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ICAB AL Strategic Business Management study materials
ICAB AL Strategic Business Management study resources

ICAB AL Strategic Business Management practice questions

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Question 1Strategic Analysis and the External Environment

A firm's managers assess the wider forces that shape its industry without examining any single competitor in detail. Which layer of the external environment are they analysing?

  1. The product portfolio
  2. The internal value chain
  3. The macro-environment Correct answer.
  4. The industry life cycle

Explanation

The macro-environment covers broad societal and economic forces such as political, economic, social, technological, environmental and legal factors that affect all organisations. Competitor-level and industry-level factors sit below this layer, while internal matters belong to the organisation itself.

Question 2Strategic Analysis and the External Environment

Which PESTLE category would cover changes to data protection legislation that raise compliance costs for a retailer?

  1. Technological
  2. Political
  3. Social
  4. Legal Correct answer.

Explanation

The legal category of PESTLE captures legislation, regulation and case law that constrain or enable organisational conduct. Data protection statutes impose obligations and penalties, making them a legal environmental factor rather than a political, social or technological one.

Question 3Strategic Analysis and the External Environment

According to Porter's five forces, which force is strengthened when suppliers are few and their input is critical to the buyer's product quality?

  1. Threat of new entrants
  2. Threat of substitutes
  3. Bargaining power of suppliers Correct answer.
  4. Bargaining power of buyers

Explanation

Supplier power rises when suppliers are concentrated, their inputs are differentiated or essential, and switching costs are high. These conditions let suppliers capture value by raising prices or restricting supply, which squeezes industry profitability.

Question 4Strategic Analysis and the External Environment

A market has many small firms, near-identical products and low switching costs for customers. Which five-forces conclusion follows most directly?

  1. Entry barriers are high
  2. Supplier power is high
  3. Threat of substitutes is low
  4. Rivalry among existing firms is intense Correct answer.

Explanation

When products are undifferentiated and buyers can switch cheaply, firms compete mainly on price and service, which intensifies rivalry. Numerous small players with little market power reinforce this pressure on margins.

Question 5Strategic Analysis and the External Environment

A regional airline faces no direct competitor on a short route, but a high-speed rail link opens between the same two cities. Which five-forces force has most directly increased?

  1. Threat of new entrants
  2. Bargaining power of suppliers
  3. Threat of substitutes Correct answer.
  4. Rivalry among existing firms

Explanation

A substitute performs the same function through a different technology or channel, so rail travel competes with the airline for the same journey. The substitute threat rises even though no new airline has entered the route.

Question 6Strategic Analysis and the External Environment

Which factor most reliably raises barriers to entry in an industry?

  1. Low capital requirements for start-ups
  2. Rapidly falling customer loyalty
  3. Absence of proprietary technology
  4. Strong economies of scale for incumbents Correct answer.

Explanation

Economies of scale force entrants to choose between small-scale operation at a cost disadvantage or large-scale entry that risks retaliation. This structural feature deters entry and protects incumbent margins.

Question 7Strategic Analysis and the External Environment

A firm identifies a segment where customers have distinctive needs, rivals serve it poorly and the firm has capabilities suited to it. Which generic strategy is being described?

  1. Diversification
  2. Cost leadership
  3. Focus strategy Correct answer.
  4. Vertical integration

Explanation

A focus strategy targets a narrow segment and tailors the offer to its particular needs rather than competing industry-wide. Serving the segment well, where rivals underperform and the firm has relevant capabilities, is the essence of focus.

Question 8Strategic Analysis and the External Environment

Which statement best captures the resource-based view of competitive advantage?

  1. Advantage depends mainly on the attractiveness of the industry
  2. Advantage flows from resources that are valuable, rare, hard to imitate and well organised Correct answer.
  3. Advantage is determined by macroeconomic growth
  4. Advantage is achieved by matching rivals' prices

Explanation

The resource-based view locates advantage inside the firm, in resources and capabilities that are valuable, rare, imperfectly imitable and supported by organisation. These attributes make superior performance difficult for rivals to replicate.

