Chapter 5

Strategic Management & Business Policy, 14e (Wheelen)
Chapter 5 Internal Scanning and Organizational Analysis

1) Resources are the organization's assets and are the basic building blocks of the organization.
Answer: TRUE
2) The resources of an organization include tangible assets, human assets, and intangible assets.
Answer: TRUE
3) Capabilities refer to a corporation's ability to exploit its resources.
Answer: TRUE
4) New product development would be a core competency if it goes beyond one division.
Answer: TRUE
5) General Electric is well known for its distinctive competency in management development.
Answer: TRUE
6) Core competencies may mature and become core deficiencies.
Answer: TRUE
7) An example of a cluster in the US is found in the Silicon Valley.
Answer: TRUE
8) Two characteristics that determine the sustainability of a firm's distinctive competency are
durability and transparency.
Answer: FALSE
9) Durability is the rate at which a firm's underlying resources and capabilities (core
competencies) can be duplicated by others.
Answer: FALSE
10) A core competency can be easily imitated to the extent that it is transparent, transferable, and
replicable.
Answer: TRUE
11) Since competitors were not able to understand how Gillette's Mach 3 razor was produced, it
was considered transparent.
Answer: FALSE
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12) Transferability is the ability of competitors to use duplicated resources and capabilities to
imitate the other firm's success.
Answer: FALSE
13) Tacit knowledge is knowledge that can be easily communicated or articulated and as result
can be easily imitated.
Answer: FALSE
14) eBay and Amazon.com have successfully used the efficiency model by acting as an
intermediary to connect multiple sellers to multiple buyers.
Answer: FALSE
15) A value chain is a linked set of value-creating activities.
Answer: TRUE
16) A company's center of gravity is the part of the value chain that is most important to the
company and the point where its greatest expertise and core competencies lie.
Answer: TRUE
17) A company's center of gravity is usually the point at which the company started.
Answer: TRUE
18) According to Porter, a manufacturing firm's support activities usually begin with inbound
logistics, go through an operations process in which a product is manufactured, and continue on
to outbound logistics and finally to service.
Answer: FALSE
19) When a company uses the same marketing channel for two separate products, this is an
example of an economy of scope.
Answer: TRUE
20) A functional structure is appropriate for a medium sized firm with several product lines in
one industry.
Answer: FALSE
21) A divisional structure has no functional or product categories and is appropriate for a small,
entrepreneur-dominated company with one or two product lines that operates in a reasonably
small, easily identifiable market niche.
Answer: FALSE
2
22) Cultural integration is the degree to which members of a unit accept the norms, values, or
other culture content associated with the unit.
Answer: FALSE
23) When employees across the organization hold the same cultural values and norms, this
demonstrates a high level of cultural integration.
Answer: TRUE
24) The corporate culture generally reflects the values of the founder(s) and the mission of the
firm.
Answer: TRUE
25) The marketing mix refers to the particular combination of key variables under the
corporation's control that can be used to affect demand and to gain competitive advantage.
Answer: TRUE
26) The product life cycle enables a marketing manager to examine the marketing mix of a
particular product or group of products in terms of its position in its life cycle.
Answer: TRUE
27) Research reveals a positive relationship between corporate reputation and financial
performance.
Answer: TRUE
28) Research indicates that greater financial leverage has a positive impact on performance for
firms in dynamic environments.
Answer: FALSE
29) A good rule of thumb for R & D spending is that a corporation should spend at a "normal"
rate for that particular industry unless its strategic plan calls for unusual expenditures.
Answer: TRUE
30) A company's capability in product R & D can be measured by consistent reductions in unit
manufacturing costs and by the number of product defects.
Answer: FALSE
31) It is generally accepted that product R & D normally dominates the early stages of a
product's life cycle, whereas process R & D becomes especially important in the later stages.
Answer: TRUE
3
32) Historically, competitive leadership in a market changes hands as one technology nears the
end of its S-curve.
Answer: TRUE
33) An example of an intermittent manufacturing system is an auto body repair shop.
Answer: TRUE
34) Intermittent manufacturing systems reap benefits from economies of scale.
Answer: FALSE
35) Flexible manufacturing permits the low-volume output of custom-tailored products at
relatively low unit costs through economies of scope.
Answer: TRUE
36) Using concurrent engineering, Chrysler Corporation was able to reduce its product
development cycle from 60 to 36 months.
Answer: TRUE
37) To increase flexibility, avoid layoffs, and reduce labor costs, corporations are using more
contingent workers.
Answer: TRUE
38) A current trend in corporate information systems is the increasing use of the Internet for
marketing, intranets for internal communication, and extranets for logistics and distribution.
Answer: TRUE
39) The EFAS Table is one way to organize the internal factors into generally accepted categories
of strengths and weaknesses as well as to analyze how well a particular company's management
is responding to these specific factors in light of the perceived importance of these factors to the
company.
Answer: FALSE
40) Those critical strengths and weaknesses that are likely to determine if a firm will be able to
take advantage of opportunities while avoiding threats are called
A) SWOT.
B) competitive forces.
C) internal strategic factors.
D) quality accounting.
E) factor analysis.
4
41) Which of the following is NOT one of the four question areas Barney proposes in his VRIO
framework used to evaluate a firm's key resources?
A) durability
B) organization
C) rareness
D) value
E) imitability
42) When a company determines a competency's competitive advantage, Barney refers to this
issue as
A) value.
B) rareness.
C) imitability.
D) organization.
E) durability.
43) According to Barney's VRIO framework, the exploitation of a resource pertains to the
________ of the resource.
A) value
B) rareness
C) imitability
D) organization
E) durability
44) A corporation's ability to exploit its resources is referred to as its
A) resources.
B) capabilities.
C) core competencies.
D) critical success factors.
E) key performance factors.
45) Things that a corporation can do exceedingly well across the corporation are called
