Tangible resources are assets that are relatively easy to identify such as financial and physical assets.

21.

The resource-based view of the firm focuses solely on the internal analysis of the operations of the firm.    FALSE The resource-based view (RBV) of the firm combines two perspectives: (1) the internal analysis of phenomena within a company and (2) an external analysis of the industry and its competitive environment.

AACSB: Analytic Blooms: Remember Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources; as well as organizational capabilities. Level of Difficulty: 1 Easy Topic: Resource-Based View of the Firm

22.	Tangible resources are assets that are relatively easy to identify such as financial and physical assets.    TRUE Tangible resources are assets that are relatively easy to identify. They include the physical and the financial assets that an organization uses to create value for its customers.

AACSB: Analytic Blooms: Remember Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources; as well as organizational capabilities. Level of Difficulty: 1 Easy Topic: Resource-Based View of the Firm

23.

Intangible resources of a firm refer to its capacity to deploy tangible resources over time and leverage those resources effectively.    FALSE Intangible resources are organizational assets that are difficult to identify and to account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources.

AACSB: Analytic Blooms: Remember Learning Objective: 03-04 The resource-based view of the firm and the different types of tangible and intangible resources; as well as organizational capabilities. Level of Difficulty: 1 Easy Topic: Resource-Based View of the Firm

24.

Products and services that are difficult to imitate help firms sustain their profitability.    TRUE For a resource to provide a firm with the potential for a sustainable competitive advantage, it must have four attributes. Among these is the idea that the resource must be difficult for competitors to imitate.

AACSB: Analytic Blooms: Remember Learning Objective: 03-05 The four criteria that a firm's resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers. Level of Difficulty: 1 Easy Topic: Resource-Based View of the Firm

25.

Path dependency has no impact on the inimitability of resources.    FALSE Many resources cannot be imitated because of what economists refer to as path dependency. This means that resources are unique and therefore scarce because of all that has happened along the path followed in their development and/or accumulation. Competitors cannot buy these resources quickly and easily; they must be built up over time in ways that are difficult to accelerate.

AACSB: Analytic Blooms: Understand Learning Objective: 03-05 The four criteria that a firm's resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers. Level of Difficulty: 2 Medium Topic: Resource-Based View of the Firm

26.

Capabilities that exhibit causal ambiguity are difficult to imitate.    TRUE One source of inimitability is termed causal ambiguity. This means that would-be competitors may be thwarted because it is impossible to disentangle the causes (or possible explanations) of either what the valuable resource is or how it can be re-created.

AACSB: Analytic Blooms: Understand Learning Objective: 03-05 The four criteria that a firm's resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers. Level of Difficulty: 2 Medium Topic: Resource-Based View of the Firm

27.

For a resource to provide a firm with potential sustainable advantages it must satisfy only two criteria: rareness and difficulty in substitution.    FALSE For a resource to provide a firm with the potential for a sustainable competitive advantage, it must have four attributes. First, the resource must be valuable in the sense that it exploits opportunities and/or neutralizes threats in the environment of the firm. Second, it must be rare among the current and potential competitors of the firm. Third, the resource must be difficult for competitors to imitate. Fourth, the resource must have no strategically equivalent substitutes.

AACSB: Analytic Blooms: Understand Learning Objective: 03-05 The four criteria that a firm's resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers. Level of Difficulty: 2 Medium Topic: Resource-Based View of the Firm

28.

Firms that are successful in creating competitive advantages that are sustainable for a period of time do not have to be concerned about profits being retained by employees or managers.    FALSE Firms may be successful in creating competitive advantages that can be sustainable for a period of time. However, much of the profits can be retained by its employees and managers or other stakeholders instead of flowing to the owners of the firm.

AACSB: Analytic Blooms: Understand Learning Objective: 03-05 The four criteria that a firm's resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers. Level of Difficulty: 2 Medium Topic: Resource-Based View of the Firm

29.

Employee exit cost is a factor that can increase employee bargaining power and help him or her appropriate profits of the firm.    FALSE Employee exit costs may tend to reduce employee bargaining power. An individual may face high personal costs when leaving the organization. Thus, the threat of the individual leaving may not be credible. In addition, employee expertise may be firm-specific and of limited value to other firms.

AACSB: Analytic Blooms: Understand Learning Objective: 03-05 The four criteria that a firm's resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers. Level of Difficulty: 2 Medium Topic: Resource-Based View of the Firm

30.

Amazon Prime is an example of a difficult to imitate capability that gives it competitive advantage over its rivals.    TRUE Amazon Prime has proven to be extremely hard for rivals to copy. It enables Amazon to exploit its wide selection, low prices, network of third-party merchants, and finely tuned distribution system, while keying off that faintly irrational human need to maximize the benefits of a club that you have already paid to join. The four criteria a resource must possess in order to maintain a sustainable advantage are: valuable, rarity, difficult to imitate, and difficult to substitute.

AACSB: Analytic Blooms: Understand Learning Objective: 03-05 The four criteria that a firm's resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers. Level of Difficulty: 2 Medium Topic: Resource-Based View of the Firm

31.

Dell lost its competitive advantage by 2009 in part because it placed its efforts on operational excellence to the exclusion of reinvention, according to Inder Sidhu.    TRUE Dell illustrates what can happen when a company emphasizes optimization to the exclusion of reinvention. According to author Inder Sidhu, the Dell obsession with operational excellence prevented it from delivering innovations that the market wanted, costing it a great deal of goodwill and prestige.

