TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.

1) Value-chain analysis assumes that the basic economic purpose of a firm is to create value,
and it is a useful framework for analyzing the strengths and weaknesses of the firm.

⊚ true
⊚ false

2) In value-chain analysis, value is measured by the market value of the total stock outstanding
of the company.

⊚ true
⊚ false

3) Primary activities contribute to the physical creation of a product or service, its sale and
transfer to the buyer, and its service after the sale.

⊚ true
⊚ false

4) The value-chain concept assumes that both primary and support activities can produce value
for customers.

⊚ true
⊚ false

5) Managers should focus their attention on interrelationships among value-chain activities

within the firm, not on relationships among activities within the firm and other organizations
(such as suppliers and customers).

⊚ true
⊚ false

6) Value-chain analysis can only be applied to manufacturing operations.

⊚ true
⊚ false

1
7) Information technology (IT) can also play a key role in enhancing the value that a company
can provide its customers and, in turn, increasing its own revenues and profits. IT is an activity
within the support activities of general administration.

⊚ true
⊚ false

8) Campbell Soup uses electronic networks to improve the efficiency of outbound logistics.
This is an example of relationships among activities within the firm and with other stakeholders
that are part of the company expanded value chain.

⊚ true
⊚ false

9) Some firms find great value by not incorporating their customers into the value creation
process.

⊚ true
⊚ false

10) The resource-based view of the firm focuses solely on the internal analysis of the operations
of the firm.

⊚ true
⊚ false

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

⊚ true
⊚ false

12) Intangible resources of a firm refer to its capacity to deploy tangible resources over time and
leverage those resources effectively.

2
 ⊚ true
⊚ false

13) Financial resources such as cash and cash equivalents are intangible resources.

⊚ true
⊚ false

14) Human resources and reputation resources are examples of intangible resources.

⊚ true
⊚ false

15) Products and services that are difficult to imitate help firms sustain their profitability.

⊚ true
⊚ false

16) Path dependency has no impact on the inimitability of resources.

⊚ true
⊚ false

17) Capabilities that exhibit causal ambiguity are difficult to imitate.

⊚ true
⊚ false

18) Financial analysis provides an accurate way to assess the relative strengths of firms and can
be used as a complete guide to study companies.

⊚ true
⊚ false

3
19) 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
⊚ false

20) Assessing the performance of a firm is less useful if it is evaluated in terms of how it
changes over time.

⊚ true
⊚ false

21) According to the balanced scorecard, even though the interests of various stakeholders can
be interrelated, improving firm performance necessarily needs to involve making trade-offs
among different stakeholders.

⊚ true
⊚ false

22) A key limitation of the balanced scorecard is that it is a quick fix that can be installed easily.

⊚ true
⊚ false

23) The value of the balanced scorecard is recognizing how the interests of a variety of
stakeholders cannot be interrelated.

⊚ true
⊚ false

24) Because business leaders face strong pressures to produce financial results, it is best to
ignore all other areas of the firm and concentrate only on financial results and stockholder
satisfaction.

4
 ⊚ true
⊚ false

25) Business software such as Hana by SAP are developing AI (artificial intelligence) tools to
create sustainable competitive advantage by leveraging data to better understand customer
preferences, use of products, and the operations of the firm.

⊚ true
⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
26) According to Michael Porter in his book, Competitive Advantage, a key concept used in
analyzing the competitive position of a firm is creating value for

A) buyers that exceeds the costs of production (i.e., margin).

B) suppliers that exceeds the costs of production (i.e., margin).
C) government that exceeds the costs of production (i.e., margin).
D) employees that exceeds the costs of production (i.e., margin).

27) Inbound logistics ⼊库物流 include which of the following?

A) machining and packaging

B) repair and parts supply
C) promotion and packaging
D) warehousing and inventory control 仓储和库存控制

28) In assessing its primary activities 评估主要活动, an airline would examine

5
 A) employee training programs.
B) baggage handling.⾏李处理 （仓储）
C) criteria for lease versus purchase decisions.
D) the effectiveness of its lobbying activities.

29) Advertising is a ________ activity. Supply of replacement parts 更换零件的供应 is a

________ activity.

A) support; primary
B) primary; primary
C) primary; support
D) support; secondary

30) Which of the following examples demonstrates how successful organizations manage their
primary activities?