A) resources.
B) distinctive competencies.
46) When a company's core competencies are superior to those of competitors, these are known
as
A) resources.
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B) distinctive competencies.
47) Which of the following statements is true concerning clusters?
A) The desire to build or upgrade a core competency is one reason why entrepreneurial and other
fast-growing firms often tend to locate close to their competitors.
B) Clusters are geographic concentrations of interconnected companies and industries.
C) An example of a cluster in the U.S. is California's Silicon Valley.
D) According to Porter, clusters provide access to employees, suppliers, specialized information,
and complementary products.
E) all of the above
48) The rate at which a firm's underlying resources and capabilities depreciate or become
obsolete is called
A) replicability.
B) transparency.
C) imitability.
D) durability.
E) transferability.
49) The rate at which a firm's underlying resources, capabilities, or core competencies can be
duplicated by others is called
A) replicability.
B) transparency.
C) imitability.
D) durability.
E) transferability.
50) When a company takes apart a competitor's product in order to find out how it works, this
process is known as
A) durability.
B) replicability.
C) reverse engineering.
D) transparency.
E) transferability.
51) The speed with which other firms can understand the relationship of resources and
capabilities supporting a successful firm's strategy is called
A) imitability.
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B) reverse engineering.
C) transferability.
D) transparency.
E) durability.
52) The ability of competitors to use duplicated resources and capabilities to imitate the other
firm's success is called
A) imitability.
B) durability.
C) transferability.
D) transparency.
E) replicability.
53) Knowledge that can be easily articulated and communicated is known as
A) tacit knowledge.
B) explicit knowledge.
C) imitable knowledge.
D) transferable knowledge.
E) durable knowledge.
54) ________ is more valuable because it can provide companies with a sustainable competitive
advantage that is harder for competitors to imitate.
A) Tacit knowledge
B) Explicit knowledge
C) Imitable knowledge
D) Transferable knowledge
E) Durable knowledge
55) Knowledge that is not easily communicated because it is deeply rooted in employee
experience or in a corporation's culture is called
A) tacit knowledge.
B) explicit knowledge.
C) imitable knowledge.
D) transferable knowledge.
E) durable knowledge.
56) On the continuum of resource sustainability, where would Sony's Walkman be placed?
A) slow-cycle resources
B) sustainable resources
C) standard-cycle resources
D) fast-cycle resources
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E) down-cycle resources
57) The business model used by IBM to make money not selling IBM products, but by selling its
expertise to improve their customers operations is the
A) profit pyramid model.
B) advertising model.
C) customer solutions model.
D) efficiency model.
E) entrepreneurial model.
58) The business model used by HP in selling printers and printer cartridges is the
A) profit pyramid model.
B) advertising model.
C) customer solutions model.
D) efficiency model.
E) multi-component system/installed base model.
59) A linked set of value-creating activities beginning with basic materials provided by suppliers
and ending with distributors getting the final product into the hands of the ultimate consumer is
called a(n)
A) value chain.
B) continuum of sustainability.
C) strategic capability.
D) fully integrated activity set.
E) a strategic group.
60) The part of an industry's value chain that is most important to a company and the point where
its greatest expertise and capabilities lie is called the company's
A) functional crossroads.
B) center of gravity.
C) dynamic equilibrium.
D) R&D intensity.
E) economy of scope.
61) Which of the following is NOT a primary activity of the value chain?
A) raw materials handling
B) installation
C) repair
D) purchasing
E) warehousing
8
62) Which of the following is NOT a support activity of the value chain?
A) procurement
B) technology development
C) human resource management
D) marketing and sales
E) strategic planning
63) When examining the corporate value chain of a particular product or service, which one of
the following is NOT one of the PRIMARY activities that usually occur?
A) operations
B) inbound and outbound logistics
C) auditing and accounting
D) marketing and sales
E) customer service
64) The second step when analyzing the value-added chain is to
A) identify the legal ramifications and responsibilities of their product or service.
B) examine the linkages among the product's or service's value activities.
C) confirm that all variables have been included and taken into consideration.
D) ensure that quality management is adequately addressed.
E) examine the potential synergies among the corporation's product or business units.
65) When the value chains of two separate products or services share activities, such as the same
marketing channels, in order to reduce costs, this is an example of
A) economies of scope.
B) economies of scale.
C) economies of integration.
D) economies of learning.
E) outsourcing.
66) Which of the following describes a typical functional structure?
A) Employees tend to be specialists in the business functions important to that industry
such as manufacturing, marketing, finance, and human resources.
B) This is most appropriate for large corporations with many product lines in several related
industries, with employees acting as specialists attempting to gain synergy among divisional
activities.
C) This is most appropriate for small, entrepreneur-dominated companies with one or two
product lines that operate in a small niche market, with employees acting as jack-of-all trades.
D) Employees have two or more superiors, a project manager and a functional manager.
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E) This is most appropriate for large corporations with many product lines in several unrelated
industries, with employees acting as specialists but with no attempt at gaining synergy among the
divisions.
67) Which of the following best describes a simple structure?
A) Work is divided into subunits on the basis of such functions as manufacturing, marketing,
finance, and human resources.
industries, with employees acting as functional specialists attempting to gain synergy among
divisional activities.
product lines that operate in a small niche market, with employees acting as jack-of-all
trades.
industries, with employees acting as functional specialists but with no attempt at gaining synergy
among the divisions.
68) Which one of the following best describes a divisional structure?