Question 9Strategic Analysis and the External Environment

A capability is described as causally ambiguous. What does this imply for competitors trying to imitate it?

  1. They can purchase the capability on an open market
  2. They can copy it easily by hiring the firm's staff
  3. They face legal restrictions on imitation
  4. They cannot tell which elements of the capability produce the advantage Correct answer.

Explanation

Causal ambiguity means the link between the firm's resources and its superior outcomes is unclear even to insiders. Competitors therefore cannot identify what to copy, which protects the advantage from imitation.

Question 10Strategic Analysis and the External Environment

Which pair of conditions best supports a strategy of cost leadership?

  1. The market is tiny and highly fragmented
  2. Buyers value unique features and pay premiums
  3. Buyers are highly price-sensitive and products are standardised Correct answer.
  4. Regulation fixes all industry prices

Explanation

Cost leadership works where customers care most about price and the product can be standardised so scale economies drive unit costs down. Price-sensitive buyers in a homogeneous market reward the lowest-cost producer.

Question 11Strategic Analysis and the External Environment

A firm sells its products in several countries and adapts features to local tastes while keeping some global standards. Which international strategy does this describe?

  1. Global standardisation
  2. Export strategy
  3. Localisation only
  4. Transnational strategy Correct answer.

Explanation

A transnational strategy simultaneously pursues global efficiency and local responsiveness, sharing some standardised elements while adapting others. This balances the pressures that pure global or pure local approaches resolve in only one direction.

Question 12Strategic Analysis and the External Environment

In the integration-responsiveness framework, which pressure pushes a multinational toward adapting its products to local markets?

  1. Pressure for global standardisation
  2. Pressure for local responsiveness Correct answer.
  3. Pressure for cost reduction
  4. Pressure for economies of scale

Explanation

Local responsiveness pressure arises from differences in customer tastes, distribution channels, government regulation and infrastructure across countries. Firms respond by tailoring products and practices to each market.

Question 13Strategic Analysis and the External Environment

Which observation would most strongly suggest that an industry has entered the maturity stage of its life cycle?

  1. Many new entrants arrive with novel technologies
  2. Product designs change radically every few months
  3. Sales growth slows and competition shifts to cost and market share Correct answer.
  4. Demand is negligible and customers are unaware of the product

Explanation

In maturity, growth decelerates as penetration approaches saturation, so firms compete harder for share and emphasise efficiency and price. Consolidation and cost focus are characteristic of this stage.

Question 14Strategic Analysis and the External Environment

What is the main strategic implication for a firm whose core product sits in the decline stage of the industry life cycle?

  1. Invest heavily to expand capacity
  2. Harvest cash or exit while redeploying resources Correct answer.
  3. Launch many new market entrants
  4. Assume demand will recover without action

Explanation

Declining industries face shrinking demand, so firms should avoid new investment and instead harvest cash, divest or redeploy resources to growing areas. This preserves capital for opportunities with better prospects.

Question 15Strategic Analysis and the External Environment

Which of Porter's five forces is most likely to be weakened by the emergence of powerful buying groups that negotiate centrally on behalf of many customers?

  1. It strengthens buyer power, so it weakens industry profitability Correct answer.
  2. It strengthens supplier power, so it weakens industry profitability
  3. It increases entry barriers, so it raises profitability
  4. It reduces the threat of substitutes, so it raises profitability

Explanation

Centralised buying groups concentrate purchase volume and increase buyer leverage over price and terms. Greater buyer power transfers value from the industry to customers, reducing average industry profitability.

Question 16Strategic Analysis and the External Environment

A firm's managers map competitors by plotting them against two strategic dimensions. What is the primary purpose of such a strategic group map?