A) Motorola has revised its compensation system to reward employees who learn a variety
of skills.
B) Wal-Mart implemented a sophisticated information system that resulted in reduced
inventory carrying costs and shortened customer response times.
C) National Steel improved its efficiency by reducing the number of job classifications.
D) JIT inventory systems are vital in order for Dell to fulfill orders in a few days.

31) Mercedes-Benz aggressively pushed for product placement 植⼊型⼴告 in Hollywood

movies. This is an example of which value chain primary or support activity?

A) support activity: general administration

B) primary activity: service
C) support activity: procurement
D) primary activity: marketing and sales

6
32) ________ is/are associated with collecting, storing, and distributing the product or service to
buyers. They consist of warehousing, material handling, delivery operation, order processing,
and scheduling.

A) Services
B) Inbound logistics
C) Outbound logistics 出境物流
D) Operations

33) When Nordstrom, the Seattle-based department store chain, aids customers with after-sales
support, it exemplifies which primary value-chain activity?

A) operations
B) outbound logistics
C) inbound logistics
D) service

34) Which of the following is a support activity? abc are primary activities

A) inbound logistics
B) customer service
C) technology development
D) operations

35) Which of the following lists consists of support activities?

A) human resource management, technology development, customer service, and

procurement
B) human resource management, customer service, marketing and sales, and operations
C) customer service, information systems, technology development, and procurement
D) human resource management, technology development, procurement 采购, and general
administration ⼀般⾏政管理

7
36) Human resource management consists of activities involved in the recruiting, hiring, training,
development, and compensation of all types of personnel. It supports

A) only individual primary activities.

B) mostly support activities but does have some impact on primary activities.
C) only individual support activities.
D) both individual primary and support activities and the entire value chain.

37) According to value-chain analysis, which of the following would be considered part of the
general administration ⼀般⾏政管理 in a firm?

A) information systems
B) technology development
C) human resource management
D) procurement

38) Coca-Cola has developed data analytic technologies to produce orange juice that meets the
taste demands of a global customer base. This is an example of using which value chain support
activity?

A) marketing and sales

B) technology development
C) human resource management
D) procurement

39) Facebook, Intuit, AB InBev, and others empower their recruiters 招聘⼈员 to make offers
on the spot when they interview college students, without knowing what specific position they
will fill. These firms search for candidates with attributes such as being a self-starter and a
problem-solver and make quick offers to preempt the market. This is an example of which value
chain support activity?

8
 A) operations
B) technology development
C) human resource management
D) procurement

40) In a telephone operating company, negotiating and maintaining ongoing relations with
regulatory bodies 与监管机构谈判，维持可持续关系 can be among the most important
activities for competitive advantage. What type of value-chain support activity is this?

A) service
B) technology development
C) human resource management
D) general administration

41) The Germany truck and trailer manufacturer, Schmitz Cargobull, mainly serves customers
who are operators of truck or trailer fleets. What sets the company apart is its expertise in
telematics 远程信息处理 (the integrated application of telecommunications data) to monitor the
current state of any Schmitz Cargobull-produced trailer. What type of a value-chain support
activity is this?

A) service
B) technology development
C) human resource management
D) general administration

42) A marketing department that promises delivery faster than the ability of the production
department to produce is an example of a lack of understanding of the

9
 A) interrelationships among value-creating activities within a firm.
B) organizational culture and leadership.
C) need to maintain the reputation of the company.
D) synergy of the business units.

43) Campbell Soup uses electronic networks to improve the efficiency of outbound logistics.
These networks also helped Campbell Soup manage the ordering of raw materials 原材料订购
more efficiently, improve its production scheduling, and help its customers better manage their
inbound logistics operations. This is an example of

A) interrelationships among activities within the firm.

B) relationships among activities within the firm and with other stakeholders that are part
of the expanded value chain of the firm.
C) relationships among activities outside of the firm.
D) interrelationships among activities outside of the firm.

44) In terms of value-chain analysis, a telephone operating company would find that negotiating
and maintaining ongoing relations with regulatory bodies 与监管机构谈判，维持可持续关系
are important activities for achieving

A) inbound logistics.
B) customer awareness.
C) competitive advantage.
D) better employees.

45) General administration ⼀般⾏政 is sometimes viewed as only ________, but it can be a
powerful source of competitive advantage.

