and control systems.
True or False? - ANSWER False
Opportunities and threats are associated with factors outside the organization.
True or False? - ANSWER True
Weaknesses and threats are associated with factors inside the organization.
True or False? - ANSWER False
In the context of the SW/OT matrix, opportunities and alternatives are often
synonymous.
True or False? - ANSWER False
The SWOT analysis precedes the SW/OT matrix.
True or False? - ANSWER True
Strength-threat alternatives are always offensive in nature.
True or False? - ANSWER False
Weakness-opportunity alternatives may be either offensive or defensive.
True or False? - ANSWER True
The purpose of the SW/OT matrix is to identify blind spots in an organization's
environment.
True or False? - ANSWER False
Research suggests that strategic alternatives most likely to lead to success are
defensive in nature.
True or False? - ANSWER False
, A firm may change its strategy as a response to a change in the environment.
True or False? - ANSWER True
Implementation issues should be considered before a decision to adopt a
strategy is made.
True or False? - ANSWER True
The tool that analyzes a firm's strengths and weaknesses to understand how
they might translate into competitive advantage is known as the
a. value chain.
b. SWOT analysis.
c. SW/OT matrix.
d. None of the above. - ANSWER A
Which of the following is not a category of firm resources?
a. organizational resources
b. physical resources
c. human resources
d. All of the above are categories of firm resources. - ANSWER D
Which of the following is an example of an organizational resource?
a. experience
b. strategies
c. employee knowledge & skills
d. None of the above. - ANSWER B
Which of the following is an example of a physical resource?
a. restructuring efforts
b. strategies
c. experience of top managers
d. None of the above. - ANSWER D
Which of the following is a valid reason why a firm might pursue a flexible
strategy?
a. Flexibility is necessary to pursue first mover advantages.
b. Organizational resources change.
c. Performance is not acceptable.
d. All of the above are valid reasons. - ANSWER D
Which of the following is not a resource consideration for the board of
directors?
a. prospective contributions from members
b. connection to the firm
c. present level of investment in the firm
d. All of the above are resource considerations. - ANSWER D
CORRECT ANSWERS
Capital-Labor Substitution - ANSWER An organization's ability to substitute
labor for capital or vice versa as production increases.
Experience Curve - ANSWER The reduction in per-unit costs that occur as an
organization gains experience producing a product or service. It's based on
three underlying concepts: (1) learning, (2) economies of scale, and (3) capital-
labor substitution possibilities
Functional Strategies - ANSWER The strategies pursued by each functional area
of a business unit, such as marketing, finance, or production.
Human Capital - ANSWER The sum of the capabilities of individuals in an
organization.
Just-In-Time (JIT) Inventory System - ANSWER An inventory system, popularized
by the Japanese, in which suppliers deliver parts just at the time they are
needed by the buying organization to use in its production process.
Knowledge Management - ANSWER People and their skills and abilities (i.e.,
knowledge capital) represent the only resource that cannot readily be
reproduced by a firm's competitors. Knowledge capital must be effectively
leveraged if high-performing firms are to remain as such over the long term.
Learning - ANSWER The increased efficiency that occurs when an employee
performs a task repeatedly.
Process R & D - ANSWER R & D activities that seek to reduce the costs of
operations and make them more efficient.
Product/Service R & D - ANSWER R & D activities directed toward improvements
or innovations in the quality or uniqueness of a company's outputs.
Total Quality Management (TQM) - ANSWER A broad-based program designed to
improve product and service quality and to increase customer satisfaction by
incorporating a holistic commitment to quality as seen through the eyes of the
customer.
Blue Ocean Strategy - ANSWER A growth strategy contingent on inventing or
discovering a new industry or industry segment that creates new demand.
,Capabilities - ANSWER A firm's skills at coordinating and leveraging resources
to create value.
Gap Analysis - ANSWER Identifying the distance between a firm's current
position and its desired position with regard to an internal weakness. All things
equal, it is desirable to take action to close the gap, especially when the gap
leaves a firm vulnerable to external threats in its environment.
Human Resources (HR) - ANSWER The experience, capabilities, knowledge,
skills, and judgment of the firm's employees.