  1. To forecast the firm's cash flow
  2. To audit the firm's internal control systems
  3. To reveal competitive positions and gaps in the market Correct answer.
  4. To calculate the firm's weighted average cost of capital

Explanation

Strategic group mapping clusters firms with similar strategies along chosen dimensions, revealing who competes with whom and where unoccupied space exists. It is a tool for understanding competitive structure rather than financial or control matters.

Question 17Strategic Analysis and the External Environment

Which set of factors belongs together as the five forces determining industry profitability?

  1. Strengths, weaknesses, opportunities and threats
  2. Political, economic, social and technological factors
  3. Entrants, suppliers, buyers, substitutes and rivalry Correct answer.
  4. Stars, cash cows, question marks and dogs

Explanation

Porter's five forces comprise the threat of new entrants, supplier power, buyer power, the threat of substitutes and rivalry among existing competitors. Together they shape the structure and profit potential of an industry.

Question 18Strategic Analysis and the External Environment

A government introduces a subsidy for electric vehicles. For a battery manufacturer, how is this best classified in a PESTLE analysis?

  1. A technological factor
  2. A political factor Correct answer.
  3. A social factor
  4. An environmental factor

Explanation

A subsidy is a government policy instrument, so it belongs in the political category of PESTLE even though its purpose is environmental. Analysts classify by the source of the force, which here is government action.

Question 19Strategic Analysis and the External Environment

Which trend would most directly increase the threat of substitutes facing a traditional newspaper publisher?

  1. Rising print distribution costs
  2. Growing use of free online news platforms Correct answer.
  3. Stricter libel legislation
  4. Consolidation among paper suppliers

Explanation

Free online news platforms meet the same need for information through a different channel, so they act as substitutes for printed newspapers. Their growth erodes circulation and advertising revenue.

Question 20Strategic Analysis and the External Environment

A firm's distinctive capability rests on a complex web of routines, culture and tacit knowledge built over decades. Which characteristic of strategic resources does this best illustrate?

  1. Low durability
  2. Social complexity and tacit knowledge Correct answer.
  3. Easy transferability
  4. Perfect substitutability

Explanation

Social complexity and tacit knowledge arise from interpersonal relationships, culture and accumulated routines that cannot be easily codified or transferred. This makes such capabilities hard for rivals to imitate.

Question 21Strategic Analysis and the External Environment

Which circumstance most clearly indicates that buyers hold strong bargaining power?

  1. Buyers can credibly integrate backwards into the industry Correct answer.
  2. Buyers face high switching costs
  3. Buyers earn low margins and buy in small volumes
  4. Buyers are numerous and each purchases a tiny fraction of output

Explanation

The credible threat of backward integration gives buyers an alternative source of supply and strengthens their negotiating position. This threat forces industry firms to offer better terms to retain customers.

Question 22Strategic Analysis and the External Environment

A diversified group reviews each business unit's market growth rate and relative market share to decide where to allocate cash. Which analytical framework is being applied?

  1. The BCG growth-share matrix Correct answer.
  2. The value chain
  3. Porter's five forces
  4. PESTLE analysis

Explanation

The BCG growth-share matrix plots business units by market growth and relative share to classify them as stars, cash cows, question marks or dogs. It then guides cash allocation across the portfolio.

Question 23Strategic Analysis and the External Environment

An industry analyst notes that capital intensity is high, exit barriers are steep and demand has plateaued. Which five-forces effect is most likely?

  1. Entry barriers collapse
  2. Supplier power falls sharply
  3. Rivalry intensifies because firms cannot easily leave Correct answer.
  4. Buyer power disappears

Explanation

High exit barriers trap firms in the industry even when returns are poor, and high fixed costs from capital intensity push them to compete aggressively for volume. With demand flat, this combination intensifies rivalry.

Question 24Strategic Analysis and the External Environment

Which statement correctly distinguishes a strength from an opportunity in SWOT analysis?