10
 A) income
B) value
C) overhead 开销
D) unimportant

46) German truck and trailer manufacturer, Schmitz Cargobull, mainly serves customers that are
operators of truck or trailer fleets. What sets the company apart is its expertise in telematics 远程
信息处理 (the integrated application of telecommunications data) to monitor the current state of
any Schmitz Cargobull-produced trailer. This is an example of using ________ to enhance
customer value and increase ________ position.

A) sales; competitive
B) operations; marketing
C) information technology; competitive
D) human resources; marketing

47) An executive states that HR must be a true partner of the business, with a deep and up-to-
date understanding of business realities and objectives and must ensure HR initiatives fully
support them at all points of the value chain. This is an example of

A) relationships among activities within the firm and with other stakeholders.
B) relationships between firms.
C) interrelationships among activities within the firm.
D) interrelationships among firms.

48) Regarding the value-chain concept, the most important interrelationship is between the
organization and its

11
 A) board of directors.
B) employees.
C) customers.
D) management.

49) Accounting is a sort of transformation process that converts daily records of individual
transactions into monthly financial reports. The ________ are the inputs, accounting is the
operation that adds value, and ________ are the outputs.

A) transaction records; financial statements

B) financial statements; transaction records
C) employee records; transaction records
D) health records; transaction statements

50) A travel agent adds value by creating an itinerary that includes transportation,
accommodations, and activities that are customized to your budget and travel dates. In terms of
the value-chain analysis, this is an example of a ________ organization.

A) retail
B) service
C) manufacturing
D) travel

51) For an engineering services firm, ________ provides inputs, the transformation process is
the engineering itself, and innovative designs and practical solutions are the outputs.

A) experimentation
B) customer support
C) research and development
D) human resource management

12
52) For a firm such as Nordstrom that has no manufacturing operations, value is added by
developing expertise in the procurement of finished goods and by displaying them in its stores in
a way that enhances sales. In the value chain, procurement activities become the primary activity.
This begins with ________ and ends with ________.

A) purchasing goods; operating stores

B) managing and distributing inventory; marketing and selling
C) partnering with vendors; marketing and selling
D) partnering with vendors; operating stores

53) The resource-based view (RBV) of the firm combines the following two perspectives:

A) the primary and support activities of the firm.

B) the interrelationships among the primary activities of the firm and corporate
management.
C) the internal analysis of the firm and the external analysis of the industry and
competitive environment.
D) the industry and the competitive environment.

54) The three key types of resources that are central to the resource-based view of the firm are

A) tangible resources, intangible resources, and organizational structure.

B) culture, tangible resources, intangible resources.
C) tangible resources, intangible resources, and organizational capabilities.
D) tangible resources, intangible resources, and top management.

55) In the resource-based view of the firm, examples of tangible resources include

13
 A) financial resources, human resources, and firm competencies.
B) financial resources, physical resources, and technological resources.
C) financial resources, physical resources, and the capacity to combine intangible
resources.
D) outstanding customer service, innovativeness of products, and reputation.

56) Many firms are finding that high-tech, computerized training has dual benefits. It develops
employees who are more effective and reduces costs at the same time. Employees at FedEx take
computer-based job competency tests every 6 to 12 months. This is an example of a(n) ________
tangible resource.

A) financial
B) organizational
C) physical
D) technological

57) ________ are typically embedded in unique routines and practices that have evolved and
accumulated over time such as effective work teams.

A) Tangible resources
B) Intangible resources
C) Reputational resources
D) Organizational capabilities

58) Harley-Davidson markets motorcycles, clothes, toys, and restaurants. It uses its strong
________, which is ________.

A) financial position; an intangible resource

B) brand image; an intangible resource
C) brand image; a tangible resource
D) technological resources; an intangible resource

14
59) Apple combines and packages proven technology in new and innovative ways. This is an
example of its use of

A) tangible resources.
B) intangible resources.
C) organizational capabilities.
D) strong primary activities.

60) ________ are the competencies or skills that a firm employs to transform inputs into outputs.

A) Tangible resources
B) Reputational resources
C) Organizational capabilities
D) Intangible resources

61) Which of the following is not an example of organizational capabilities?

A) outstanding customer service

B) reputation with customers for quality and reliability
C) innovativeness of products and services
D) ability to hire, motivate, and retain human capital

62) The ability to hire, motivate, and retain human capital is an example of ________
capabilities in the resource-based view of the firm.

