Chapter 3—The Internal Organization: Resources, Capabilities, Core Competencies,
and Competitive Advantages
TRUE/FALSE
1. In the global market, employees move freely from firm to firm, so they are not an important source of
competitive advantage for the firm.
ANS: F PTS: 1 DIF: Medium REF: 70
OBJ: 03-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing human capital
2. Firms should seek to continually develop new core competencies because all core competencies have
limited life spans.
ANS: T PTS: 1 DIF: Easy REF: 70
OBJ: 03-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Strategic & systems skills
3. The sustainability of a competitive advantage depends upon the imitability of the core competence, the
availability of substitutes for the core competence, and the rate of obsolescence of the core
competence.
ANS: T PTS: 1 DIF: Medium REF: 71
OBJ: 03-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Strategic & systems skills
4. A useful rule for evaluating whether a capability is a core competence is its historical ability to provide
sustainable competitive advantage for the firm.
ANS: F PTS: 1 DIF: Hard REF: 71
OBJ: 03-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Strategic & systems skills
5. Analyzing the internal environment enables a firm to determine what it might be able to do by
identifying what opportunities exist.
ANS: F PTS: 1 DIF: Hard REF: 71
OBJ: 03-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Strategic & systems skills
6. Analyzing the internal environment enables a firm to determine what it can do by identifying what
opportunities exist.
ANS: T PTS: 1 DIF: Hard REF: 71
OBJ: 03-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Strategic & systems skills
, 7. Given enough time, any firm’s competitive advantage can be imitated by its competitors.
ANS: T PTS: 1 DIF: Easy REF: 71
OBJ: 03-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Strategic & systems skills
8. Some resources, such as financial capital, have inherent value to the firm, while others are not
inherently valuable.
ANS: F PTS: 1 DIF: Hard REF: 71
OBJ: 03-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Strategic & systems skills
9. In the global economy, traditional factors such as labor costs, access to financial resources and raw
materials, and protected or regulated markets are no longer sources of competitive advantage.
ANS: F PTS: 1 DIF: Easy REF: 71-72
OBJ: 03-01 TYPE: knowledge
NOT: AACSB: Multicultural & Diversity | Management: Creation of Value | Dierdorff & Rubin:
Strategic & systems skills
10. A global mind-set is free of the assumptions of a single country, culture, or context.
ANS: T PTS: 1 DIF: Easy REF: 71
OBJ: 03-01 TYPE: knowledge
NOT: AACSB: Multicultural & Diversity | Management: Strategy | Dierdorff & Rubin: Strategic &
systems skills
11. Analysis of the firm’s internal organization examines the firm’s portfolio of resources but excludes the
bundles of heterogeneous resources and capabilities.
ANS: F PTS: 1 DIF: Easy REF: 72
OBJ: 03-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Knowledge of general business functions
12. Value is measured by the variable and fixed costs associated with the production and marketing of a
particular product compared with the revenue and profits the product generates.
ANS: F PTS: 1 DIF: Hard REF: 72
OBJ: 03-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
13. Value is created when the firm exploits its core competencies or competitive advantages to meet or
exceed the demanding standards of global competition.
ANS: T PTS: 1 DIF: Medium REF: 72
OBJ: 03-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
,14. Creating customer value is the source of the firm’s potential to earn above-average returns.
ANS: T PTS: 1 DIF: Easy REF: 72-73
OBJ: 03-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Strategic & systems skills
15. The challenge and difficulty of making effective decisions are implied by preliminary evidence
suggesting that one-half of organizational decisions fail.
ANS: T PTS: 1 DIF: Easy REF: 73
OBJ: 03-02 TYPE: knowledge
NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing
decision-making processes
16. The need to meet quarterly earnings numbers disciplines managers to exercise judgment and to make
strategic decisions that are best for the long-run performance of the firm.
ANS: F PTS: 1 DIF: Medium REF: 73
OBJ: 03-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Foundational skills
17. Firms and managers can learn from the failure resulting from a mistake—that is, what not to do when
seeking competitive advantage.