B) This is most appropriate for large corporations with many product lines in several
related industries, with employees acting as functional specialists attempting to gain
synergy among divisional activities.
industries, with employees acting as functional specialists but with no attempt at gaining synergy
among the divisions.
69) Which one of the following best describes a conglomerate structure?
industries, with employees acting as functional specialists attempting to gain synergy among
divisional activities.
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E) This is most appropriate for large corporations with many product lines in several
unrelated industries; unrelatedness prevents any attempt at gaining synergy among the
divisions.
70) According to the text, which one of the following is NOT descriptive of a corporation's
culture?
A) A corporation's culture is a collection of beliefs, expectations, and values learned and shared
by corporation's members and transmitted from one generation of employees to another.
B) Corporate cultures are only temporary and can be easily changed.
C) Corporate culture norms are created which define acceptable behavior from top management
to operative employee.
D) Myths and rituals often emerge over time to explain why a certain aspect of the culture is
important.
E) Cultures have a powerful influence on the behavior of managers and can strongly affect a
corporation's ability to shift its strategic direction.
71) What are the two distinct attributes of corporate culture?
A) differentiation and integration
B) durability and imitability
C) concern for people and concern for task
D) intensity and integration
E) amount of complexity and tolerance of change
72) What is the attribute of corporate culture that is the degree to which members of a unit accept
the norms, values, or other culture content associated with the unit?
A) integration
B) strength
C) intensity
D) coordination
E) unity
73) Which of the following is a function of corporate culture?
A) It encourages a laissez faire set of attitudes.
B) It encourages flexibility and thus constant change.
C) It conveys a sense of identity for employees.
D) It generates creative approaches to new situations.
E) It focuses employee commitment on their own careers.
74) Which of the following is NOT a function of corporate culture?
A) conveys a sense of identity for employees
B) adds to the stability of the organization as a social system
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C) helps generate employee commitment to something greater than themselves

D) keeps people guessing about what to do next
E) serves as a frame of reference for employees to use as a guide for appropriate behavior
75) The breadth of an organization's culture is also known as
A) cultural integration.
B) cultural diversification.
C) cultural intensity.
D) cultural strategy.
E) cultural prerogative.
76) Through market research, corporations can target their various products or services so that
management can discover what niches to seek or develop, and how to minimize competitive
pressure. This is descriptive of
A) marketing position.
B) product life cycle.
C) market segmentation.
D) marketing mix.
E) marketing leverage.
77) The particular combination of product, place, promotion, and price is called
D) marketing mix.
78) An example of the promotion variable of the marketing mix is
A) advertising.
B) discounts
C) location.
D) services.
E) quality.
79) A graph showing time plotted against the dollar sales of a product as it moves from
introduction through growth and maturity to decline is called the
D) marketing mix.
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80) Which of the following statements is true concerning a corporate reputation?