A) tangible
B) organizational
C) management
D) design

15
63) To be considered strategic resources that contribute competitive advantage, they must have
several characteristics. Which of the following is not one of these?

A) rare
B) valuable
C) inexpensive to imitate
D) costly to substitute

64) Which of the following is not a tangible resource?

A) technical and scientific skills

B) trade secrets, patents, copyrights
C) state-of-the art machinery
D) company borrowing capacity

65) Intangible resources are typically embedded in ________ routines and practices that have
evolved and accumulated over time.

A) common
B) standard
C) unique
D) obvious

66) The culture of a firm also may be a resource that provides competitive advantage. Which of
these companies might be a good example of this intangible resource?

A) Google
B) Kmart
C) Wells Fargo
D) Walmart

16
67) For a resource to provide a firm with the potential for a sustainable competitive advantage, it
must have four attributes. Which of the following is not one of these attributes?

A) rare
B) valuable
C) easy for competitors to substitute
D) difficult for competitors to imitate

68) A competitive advantage based on inimitability can be sustained for at least some time, if it
has the following characteristics:

A) psychographic uniqueness, path dependency, causal ambiguity, and substitutability.

B) physical uniqueness, path dependency, causal ambiguity, and social complexity.
C) rarity, path dependency, causal ambiguity, and social substitutability.
D) geographic uniqueness, cause dependency, social ambiguity, and path complexity.

69) Groupon offers online coupons for bargains at local shops and restaurants. Which of the
following is a reason that rivals are limiting its growth?

A) Its core capability is not easily imitated.

B) Its core capability is easily imitated.
C) Not many firms possess the same capability.
D) There are few equivalent capabilities.

70) A crash R&D program by one firm cannot replicate a successful technology developed by
another firm, when research findings cumulate. This is an example of

A) social complexity.
B) physical uniqueness.
C) path dependency.
D) causal ambiguity.

17
71) Gerber Products Co. brands their baby food which gives them a resource that is potentially
intimitable because re-creating brand loyalty is likely to be a time-consuming process
competitors would find difficult to expedite. This is an example of using ________ conditions to
build protection in the baby food market.

A) social complex
B) physical uniqueness
C) path dependent
D) causal ambiguity

72) Ashley Furniture controls all steps of its distribution systems, developing specific
competencies that are difficult to match. They are using ________ to build sustainable advantage.

A) path dependency
B) social complexity
C) physical uniqueness
D) tangible resources

73) The root of the 3M innovation process is complex, hard to understand, and difficult to
imitate. This is a competitive advantage based on

A) path dependency.
B) social complexity.
C) casual ambiguity.
D) availability.

74) A wide variety of firm resources that are costly to imitate due to the social engineering that
is required being beyond the capability of competitors include interpersonal relations among
managers in the firm, its culture, and its reputation with its suppliers and customers. Such
competitive advantages are based upon

18
 A) path dependency.
B) social complexity.
C) physical uniqueness.
D) tangible resources.

75) All of the following are examples of socially complex organizational phenomena except

A) the culture of a firm.

B) complex physical technology.
C) interpersonal relations among managers of a firm.
D) leadership and trust.

76) A resource is valuable and rare but neither difficult to imitate nor without substitutes. This
should enable the firm to attain

A) no competitive advantage.
B) a temporary competitive advantage.
C) competitive parity.
D) a sustainable competitive advantage.

77) Employees will be able to obtain a proportionately high level of profits they generate
(relative to the firm) if

A) suppliers are loyal to the firm.

B) their expertise is firm-specific.
C) the cost to the firm of replacing them is high.
D) the firm's resources are path dependent.

78) Which of the following is not a factor that helps to explain the extent to which employees
and managers will be able to obtain a proportionately high level of the profits that they generate?

19
 A) Employees have high bargaining power.
B) The cost of employee replacement is high.
C) The cost of exit is high for an employee.
D) Managers have low bargaining power.

79) Many competitors find it difficult to compete with Google and its ability to innovate and
launch new products. While they believe this is tied to the Google trend to hire good talent and
thus build the culture of creativity within the firm, they are not able to easily identify the specific
set of actions Google takes to build its image and culture and then to replicate it. This
competitive advantage is known as

A) causal ambiguity.
B) product rarity.
C) service validity.
D) substitutability.

