MGMT 700

Quiz 2 Chapters 3 and 4 Part I. Indicate whether each statement below is true or false. One way to do it is to make your answer, T or F boldface. Please avoid using colors because I print your answers before grading them and the colors do not show well in print. Each question carries three points. T T F 1. A value creation is at the heart of any successful strategy and the firm must also be able to capture the value it creates. F 2. A firms position in the competitive environment and the capabilities that enable it to perform certain functions better than its rivals can are the two main kinds of competitive advantage that firm can have. F 3. Both sources of competitive advantage position and capabilities depend on the firms internal and external context. F 4. Most firms have some of both types of advantage, and each reinforces the other. F 5. Most positional advantages do not accrue to the firm that moves first. F 6. The examples of positional advantage include brand name, customer relationships, government protection and support, status, distribution channels, geographic incumbency, installed base and de facto standards, and the gatekeepers in the flow of goods or information. F 7. Airbus and Boeing are the only two manufactures of large, commercial aircraft in the world, and each benefits from that position.

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T F 8. A firm cannot derive positional advantage from its relationships with buyers, suppliers, or competitors. T T T T F 9. General capabilities may create significant value in the existing environment, but are vulnerable to environmental changes. F 10. Specific abilities offer greater flexibility than general abilities. F 11. The most impressive capabilities are a source of competitive advantage even if most competing firms can match them. F 12. When a firm has actually demonstrated its competitive prowess by performing a set of activities better than its rival can, the specific application of capability is sometimes called a distinctive competence.

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F 13. A firm that views itself in terms of capabilities will tend to view its opportunities relative to its existing product line. F 14. A firm that views itself in terms of positional advantage may be inclined to think more broadly about ways to leverage its existing capabilities into products it has not previously considered. F 15. For 20 years Southwest had the highest stock return of any publicly traded firm in the United States. F 16. Delta Airlines is the only U.S. carrier to have achieved the record of best in three key areas in a given month: best baggage handling, fewer customers complaints, and best one-time performance. F 17. One reason a competing firm can not copy all the important pieces of a successful firm because it is difficult to tell which pieces are important. F 18. One reason a competitive firm can not copy all the important pieces of a successful firm because the two firms may have strikingly different strategies. F 19. There is a problem of hidden information because the superiors simply do not have hall the information possessed by those who make the decisions. F 20. When the superiors can not observe exactly what a unit is doing, there is a problem of hidden action. F 21. In a flat structure information is rarely lost as it moves across formal boundaries. F 22. The cost of passing along information is the rationale for allocating decision-making rights to those with the most immediate access to the relevant information. F 23. The problem of finding indicators that are informative is particularly severe for effort that involves cooperation among subunits. F 24. The problem of developing performance indicators is complicated because the mechanisms put in place to get the subunit to be productive on its own may give it an incentive to avoid cooperation.

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T F 25. Fox and Lorsch article: Corporate boards are stuck between their executives and shareholders. T F 26. Fox and Lorsch article: In the modern corporation, the role of outside shareholders is to provide money, information, and discipline. In recent years, theyve done poorly on all three counts. T F 27. Fox and Lorsch article: The conflict between shareholders and managers is asymmetric warfare, with shareholders in no position to prevail.

T F 28. Fox and Lorsch article: Employees and customers often know more about and have more of a long-term commitment to a company than shareholders do. Part II. Mark the right answer. One way to do it is to make your answer (just a, b, or so forth, not the entire sentence) boldface. Each question carries 8 points. 1. Which of the following issue does not related to architecture structure? a. Is the structure divisional or functional? b. How important and prevalent is promotion from within? c. How interdependent are subunits? d. What formal linking mechanisms exist? 2. Which of the following rule of thumb is not relevant to the design of indicators of unit performance? a. Indicators that are highly correlated with the direct profit impact of the units work are more useful than indicators that are only weakly correlated with it. b. Choose only one or two indicators in the incentive scheme. c. Have indicators that allow one to net out the effects of features beyond the control of the unit. d. Consider the cost of monitoring

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