A) It is a widely held perception of a company by the general public.
B) A good corporate reputation can be a strategic resource.
C) There is a positive relationship between corporate reputation and financial performance.
D) Reputation tends to be long-lasting and hard for others to duplicate.
E) all of the above
81) As compared to a firm with low financial leverage, a firm with a high amount of financial
leverage in an expanding market should have
A) lower profits.
B) higher profits
C) higher earnings per share.
D) lower earnings per share.
E) higher sales revenue.
82) The ratio of total debt to total assets is known as
A) budgeting leverage.
B) capital finance.
C) capital budgeting.
D) financial leverage.
E) financial budgeting.
83) Which of the following is NOT a responsibility of a research and development manager?
A) Choosing among alternative new technologies to use within the corporation.
B) Developing methods of embodying the new technology in new products and processes.
C) Deploying resources so that the new technology can be successfully implemented.
D) Taking the design and operationalizing the plan into mass production.
E) Suggesting and implementing a corporation's technological strategy in light of its corporate
objectives and policies.
84) The process of taking a new technology from the laboratory to the marketplace is called
A) economies of scope versus operating leverage.
B) the R&D mix.
C) technological competence.
D) technological discontinuity.
E) technology transfer.
85) When scientists concentrate on quality control and the development of design specifications,
this is referred to as
A) basic R&D.
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B) product R&D.
C) engineering R&D.
D) life cycle R&D.
E) R&D mix.
86) The displacement of one technology by another, as shown by two S-shaped curves on a
graph, is referred to as
A) economies of scope versus operating leverage.
B) technology transfer.
C) the R&D mix.
D) technological discontinuity.
E) a disjunctive learning or experience curve.
87) The proposition that silicon chips double in complexity every 18 months is referred to as
A) Ohm's Law.
B) Porter's Five Forces Model.
C) Moore's Law.
D) Mintzberg's Rule.
E) Keynesian's Theory.
88) In Christensen's book, The Innovator's Dilemma, he explains that managers remain with
certain technologies based on
A) return of investment.
B) net present value.
C) cost reduction.
D) total operating expenses.
E) time spent during technology implementation.
89) According to the text, the primary task of the operations manager is to
A) make sure all the products or services are producing maximum revenue.
B) develop and operate a system that will produce the required number of products or
services with a certain quality, at a given cost, within an allotted time.
C) make sure the process has a high quality control.
D) ensure that the process is manufactured or delivered as efficiently as possible.
E) interface with the other functional departments to coordinate their operations in avoiding
duplication of effort.
90) Which of the following terms best describes a system in which items are normally processed
sequentially, but the work and sequence of the process vary?
A) continuous system
B) debt capacity
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C) chronological processing
D) operating leverage
E) intermittent system
91) An automobile assembly line is an example of which approach to manufacturing?
A) continuous system
B) debt capacity
C) sequential processing
D) job shop
E) intermittent system
92) The impact of a specific change in sales volume on net operating income is referred to as the
A) continuous system.
B) chronological processing.
C) operating leverage.
D) debt capacity.
E) intermittent system.
93) The concept that suggests that unit production costs decline by some fixed percent each time
the total accumulated volume of production in units doubles is referred to as
A) the R & D mix.
B) the experience curve.
C) technological competence.
D) break-even analysis.
E) technology transfer.
94) Which one of the following is NOT descriptive of the experience curve?
A) It is very useful because it is consistent within the industry for all involved organizations
over time.
B) It is used to estimate the production cost of a product produced by newly introduced
techniques or processes.
C) It is used to estimate the production costs of a product never before made with the present
techniques and process.
D) The concept was first applied in the airframe industry.
E) It shows that production costs decline by some fixed percentage as production in units
doubles.
95) Flexible manufacturing emphasizes
A) high-volume output of mass produced products.
B) the cost advantages of an intermittent system with the customer-oriented advantages of a
continuous system.
15
C) the learning curve is longer since technology is automated.