80) Four factors help explain the extent to which employees and managers will be able to obtain
a proportionately high level of the profits that they generate. Which is not one of these factors?

A) employee bargaining power

B) employee replacement cost
C) employee exit costs
D) competitor bargaining power

81) Which of the following groups generally is charged with creating value through the process
of organizing, coordinating, and leveraging employees as well as other forms of capital such as
plant, equipment, and financial capital?

A) unions
B) boards of directors
C) managers
D) stakeholders

20
82) Raymond Ozzie, the software designer who was critical in the development of Lotus Notes,
was able to dictate the terms under which IBM acquired Lotus. This illustrates that he had
________ bargaining power based on the ________ cost required by the firm to replace him.

A) low; low
B) low; high
C) high; low
D) high; high

83) Historical comparisons provide information to managers about changes in the competitive
position of a firm. Historical comparisons often are misleading

A) if the overall strategy of the firm is the same.

B) if the firm shows constant growth.
C) in periods of recession or economic boom.
D) if the stock of the firm is publicly traded.

84) The best measure of company ability to meet imminent financial obligations is known as the

A) debt ratio.
B) profit margin.
C) total asset turnover.
D) current ratio.

85) Which of the following would be most difficult to assess?

A) the liquidity position of a firm

B) market share growth
C) the legitimacy and reputation of a firm
D) the efficiency with which a firm utilizes its assets

21
86) Which of these categories of financial ratios is used to measure the ability of a firm to meet
its short-term financial obligations?

A) liquidity ratios
B) profitability ratios
C) activity ratios
D) leverage ratios

87) ________ ratios reflect whether a firm is efficiently using its resources.

A) Turnover
B) Leverage
C) Liquidity
D) Profitability

88) Which of the following is a profitability ratio?

A) current ratio
B) total debt ratio
C) total asset turnover
D) return on equity

89) Financial ratio analysis measures the performance of the firm based on all but which of the
following?

A) balance sheet
B) market valuation
C) income statement
D) industry comparison

22
90) Comparing your firm with all other firms in your industry assesses ________ performance.

A) excessive
B) consistent
C) relative
D) non-comparable

91) Making comparisons between a firm and its most direct rivals is useful because firms within
the same strategic industry group have ________ strategies.

A) different
B) the same
C) similar
D) relative

92) In making the decision to enter the pharmaceutical industry, a company would not need to
consider which of the following?

A) historical comparisons
B) comparisons with industry norms
C) comparisons with key competitors
D) comparisons with non-competitors

93) A firm that takes on too much long-term debt to finance operations will see an immediate
impact on its indicators of ________ financial leverage.

A) short-term
B) long-term
C) relative
D) comparable

23
94) Apple Inc. reported revenues of 234 billion USD and net income of 53 billion USD in 2015.
These figures represent a stunning annual growth in revenue and net income of 28 percent and 33
percent, respectively, for 2014. This information indicates the importance of using ________ to
evaluate company financial performance.

A) financial ratios
B) industry norms
C) historical comparisons
D) competitor analysis

95) The balanced scorecard provides top managers with a ________ view of the business.

A) detailed and complex

B) simple and routine
C) fast but comprehensive
D) long-term financial

96) The balanced scorecard, developed by Kaplan and Norton, helps to integrate

A) financial analysis and the reputation of a firm.

B) intangible resources and operational measures.
C) financial analysis and stakeholder perspectives.
D) short-term perspectives and strategic positioning.

97) The balanced scorecard enables managers to consider their business from all the following
perspectives except

A) customer perspective.
B) internal perspective.
C) innovation and learning perspective.
D) ethical perspective.

24
98) An important implication of the balanced scorecard approach is that

A) managers need to recognize that satisfaction of stockholder demands is their primary

job.
B) the emphasis on customer satisfaction and financial goals are only a means to that end.
C) managers should not look at their job as primarily balancing stakeholder demands.
D) gains in financial performance must come at a cost of employee satisfaction.

99) The financial perspective of the balanced scorecard answers which of the following
questions?

A) How do customers see us?

B) What must we excel at?
C) How do we look to shareholders?
D) Can we continue to improve and create value?

100)The innovation and learning perspective of the balanced scorecard answers which of the
following questions?

A) How do customers see us?

B) What must we excel at?
C) How do we look to shareholders?
D) Can we continue to improve and create value?