ANS: T PTS: 1 DIF: Medium REF: 74
OBJ: 03-02 TYPE: knowledge
NOT: AACSB: Reflective Thinking Skills | Management: Leadership Principles | Dierdorff & Rubin:
Managing decision-making processes
18. The core competencies of a firm should be the primary drivers of its strategy.
ANS: F PTS: 1 DIF: Hard REF: 74
OBJ: 03-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
19. Managerial decisions concerning resources, capabilities, and core competencies are characterized by
three conditions: ambiguity, interconnectivity, and intraorganizational agreement.
ANS: F PTS: 1 DIF: Medium REF: 74
OBJ: 03-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
20. In the long run, if an organization does not change it will fail.
ANS: T PTS: 1 DIF: Easy REF: 74
OBJ: 03-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
, 21. A competitive advantage can be created when several resources are bundled together in a unique
fashion.
ANS: T PTS: 1 DIF: Medium REF: 76
OBJ: 03-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
22. Coca-Cola’s brand name is a tangible source of competitive advantage for the company.
ANS: F PTS: 1 DIF: Easy REF: 76 | 77 (Table 3.2)
OBJ: 03-03 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
23. Trademarks and copyrights are examples of a firm’s tangible resources.
ANS: T PTS: 1 DIF: Easy REF: 76 | 77 (Table 3.1)
OBJ: 03-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
24. The value of tangible assets such as the firm’s borrowing capacity and its physical plant are high
because they can be easily leveraged to derive additional value.
ANS: F PTS: 1 DIF: Hard REF: 77
OBJ: 03-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Strategic & systems skills
25. Although an organization’s good reputation is a valuable resource that takes years of superior
marketplace competence to achieve, it is not a good basis for building a competitive advantage because
it can be destroyed almost instantly by bad publicity.
ANS: F PTS: 1 DIF: Medium REF: 77
OBJ: 03-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Strategic & systems skills
26. Compared to tangible resources, intangible resources are an inferior source of core competencies.
ANS: F PTS: 1 DIF: Medium REF: 77-78
OBJ: 03-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Strategic & systems skills
27. The capacity to manage human intellect—and to convert it into useful products and services—is fast
becoming the critical executive skill of the age.
ANS: T PTS: 1 DIF: Easy REF: 78
OBJ: 03-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing human capital
and Competitive Advantages
TRUE/FALSE
1. In the global market, employees move freely from firm to firm, so they are not an important source of
competitive advantage for the firm.
ANS: F PTS: 1 DIF: Medium REF: 70
OBJ: 03-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing human capital
2. Firms should seek to continually develop new core competencies because all core competencies have
limited life spans.
ANS: T PTS: 1 DIF: Easy REF: 70
OBJ: 03-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Strategic & systems skills
3. The sustainability of a competitive advantage depends upon the imitability of the core competence, the
availability of substitutes for the core competence, and the rate of obsolescence of the core
competence.
ANS: T PTS: 1 DIF: Medium REF: 71
OBJ: 03-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Strategic & systems skills
4. A useful rule for evaluating whether a capability is a core competence is its historical ability to provide
sustainable competitive advantage for the firm.
ANS: F PTS: 1 DIF: Hard REF: 71
OBJ: 03-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Strategic & systems skills
5. Analyzing the internal environment enables a firm to determine what it might be able to do by
identifying what opportunities exist.
ANS: F PTS: 1 DIF: Hard REF: 71
OBJ: 03-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Strategic & systems skills
6. Analyzing the internal environment enables a firm to determine what it can do by identifying what
opportunities exist.
ANS: T PTS: 1 DIF: Hard REF: 71
OBJ: 03-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Strategic & systems skills
, 7. Given enough time, any firm’s competitive advantage can be imitated by its competitors.
ANS: T PTS: 1 DIF: Easy REF: 71
OBJ: 03-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Strategic & systems skills
8. Some resources, such as financial capital, have inherent value to the firm, while others are not
inherently valuable.
ANS: F PTS: 1 DIF: Hard REF: 71
OBJ: 03-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Strategic & systems skills
9. In the global economy, traditional factors such as labor costs, access to financial resources and raw
materials, and protected or regulated markets are no longer sources of competitive advantage.