AACSB: Analytic Blooms: Understand Learning Objective: 03-05 The four criteria that a firm's resources must possess to maintain a sustainable advantage and how value created can be appropriated by employees and managers. Level of Difficulty: 2 Medium Topic: Resource-Based View of the Firm

32.

Financial analysis provides an accurate way to assess the relative strengths of firms and can be used as a complete guide to study companies.    FALSE The financial position of a firm should not be analyzed in isolation. Important reference points are needed. Some issues that must be taken into account to make financial analysis more meaningful include: historical comparisons, comparisons with industry norms, and comparisons with key competitors.

AACSB: Analytic Blooms: Understand Learning Objective: 03-06 The usefulness of financial ratio analysis; its inherent limitations; and how to make meaningful comparisons of performance across firms. Level of Difficulty: 2 Medium Topic: Evaluating Firm Performance: Two Approaches

33.	Leverage ratios provide measures of the capacity of a firm to meet its long-term financial obligations.    TRUE Financial leverage ratios are also known as long-term solvency ratios. They measure the capacity of the firm to meets its long-term obligations.

AACSB: Analytic Blooms: Remember Learning Objective: 03-06 The usefulness of financial ratio analysis; its inherent limitations; and how to make meaningful comparisons of performance across firms. Level of Difficulty: 1 Easy Topic: Evaluating Firm Performance: Two Approaches

34.

Historical comparisons are most appropriate during periods of recession or economic boom.    FALSE Exhibit 3.10 illustrates a 10-year period of return on sales (ROS) for a hypothetical company. As indicated by the dotted trend lines, the rate of growth (or decline) differs substantially over time periods, and periods of recession and economic boom may make the trends unreliable.

AACSB: Analytic Blooms: Understand Learning Objective: 03-06 The usefulness of financial ratio analysis; its inherent limitations; and how to make meaningful comparisons of performance across firms. Level of Difficulty: 2 Medium Topic: Evaluating Firm Performance: Two Approaches

35.

When using industry norms as a standard of comparison, managers must be sure that the firms used in the comparisons are representative of all sizes and strategies within the industry.    FALSE Comparing a firm with all other firms in that industry assesses relative performance. Banks often use such comparisons when evaluating the creditworthiness of an individual firm.

AACSB: Analytic Blooms: Understand Learning Objective: 03-06 The usefulness of financial ratio analysis; its inherent limitations; and how to make meaningful comparisons of performance across firms. Level of Difficulty: 2 Medium Topic: Evaluating Firm Performance: Two Approaches

36.

A primary benefit of the balanced scorecard is that it complements financial indicators with operational measures of customer satisfaction, internal processes, and the innovation and improvement activities of the organization.    TRUE A balanced scorecard provides top managers with a fast but comprehensive view of the business. In a nutshell, it includes financial measures that reflect the results of actions already taken, but it complements these indicators with measures of customer satisfaction, internal processes, and the innovation and improvement activities of the organization (operational measures that drive future financial performance).

AACSB: Analytic Blooms: Understand Learning Objective: 03-07 The value of the "balanced scorecard" in recognizing how the interests of a variety of stakeholders can be interrelated. Level of Difficulty: 2 Medium Topic: Evaluating Firm Performance: Two Approaches

37.	The balanced scorecard enables managers to evaluate their business from only two perspectives: customer and financial.    FALSE The balanced scorecard enables managers to consider their business from four key perspectives: customer, internal, innovation and learning, and financial.

AACSB: Analytic Blooms: Remember Learning Objective: 03-07 The value of the "balanced scorecard" in recognizing how the interests of a variety of stakeholders can be interrelated. Level of Difficulty: 1 Easy Topic: Evaluating Firm Performance: Two Approaches

38.

An important implication of the balanced scorecard is that managers need NOT look at their job as primarily balancing stakeholder demands.    TRUE A key implication is that managers do not need to look at their job as balancing stakeholder demands. The balanced scorecard provides a win-win approach, increasing satisfaction among a wide variety of organizational stakeholders, including employees, customers, and stockholders.

AACSB: Analytic Blooms: Understand Learning Objective: 03-07 The value of the "balanced scorecard" in recognizing how the interests of a variety of stakeholders can be interrelated. Level of Difficulty: 2 Medium Topic: Evaluating Firm Performance: Two Approaches

39.

A strength of the balanced scorecard is that it is very easy to implement and that there is little need for executive sponsorship.    FALSE The key limitation of the balanced scorecard is that some executives may view it as a quick fix that can be easily installed. Implementing a balanced metrics system is an evolutionary process. It is not a one-time task that can be quickly checked off as completed. If managers do not recognize this from the beginning and fail to commit to it long term, the organization will be disappointed.

AACSB: Analytic Blooms: Understand Learning Objective: 03-07 The value of the "balanced scorecard" in recognizing how the interests of a variety of stakeholders can be interrelated. Level of Difficulty: 2 Medium Topic: Evaluating Firm Performance: Two Approaches

40.

In considering the business from the innovation and learning perspective using the balanced scorecard, the ability of the firm to do well is more dependent on its intangible and tangible assets.    TRUE The ability of the firm to do well from an innovation and learning perspective is more dependent on its intangible than tangible assets. Three categories of intangible assets are critically important: human capital (skills, talent, and knowledge), information capital (information systems, networks), and organization capital (culture, leadership).

AACSB: Analytic Blooms: Understand Learning Objective: 03-07 The value of the "balanced scorecard" in recognizing how the interests of a variety of stakeholders can be interrelated. Level of Difficulty: 2 Medium Topic: Evaluating Firm Performance: Two Approaches