101)The customer perspective of the balanced scorecard answers which of the following
questions?

A) How do customers see us?

B) What must we excel at?
C) How do we look to shareholders?
D) Can we continue to improve and create value?

25
102)The internal business perspective of the balanced scorecard answers which of the following
questions?

A) How do customers see us?

B) What must we excel at?
C) How do we look to shareholders?
D) Can we continue to improve and create value?

103)The internal measures should reflect business processes that have ________ impact on
customer satisfaction. These include factors that affect cycle time, quality, employee skills, and
productivity.

A) the least
B) variable
C) the most
D) potential

104)From the innovation and learning perspective, survival is dependent upon managers making
________ changes to existing products and services as well as introduce entirely new products
with expanded capabilities.

A) few
B) no
C) frequent
D) rare

105)If managers do not recognize from the beginning that the balanced scorecard is not a
________ and fail to commit to it long term, the organization will be disappointed.

26
 A) panacea
B) quick fix
C) marketing ploy
D) cheap solution

106)Managers must commit to a ________ use of the balanced scorecard if they expect sustained
performance.

A) short-term
B) long-term
C) interim
D) rapid

107)Assessing the performance of a firm is more useful if it is evaluated in terms of how it

changes over time, ________ with industry norms, and ________ with competitors.

A) compares, contrasts
B) disagrees, disagrees
C) agrees, agrees
D) compares, compares

108)Financial ratio analysis involves identifying how a firm is performing according to all but
which of the following?

A) balance sheet
B) income statement
C) market valuation
D) innovation

109)Which of the following is not a common measure assessed in financial ratio analysis?

27
 A) short and long-term solvency
B) asset utilization
C) profitability
D) market devaluation

110)Which of the following is not one of the four perspectives addressed by the balanced
scorecard?

A) customer
B) external business
C) innovation and learning
D) financial factors

111)According to the Drucker Institute study of 693 large, publicly traded companies from 2012
to 2017, which of the following is not a key area of performance for firms to focus on?

A) customer satisfaction
B) innovation
C) social responsibility
D) crisis management

112)Firms that use AI to produce improved predictions and evaluations with the direct
intervention of a human programmer or statistician have a high degree of sustainability because
the combine aspects of ________ and ________ that make it difficult to imitate their resource
bases.

A) path dependence, efficient procedures

B) casual ambiguity, efficient procedures
C) path dependence, social complexity
D) casual ambiguity, equivalent strategic capabilities

28
113)When building sustainability into business operations, companies look at all activities in the
value chain. Which of the following is not a direct value chain activity that would be considered?

A) research and development

B) government relations
C) procurement
D) marketing

SHORT ANSWER. Write the word or phrase that best completes each statement or
answers the question.
114)L.L. Bean now limits providing refunds on or replacements of products purchased within the
last year. Customers must have a receipt for these refunds to be considered. Discuss how this
new policy relates to the company value chain and explain why it was deemed necessary to
implement. What are the risks to the company related to this policy?

115)There are two levels of relationships among value-chain activities. Discuss the differences
and provide an example of each.

116)Explain the difference between tangible and intangible resources. Provide an example of
each.

117)Discuss the four criteria that the resources of a firm must possess to maintain a sustainable
advantage. Give an example of one of these criteria.

29
118)A firm’s financial position should not be analyzed in isolation. Important reference points
are needed. Discuss how historical comparisons, comparisons with industry norms, and
comparisons with key competitors can be used to make financial analysis more meaningful.

119)Explain this statement: 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.

120)Analyze the Merck 2019 quarterly financial statements in terms of the drug, Keytruda, and
its contribution to the company bottom line. Does your analysis support the Chapter 3 issue for
debate concerning the potential upside for Merck as a result of concentrating its efforts primarily
on this one drug?

121)Focusing on the innovation and learning perspective of the balanced scorecard, evaluate a
company of your choice that uses innovation to create sustainable value.

30
122)The rise of artificial intelligence (AI) and data analytics in the farming industry has
produced a new industry of data collection vehicles such as drones. While for-hire drone data
collection services exist (e.g. senseFly Inc.), explain how the farm client can leverage AI and
data analytics from these services to create sustainable advantage.