ANS: F PTS: 1 DIF: Easy REF: 71-72
OBJ: 03-01 TYPE: knowledge
NOT: AACSB: Multicultural & Diversity | Management: Creation of Value | Dierdorff & Rubin:
Strategic & systems skills
10. A global mind-set is free of the assumptions of a single country, culture, or context.
ANS: T PTS: 1 DIF: Easy REF: 71
OBJ: 03-01 TYPE: knowledge
NOT: AACSB: Multicultural & Diversity | Management: Strategy | Dierdorff & Rubin: Strategic &
systems skills
11. Analysis of the firm’s internal organization examines the firm’s portfolio of resources but excludes the
bundles of heterogeneous resources and capabilities.
ANS: F PTS: 1 DIF: Easy REF: 72
OBJ: 03-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Knowledge of general business functions
12. Value is measured by the variable and fixed costs associated with the production and marketing of a
particular product compared with the revenue and profits the product generates.
ANS: F PTS: 1 DIF: Hard REF: 72
OBJ: 03-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
13. Value is created when the firm exploits its core competencies or competitive advantages to meet or
exceed the demanding standards of global competition.
ANS: T PTS: 1 DIF: Medium REF: 72
OBJ: 03-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
,14. Creating customer value is the source of the firm’s potential to earn above-average returns.
ANS: T PTS: 1 DIF: Easy REF: 72-73
OBJ: 03-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Strategic & systems skills
15. The challenge and difficulty of making effective decisions are implied by preliminary evidence
suggesting that one-half of organizational decisions fail.
ANS: T PTS: 1 DIF: Easy REF: 73
OBJ: 03-02 TYPE: knowledge
NOT: AACSB: Reflective Thinking Skills | Management: Strategy | Dierdorff & Rubin: Managing
decision-making processes
16. The need to meet quarterly earnings numbers disciplines managers to exercise judgment and to make
strategic decisions that are best for the long-run performance of the firm.
ANS: F PTS: 1 DIF: Medium REF: 73
OBJ: 03-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Foundational skills
17. Firms and managers can learn from the failure resulting from a mistake—that is, what not to do when
seeking competitive advantage.
ANS: T PTS: 1 DIF: Medium REF: 74
OBJ: 03-02 TYPE: knowledge
NOT: AACSB: Reflective Thinking Skills | Management: Leadership Principles | Dierdorff & Rubin:
Managing decision-making processes
18. The core competencies of a firm should be the primary drivers of its strategy.
ANS: F PTS: 1 DIF: Hard REF: 74
OBJ: 03-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
19. Managerial decisions concerning resources, capabilities, and core competencies are characterized by
three conditions: ambiguity, interconnectivity, and intraorganizational agreement.
ANS: F PTS: 1 DIF: Medium REF: 74
OBJ: 03-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
20. In the long run, if an organization does not change it will fail.
ANS: T PTS: 1 DIF: Easy REF: 74
OBJ: 03-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
, 21. A competitive advantage can be created when several resources are bundled together in a unique
fashion.
ANS: T PTS: 1 DIF: Medium REF: 76
OBJ: 03-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
22. Coca-Cola’s brand name is a tangible source of competitive advantage for the company.
ANS: F PTS: 1 DIF: Easy REF: 76 | 77 (Table 3.2)
OBJ: 03-03 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
23. Trademarks and copyrights are examples of a firm’s tangible resources.
ANS: T PTS: 1 DIF: Easy REF: 76 | 77 (Table 3.1)
OBJ: 03-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
24. The value of tangible assets such as the firm’s borrowing capacity and its physical plant are high
because they can be easily leveraged to derive additional value.
ANS: F PTS: 1 DIF: Hard REF: 77
OBJ: 03-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Strategic & systems skills
25. Although an organization’s good reputation is a valuable resource that takes years of superior
marketplace competence to achieve, it is not a good basis for building a competitive advantage because
it can be destroyed almost instantly by bad publicity.
ANS: F PTS: 1 DIF: Medium REF: 77
OBJ: 03-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Strategic & systems skills
26. Compared to tangible resources, intangible resources are an inferior source of core competencies.
ANS: F PTS: 1 DIF: Medium REF: 77-78
OBJ: 03-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Strategic & systems skills
27. The capacity to manage human intellect—and to convert it into useful products and services—is fast
becoming the critical executive skill of the age.
ANS: T PTS: 1 DIF: Easy REF: 78
OBJ: 03-03 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing human capital