  1. A strength is an external condition while an opportunity is an internal capability
  2. Both strengths and opportunities are external conditions
  3. A strength is an internal capability while an opportunity is an external condition Correct answer.
  4. Both strengths and opportunities are internal capabilities

Explanation

SWOT separates internal factors, strengths and weaknesses, from external factors, opportunities and threats. A strength is something the organisation does well internally, while an opportunity arises in the environment.

Question 25Strategic Analysis and the External Environment

A firm faces high pressure for cost reduction and low pressure for local responsiveness in its international markets. Which strategy does the integration-responsiveness framework recommend?

  1. Localisation strategy
  2. Global standardisation strategy Correct answer.
  3. Multidomestic strategy
  4. Transnational strategy

Explanation

When cost pressure is high but local responsiveness pressure is low, a global standardisation strategy suits best. It centralises production and offers uniform products to capture scale economies.

Question 26Strategic Analysis and the External Environment

A clothing retailer notices that its customers increasingly compare prices on mobile phones before buying in store. In a PESTLE analysis, which category does this behaviour most directly belong to?

  1. Economic
  2. Social
  3. Legal
  4. Technological Correct answer.

Explanation

PESTLE sorts macro-environmental influences into political, economic, social, technological, legal and environmental categories. The decisive feature here is the change in how customers use a new device and channel, which is a technological shift even though it shows up as changed shopping habits. Social factors concern demographics, values and lifestyles rather than the enabling technology itself.

Question 27Strategic Analysis and the External Environment

Which statement best describes the purpose of competitor profiling within strategic analysis?

  1. It builds an understanding of rivals' objectives, assumptions, strategies and capabilities. Correct answer.
  2. It sets the firm's own prices by copying rival price lists.
  3. It replaces industry analysis by focusing only on named firms.
  4. It predicts the exact future moves of each rival firm.

Explanation

Competitor profiling assembles evidence on each rival's future objectives, current strategy, assumptions about the industry and underlying capabilities, so managers can anticipate responses. It is an interpretive exercise that informs strategy rather than a forecasting machine or a pricing rule. It complements industry-level analysis instead of substituting for it.

Question 28Strategic Analysis and the External Environment

A domestic appliance maker faces falling tariffs on imported rivals, rising steel costs and new energy-efficiency rules, all at the same time. Which approach makes the most sense when ranking these for strategic response?

  1. Rank factors by their likely impact on the firm and their probability of occurring. Correct answer.
  2. Focus only on the factor that is easiest to measure.
  3. Treat every factor as equally urgent and respond to all at once.
  4. Ignore regulatory factors because they are outside management control.

Explanation

Environmental scanning becomes useful when influences are prioritised by impact and likelihood, often using a simple matrix or scoring approach. This lets managers concentrate scarce attention and resources on the factors most likely to reshape competitive position. Equal weighting, ease of measurement or blanket dismissal of regulation all produce distorted priorities.

Question 29Strategic Analysis and the External Environment

An analyst argues that high profitability in a sector is better explained by the structure of the industry than by the superior resources of individual firms. Which body of thinking does this argument reflect?

  1. The resource-based view
  2. The cultural web framework
  3. Stakeholder theory
  4. The industry organisation or positioning tradition Correct answer.

Explanation

The industry organisation tradition, associated with the structure-conduct-performance logic and five forces analysis, locates the main explanation of profitability in industry structure and competitive positioning. The resource-based view instead explains performance differences through firm-specific resources and capabilities. Stakeholder theory and the cultural web address different questions entirely.

Question 30Strategic Analysis and the External Environment

Two firms operate in the same industry with similar cost structures, yet one earns persistently higher returns because its managers have built a reputation for reliability that customers trust and rivals have repeatedly failed to copy. Which explanation of superior performance does this best illustrate?

  1. Superior returns come from choosing a fast-growing market segment.
  2. Industry structure determines profitability, so the difference must be temporary.
  3. Firm-specific intangible assets can sustain advantage when they are valuable, rare and hard to imitate. Correct answer.
  4. Advantage arises mainly from economies of scale in production.