Organizational Resources - ANSWER The firm's systems and processes,
including its strategies at various levels, structure, and culture.
Physical Resources - ANSWER An organization's plant and equipment,
geographic locations, access to raw materials, distribution network, and
technology.
Strategy Level-Strategy Complexity (SLSC) Matrix - ANSWER A tool for
evaluating strategic alternatives that considers the organizational level of the
alternative and the degree of strategic complexity.
SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis - ANSWER
An analysis intended to match the firm's strengths and weaknesses (the S and W
in the acronym) with the opportunities and threats (the O and T) posed by the
environment.
SW/OT Matrix - ANSWER A tool for generating alternative courses of action by
identifying relevant combinations of internal characteristics (i.e., strengths and
weaknesses) and external forces (i.e., opportunities and threats).
Value Chain - ANSWER A useful tool for analyzing a firm's strengths and
weaknesses and understanding how they might translate into competitive
advantage or disadvantage. This describes the activities that comprise the
economic performance and capabilities of the firm.
VRIO (Valuable, Rare, Inimitable, and Organization) Framework - ANSWER A
tool for assessing the competitive quality of a firm's resources by examining
value, rarity, imitability, and organization.
VRIO Rare - ANSWER Controlled by one or a few entities. If only valuable and
this, competitive advantage exists but is likely to be temporary.
VRIO Inimitable - ANSWER Costly for rivals to duplicate. If valuable, rare, and
this, the firm has the potential for long-term competitive advantage.
,The first step in the strategy formulation process is the SW/OT matrix.
True or False? - ANSWER False
Organizational strengths are derived from earlier assessment of the
environment.
True or False? - ANSWER False
An organization's weaknesses are derived from its set of resources.
True or False? - ANSWER True
Organizational resources include the experience, capabilities, knowledge,
skills, and judgment of all the firm's employees.
True or False? - ANSWER False
Physical resources include the firm's systems and processes, including its
strategies, structure, culture, financial base, research and development,
marketing, information systems, and control systems.
True or False? - ANSWER False
Opportunities and threats are associated with factors outside the organization.
True or False? - ANSWER True
Weaknesses and threats are associated with factors inside the organization.
True or False? - ANSWER False
In the context of the SW/OT matrix, opportunities and alternatives are often
synonymous.
True or False? - ANSWER False
The SWOT analysis precedes the SW/OT matrix.
True or False? - ANSWER True
Strength-threat alternatives are always offensive in nature.
True or False? - ANSWER False
Weakness-opportunity alternatives may be either offensive or defensive.
True or False? - ANSWER True
The purpose of the SW/OT matrix is to identify blind spots in an organization's
environment.
True or False? - ANSWER False
Research suggests that strategic alternatives most likely to lead to success are
defensive in nature.
True or False? - ANSWER False
, A firm may change its strategy as a response to a change in the environment.
True or False? - ANSWER True
Implementation issues should be considered before a decision to adopt a
strategy is made.
True or False? - ANSWER True
The tool that analyzes a firm's strengths and weaknesses to understand how
they might translate into competitive advantage is known as the
a. value chain.
b. SWOT analysis.
c. SW/OT matrix.
d. None of the above. - ANSWER A
Which of the following is not a category of firm resources?
a. organizational resources
b. physical resources
c. human resources
d. All of the above are categories of firm resources. - ANSWER D
Which of the following is an example of an organizational resource?
a. experience
b. strategies
c. employee knowledge & skills
d. None of the above. - ANSWER B
Which of the following is an example of a physical resource?
a. restructuring efforts
b. strategies
c. experience of top managers
d. None of the above. - ANSWER D
Which of the following is a valid reason why a firm might pursue a flexible
strategy?
a. Flexibility is necessary to pursue first mover advantages.
b. Organizational resources change.
c. Performance is not acceptable.
d. All of the above are valid reasons. - ANSWER D
Which of the following is not a resource consideration for the board of
directors?
a. prospective contributions from members
b. connection to the firm
c. present level of investment in the firm
d. All of the above are resource considerations. - ANSWER D