123)Using Exhibit 3.2 The Value Chain: Some Factors to consider in assessing a firm’s primary
activities, apply these factors to a specific manufacturing company of your choice and one of its
major competitors. How does this analysis help you understand your company’s value relative to
its industry competitor?

124)In reviewing Learning from Mistakes, the opening short case on KFC, explain how small
trucking companies are now working with Amazon successfully. Use value chain analysis to
frame your analysis.

125)Retail Equation has developed customized algorithms for retailers to track and score the
return behavior of customer returns. Why is such a service useful and what is the risk for
companies who use this service? Explain your reasoning in terms of value chain analysis which
you apply to a specific company which has or is using this kind of customer analytic.

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Answer Key

Test name: Chapter 03 2

1) TRUE
2) FALSE
3) TRUE
4) TRUE
5) FALSE
6) FALSE
7) TRUE
8) TRUE
9) FALSE
10) FALSE
11) TRUE
12) FALSE
13) FALSE
14) TRUE
15) TRUE
16) FALSE
17) TRUE
18) FALSE
19) TRUE
20) FALSE
21) FALSE
22) FALSE
23) FALSE
24) FALSE
25) TRUE
26) A

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27) D
28) B
29) B
30) D
31) D
32) C
33) D
34) C
35) D
36) D
37) A
38) B
39) C
40) D
41) D
42) A
43) B
44) C
45) C
46) C
47) C
48) C
49) A
50) B
51) C
52) C
53) C
54) C
55) B
56) B

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57) B
58) B
59) C
60) C
61) B
62) B
63) C
64) A
65) C
66) A
67) C
68) B
69) B
70) C
71) C
72) A
73) C
74) B
75) B
76) B
77) C
78) D
79) A
80) D
81) C
82) D
83) C
84) D
85) C
86) A

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87) A
88) D
89) D
90) C
91) C
92) D
93) B
94) C
95) C
96) C
97) D
98) C
99) C
100) D
101) A
102) B
103) C
104) C
105) B
106) B
107) D
108) D
109) D
110) B
111) D
112) C
113) B

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114) One of the most direct ways retailers can curry favor with
customers is by offering generous return policies. Customers have
grown accustomed to retailers offering the ability to return items with or
without receipts for years after the product was purchased. This has
often been seen as a hallmark for retailers wishing to be seen as
providing a high level of customer service. In order to reduce costs and
the potential for fraud, retailers have recently tightened their return
policies. For example, L.L. Bean, long known for its generous return
policies, has limited providing refunds on or replacement of products
purchased within the last year and only if customers have a receipt. The
company stated that their desire to meet the service expectations of
customers has been misinterpreted as a lifetime product replacement
guarantee. While these actions allow retailers to lower their costs, they
have also led to push back from customers and online posting of
complaints. Thus, retailers need to balance their desire to rein in costs
and their desire to retain a high level of customer service.

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115) The importance of relationships among value-chain activities has
two levels: (1) interrelationships among activities within the firm and (2)
relationships among activities within the firm and with other
stakeholders that are part of the expanded value chain of the firm. With
regard to the first level, consider the Lise Saari quote from the text on
the strategic importance of effective human resource management
practices. As she notes, "HR [must be] a true partner of the business,
with a deep and up-to-date understanding of business realities and
objectives, and, in turn, must ensure HR initiatives fully support them at
all points of the value chain." With regard to the second level, the
Campbell Soup use of electronic networks enabled it to improve the
efficiency of outbound logistics. However, it also helped Campbell
manage the ordering of raw materials more effectively, improve its
production scheduling, and help its customers better manage their
inbound logistics operations.

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116) Firm resources are all assets, capabilities, organizational processes,
information, knowledge, and so forth, controlled by a firm that enable it
to develop and implement value-creating strategies. Tangible resources
are assets that are relatively easy to identify. They include the physical
and financial assets that an organization uses to create value for its
customers. Among them are financial resource (e.g., a firm’s cash,
accounts receivable, and its ability to borrow funds); physical resources
(e.g., the company plant, equipment, and machinery as well as its
proximity to customers and suppliers); organizational resources (e.g., the
company strategic planning process and its employee development,
evaluation, and reward systems); and technological resources (e.g., trade
secrets, patents, and copyrights). Intangible resources are typically
embedded in unique routines and practices that have evolved and
accumulated over time. These include human resources (e.g., experience
and capability of employees, trust, effectiveness of work teams,
managerial skills), innovation resources (e.g., technical and scientific
expertise, ideas), and reputation resources (e.g., brand name, reputation
with suppliers for fairness and with customers for reliability and product
quality). The culture of a firm may also be a resource that provides
competitive advantage.
117) 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.