Explanation

The resource-based view holds that advantage persists when a resource is valuable, rare, imperfectly imitable and not easily substituted. A trusted reputation is an intangible asset built through accumulated behaviour, which makes imitation slow and uncertain even for rivals with similar costs. Industry structure, scale and segment choice cannot by themselves explain why two similar firms differ.

Question 31Strategic Capability, Resources and Competence

A firm's marketing team has skills that are valuable and rare but that competitors can easily imitate by hiring away staff. According to the resource-based view, what is the most likely consequence for competitive advantage?

  1. The advantage will be sustained indefinitely
  2. The resource will cease to be valuable
  3. The firm will achieve a monopoly position
  4. The advantage will be temporary rather than sustained Correct answer.

Explanation

The resource-based view holds that sustained advantage requires resources that are valuable, rare, hard to imitate and non-substitutable. When imitation is easy, competitors replicate the capability quickly and any advantage erodes. The advantage therefore exists only until rivals copy it, which is temporary.

Question 32Strategic Capability, Resources and Competence

Which term describes the collective knowledge, routines and learning embedded in an organisation's people and processes that competitors find difficult to copy?

  1. Tangible assets
  2. Brand equity
  3. Organisational capital Correct answer.
  4. Financial slack

Explanation

Organisational capital refers to the knowledge, routines, culture and learning embedded in the firm that enable it to perform activities effectively. Because it resides in relationships and processes rather than in a single asset, it is hard for rivals to imitate. Tangible assets and financial resources are easier to observe and replicate.

Question 33Strategic Capability, Resources and Competence

A company operates a unique distribution network that rivals cannot replicate because of long-term exclusive contracts and location-specific investments. Which characteristic of strategic capability does this best illustrate?

  1. Path dependency Correct answer.
  2. Substitutability
  3. Causal ambiguity
  4. Resource mobility

Explanation

Path dependency describes how capabilities built up through a unique historical sequence of decisions and investments cannot be quickly recreated by others. Exclusive contracts accumulated over time and site-specific investments reflect that historical path. Substitutability and mobility describe conditions that would weaken, not explain, inimitability.

Question 34Strategic Capability, Resources and Competence

In the value chain, which activity is best classified as a support activity rather than a primary activity?

  1. Inbound logistics
  2. Firm infrastructure Correct answer.
  3. Outbound logistics
  4. Marketing and sales

Explanation

Firm infrastructure, such as planning, finance and quality management, supports the whole value chain and is classified as a support activity. Inbound logistics, outbound logistics and marketing and sales are all primary activities directly involved in creating and delivering value to customers.

Question 35Strategic Capability, Resources and Competence

A retailer benchmarks each of its activities against competitors and finds that its procurement process costs more while adding no extra customer value. Which action best reflects value chain analysis?

  1. Reduce the quality of inputs to lower cost
  2. Increase the price of the final product to recover the cost
  3. Outsource or redesign the procurement activity Correct answer.
  4. Ignore the finding because procurement is a support activity

Explanation

Value chain analysis seeks to identify activities that consume cost without contributing proportionate value, so the firm can reconfigure or outsource them. Redesigning or outsourcing an inefficient support activity removes the disadvantage. Raising prices or cutting input quality does not address the underlying process inefficiency.

Question 36Strategic Capability, Resources and Competence

Which statement best describes a core competence as defined in strategic management literature?

  1. A short-term cost advantage obtained through bulk purchasing
  2. Any activity the firm performs at average industry standard
  3. A physical asset that appears prominently on the balance sheet
  4. A skill that enables access to many markets and is hard for rivals to copy Correct answer.

Explanation

A core competence is a bundle of skills that provides potential access to a wide variety of markets, makes a significant contribution to perceived customer benefits, and is difficult for competitors to imitate. It is therefore more than an average activity or a balance-sheet asset. Short-term purchasing gains do not meet these tests.