D) economies of scope over economies of scale.
E) economies of scale over economies of scope.
96) Strategic managers must be concerned with human resource management because
A) dealing with people is their primary job.
B) quality of work life is more important than strategic management.
C) they must be aware of the ability and willingness of the workforce to implement new
strategies.
D) workers are more likely to go on strike if management attempts to cross them.
E) they must be aware of the possibility and potential of unionism.
97) In order to move more quickly through a product's development stage, companies like
Motorola and Chrysler are using
A) concurrent engineering.
B) cross-functional work teams.
C) advisory committees.
D) task forces.
E) continuous engineering.
98) The term that describes putting once isolated specialists together to work and compare notes
in a collective product design effort is called
A) simultaneous strategy.
B) participatory planning.
C) jointly-designed objectives.
D) concurrent engineering.
E) cooperative design.
99) Human resource departments have found that to reduce employee dissatisfaction and
unionization efforts, they must
A) significantly increase their wage rates.
B) shorten the work week to allow for more leisure time.
C) offer a wider variety of benefits and attractive enticements.
D) guarantee their workers life time jobs.
E) consider the quality of work life in the design of jobs.
100) Which one of the following is NOT one of the four methods to improve the corporation's
quality of work life?
A) Improve the work environment
B) Introduce participative problem-solving
C) More responsive management
16
D) Introduce innovative reward systems

E) Restructuring work
101) The mix in the workplace of people from different races, cultures, and backgrounds is
referred to as
A) demographics.
B) human diversity.
C) quality of work life.
D) globalization.
E) internationalization.
102) The PRIMARY task of the manager of information systems is to
A) prevent unlawful usage of the information from the system.
B) make sure the information contained in the system is up-to-date and accurate.
C) monitor the input of information into the information system.
D) design and manage the flow of information in a corporation to improve productivity and
decision making.
E) ensure that only those who have authorized permission have access to the information system.
103) Describe Barney's VRIO framework.
Answer:
Barney, in his VRIO framework of analysis, proposes four questions to evaluate a firm's
competencies:
Value: Does it provide competitive advantage?
Rareness: Do other competitors possess it?
Imitability: Is it costly for others to imitate?
Organization: Is the firm organized to exploit the resource?
104) Discuss the two characteristics that determine the sustainability of a firm's distinctive
competency.
Answer:
Two characteristics determine the sustainability of a firm's distinctive competency:
durability and imitability. Durability is the rate at which a firm's underlying resources,
capabilities, or core competencies depreciate or become obsolete. Imitability is the rate at
which a firm's underlying resources, capabilities, or core competencies can be duplicated
by others.
105) Define a value chain and the significance of the center of gravity.
Answer:
A value chain is a linked set of value-creating activities beginning with basic raw materials
coming from suppliers, moving on to a series of value-added activities involved in
17
producing and marketing a product or service, and ending with distributors getting the
final goods into the hands of the ultimate consumer. A company's center of gravity is the
part of the chain that is most important to the company and the point where its greatest
expertise and capabilities lie - its core competencies. This is usually the point at which the
company started.
106) Discuss the three basic organizational structures.
Answer:
The three basic organizational structures are the simple, functional, and divisional. The
simple structure has no functional or product categories and is appropriate for a small,
entrepreneur-dominated company with one or two product lines that operates in a
reasonably small, easily identifiable market niche. Employees tend to be generalists and
jacks-of-all-trades. The functional structure is appropriate for a medium-sized firm with
several product lines in one industry. Employees tend to be specialists in the business
functions important to that industry. The divisional structure is appropriate for a large
corporation with many product lines in several related industries. Employees tend to be
functional specialists organized according to product-market distinctions.
107) What are the two distinct attributes of culture?
Answer:
Corporate culture has two distinct attributes - intensity and integration. Cultural intensity
is the degree to which members of a unit accept the norms, values, or other culture content
associated with the unit. This shows the culture's depth. Cultural integration is the extent
to which units throughout an organization share a common culture. This is the culture's
breadth.
108) What is R & D intensity?
Answer:
A company's R & D intensity is the firm's spending on R & D as a percentage of sales
revenue. This is a principal means of gaining market share in global competition. This
amount often varies by industry.
109) Distinguish between continuous and intermittent systems providing examples of each.
Answer:
Manufacturing can be intermittent or continuous. In intermittent systems (job shops), the
item is normally processed sequentially, but the work and sequence of the process vary. An
example is an auto body repair shop. Continuous systems are those laid out as lines on
which products can be continuously assembled or processed. A firm using continuous
systems invests heavily in fixed investments such as automated processes and highly
sophisticated machinery. Continuous systems reap benefits from economies of scale. An
example is an automobile assembly line.
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Strategic Management & Business Policy, 14e (Wheelen)

Chapter 5 Internal Scanning and Organizational Analysis

68) Which one of the following best describes a divisional structure?

C) helps generate employee commitment to something greater than themselves

80) Which of the following statements is true concerning a corporate reputation?

C) the learning curve is longer since technology is automated.

D) Introduce innovative reward systems

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