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118) 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. In evaluating the financial
performance of a firm, it is very useful to compare its financial position
over time. This provides a means of evaluating trends. When evaluating
the financial performance of the firm, it is important also to compare it
with industry norms. The current ratio or profitability of a firm may
appear impressive at first glance. However, it may pale when compared
with industry standards or norms. Valuable insights can be gained into
the financial and competitive position of a firm, if comparisons are made
between a firm and its most direct rivals.
119) 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).
120) Students should search EDGAR for financial statements for Merck.
The second quarter 2019 financial results show that Keytruda sales grew
58 percent to 2.6 billion USD and excluding the impact of foreign
exchange, sales grew 63 percent. Worldwide sales were 11.8 billion USD,
which was an increase of 12 percent compared with the second quarter
of 2018; excluding the negative impact of foreign exchange, worldwide
sales grew by 15 percent. Research confirms that Merck appears to have
a good strategy for Keytruda. Additionally, students can demonstrate the
relative importance of Keytruda to the overall company pipeline.

39
121) Students might find the example of Apple Inc. to be of interest for
this study. Keeping in mind that the Innovation and Learning
Perspective states that it is a given that the rapid rate of markets,
technologies, and global competition, the criteria for success are
constantly changing. To survive and prosper, managers must make
frequent changes to existing products and services as well as introduce
entirely new products with expanded capabilities. The ability of the firm
to do well from an innovation and learning perspective is more
dependent on its intangible than on its 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).
122) Artificial intelligence, sometimes referred to as machine learning,
involves the use of sophisticated programs that crunch vast volumes of
data to find patterns and produce improved predictions or evaluations
without the direct intervention of a human programmer or statistician.
As an example of the benefits of big data and analytical models,
Monsanto is working to build a business in model-driven farming. The
firm has invested over 1.5 billion USD to build a set of resources and
capabilities that will allow it to identify optimal timing, location, and
seed to optimize crop yields. The Monsanto models use data on historic
yields, sensors built into tractors, other ground-based sensors, weather
data, and field data collected in satellite imagery. As they build this
business, they will be able to further optimize their models, further
increasing the yields for farmers.
123) Students are to choose a specific manufacturing company and one
of its major competitors. Then, they are to compare the value chain for
each of these competitors. The explanation of what they learned should
be stated in terms of Inbound Logistics, Operations, Outbound Logistics,
Marketing and Sales, and Service.

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124) Amazon realized it could expand its truck deliveries by creating
relationships called Amazon Delivery Service Partner. The original
service, Amazon Flex, in which independent drivers would deliver for
Amazon meant that much of the customer service was no longer in the
hands of Amazon. Additionally, Amazon had little control over the flex
driver services and logistics capabilities. The new DSP program helps its
designated partners by providing branded Amazon vans customized for
delivery, fuel program, high-quality branded uniforms, rugged devices,
and business services such as recruiting tool discounts, payroll, tax and
accounting software discounts, legal support, and insurance options. By
assuring that the DSP has the full availability of all the necessary value
chain services, Amazon maintains some control over the success of the
DSP and its customer relationships. The DSP is an independent business
but with all of the branding of Amazon and its value chain services.

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125) Retailers, including Best Buy, Home Depot, J.C. Penney, and
Victoria’s Secret, contract with Retail Equation, a data analytics firm.
Retail Equation has developed customized algorithms for each retailer to
track and score the return behavior of customers. This includes the
frequency of returns, whether the customer has a receipt, whether the
products have been used, whether the returned products are high-theft
items, and other factors. When a customer makes a return, if their
behavior has been flagged by Retail Equation’s algorithm, the customer
is warned that the retailer will not accept future returns from that
customer. Retail Equation states that its systems are designed to identify
the 1 percent of customers whose actions suggest fraud or abuse.
Customers who receive a warning are then given information on how to
contact Retail Equation to get information on their behavior that led to
them being flagged for abuse. While these actions allow retailers to
lower their costs, they have also led to push back from customers and
online posting of complaints. Thus, retailers need to balance their desire
to rein in costs and their desire to retain a high level of customer service.

42