Question 37Strategic Capability, Resources and Competence

A firm's core competence is described as 'the ability to miniaturise components'. Which test of a core competence does this statement most directly satisfy?

  1. It provides potential access to a wide variety of markets Correct answer.
  2. It increases the firm's dividend capacity
  3. It is recorded as an intangible asset
  4. It reduces the firm's working capital

Explanation

One recognised test of a core competence is that it should open the door to many markets, and a miniaturisation skill can be applied in consumer electronics, medical devices and telecommunications. The other options concern accounting or financial outcomes that are not tests of a core competence.

Question 38Strategic Capability, Resources and Competence

A firm builds a capability by combining several of its resources in a way that rivals cannot easily match even though each individual resource is widely available. This best illustrates which concept?

  1. Competitive parity
  2. Resource homogeneity
  3. Distinctive capability Correct answer.
  4. Industry convergence

Explanation

A distinctive capability arises when the firm integrates and deploys resources in ways that produce superior performance, even if the individual inputs are common. The combination and coordination, not the resources alone, create the advantage. Resource homogeneity and competitive parity describe the absence of such advantage.

Question 39Strategic Capability, Resources and Competence

Which of the following is the best example of a threshold capability rather than a distinctive capability?

  1. A manufacturer's patented production process
  2. A logistics firm's proprietary route-optimisation algorithm
  3. A retailer's widely shared ability to accept card payments Correct answer.
  4. A bank's unique credit-scoring model built over decades

Explanation

Threshold capabilities are the minimum competences needed just to compete in a market and are shared by most players, such as accepting card payments. Distinctive capabilities exceed that baseline and are hard to imitate, such as proprietary algorithms or patented processes.

Question 40Strategic Capability, Resources and Competence

A firm's resources are valuable and rare but the market offers many alternative ways to achieve the same customer benefit. Which condition is weakening the firm's ability to sustain advantage?

  1. High substitutability Correct answer.
  2. High causal ambiguity
  3. Strong path dependency
  4. Low substitutability

Explanation

The resource-based view requires that resources be non-substitutable for advantage to persist. When customers can obtain the same benefit through many alternative means, the firm's resource loses its strategic potency. High causal ambiguity and path dependency would strengthen rather than weaken inimitability.

Question 41Strategic Capability, Resources and Competence

Which financial measure is most appropriate for assessing whether a firm's strategic capabilities are translating into superior returns relative to its peers?

  1. Absolute revenue growth
  2. Gross value of fixed assets
  3. Return on capital employed compared with the industry average Correct answer.
  4. Total number of employees

Explanation

Comparing return on capital employed with the industry average shows whether the firm generates more profit per unit of capital than peers, which is a test of capability-driven advantage. Absolute revenue growth, headcount and asset value say nothing about efficiency relative to competitors.

Question 42Strategic Capability, Resources and Competence

A firm's managers cannot explain precisely why its customer-service culture produces loyalty, but rivals consistently fail to reproduce it. Which isolating mechanism is at work?

  1. Network effects
  2. Switching costs
  3. Causal ambiguity Correct answer.
  4. Economies of scale

Explanation

Causal ambiguity exists when the link between a firm's resources and its advantage is poorly understood, so competitors cannot determine what to copy. Here even the firm's own managers cannot articulate the cause, which protects the culture from imitation. Scale economies, switching costs and network effects are market-based barriers rather than uncertainty about causes.

Question 43Strategic Capability, Resources and Competence

A firm decides to sell off a business unit whose activities do not fit its core competences, even though the unit is profitable. Which rationale best supports this decision?

  1. Diversification always destroys shareholder value
  2. Focusing resources on capabilities where the firm can lead creates more value Correct answer.
  3. Divested units always lose money after sale
  4. Profitability guarantees strategic fit

Explanation

Resource-based logic argues that firms create most value by concentrating on activities where their capabilities yield advantage, so divesting non-core but profitable units can raise overall performance. Profitability alone does not prove strategic fit, and the other statements are overgeneralised.

Question 44Strategic Capability, Resources and Competence

Which of the following best describes the concept of dynamic capabilities?

  1. The ability to keep the existing product range unchanged
  2. The ability to reduce headcount during a downturn
  3. The ability to sense change and reconfigure resources to meet new conditions Correct answer.
  4. The ability to maintain current operations efficiently

Explanation

Dynamic capabilities concern a firm's capacity to sense opportunities and threats and to reconfigure its resource base in response to changing environments. They go beyond operating efficiently today and involve deliberate adaptation. Cost cutting or preserving the status quo does not capture this adaptive dimension.

Question 45Strategic Capability, Resources and Competence

A smartphone maker continuously launches new models and reorganises its supply chain as technology shifts. Which concept does this behaviour most directly reflect?

  1. Dynamic capabilities Correct answer.
  2. Resource inertia
  3. Static efficiency
  4. Cost leadership

Explanation

Repeatedly sensing technological change and reconfiguring products and supply chains demonstrates dynamic capabilities, the capacity to adapt the resource base over time. Static efficiency and inertia describe stability rather than adaptation, and cost leadership is a generic strategy rather than an adaptive capability.

Question 46Strategic Capability, Resources and Competence

Which of the following would most likely be classified as an intangible resource in a resource audit?

  1. Warehouse buildings
  2. Reputation for reliability Correct answer.
  3. Delivery vehicles
  4. Raw material inventory

Explanation

A reputation for reliability is an intangible resource because it resides in perceptions and relationships rather than in physical form. Buildings, vehicles and inventory are tangible resources that can be seen, valued and often bought. Intangible resources are typically harder for rivals to imitate.

Question 47Strategic Capability, Resources and Competence

A firm's resource audit shows strong physical assets but weak staff skills and poor information systems. Which conclusion is most consistent with resource-based reasoning?

  1. The firm should immediately buy more physical assets
  2. Human and information resources may constrain the value obtained from physical assets Correct answer.
  3. Physical assets alone guarantee competitive advantage
  4. Weak skills are irrelevant if the assets are modern

Explanation

Resources create value through complementary combination, so weaknesses in human skills and information systems can limit how well physical assets are exploited. Advantage rarely flows from one resource category alone. Buying more assets without addressing the skills gap would not resolve the constraint.

Question 48Strategic Capability, Resources and Competence

Which of the following best explains why tacit knowledge is difficult for competitors to imitate?

  1. It is written down in detailed manuals
  2. It is traded openly in factor markets
  3. It is protected by patent law
  4. It is gained through experience and hard to codify Correct answer.

Explanation

Tacit knowledge is acquired through experience and practice and is difficult to express in explicit, transferable form. Because it cannot easily be codified or taught, competitors cannot simply copy it from documents. Patents and open markets, by contrast, make knowledge accessible.

Question 49Strategic Capability, Resources and Competence

A consulting firm's advantage rests on the personal networks and experience of a few senior partners. Which risk does this most clearly represent?

  1. Overinvestment in research
  2. Excessive diversification
  3. Too many distribution channels
  4. Capability embedded in individuals rather than the organisation Correct answer.

Explanation

When a capability resides in a few individuals rather than in organisational routines and systems, it is fragile because those people may leave and take the capability with them. The firm has not embedded the competence in its structures. Diversification, research spending and channel numbers are unrelated to this specific risk.

Question 50Strategic Capability, Resources and Competence

Which of the following is the primary purpose of conducting a benchmarking exercise on strategic capabilities?

  1. To reduce the number of suppliers
  2. To confirm that the firm is already the industry leader
  3. To set the annual dividend policy
  4. To identify gaps between the firm's capabilities and best practice Correct answer.

Explanation

Benchmarking compares the firm's activities and capabilities with best practice or leading competitors in order to reveal performance gaps and priorities for improvement. It is a diagnostic tool, not a confirmation of leadership or a financial policy instrument. Supplier reduction is at most a possible follow-on action.