CAF-7 · Chapter 5
Internal Analysis MCQs with Answers
15 multiple-choice questions on Internal Analysis for CAF-7 Business Insights and Analysis. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
A retail bank employs standard IT systems and basic customer service protocols that are identical to every other bank in the country. These basic abilities, which are required simply to stay in business, are known as:
- A) Core competences
- B) Dynamic capabilities
- C) Threshold competences
- D) Unique resources
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Answer: C) Threshold competences
Threshold competences are the basic activities, processes, and abilities needed just to meet minimum customer requirements and survive in an industry. They do not provide a competitive advantage.
Question 2
An exclusive, patented chemical formula that allows a pharmaceutical company to produce a highly effective, unique drug that competitors cannot legally copy is an example of a:
- A) Threshold resource
- B) Unique resource
- C) Dynamic capability
- D) Secondary value chain activity
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Answer: B) Unique resource
A unique resource is an asset that a company controls that competitors do not have and cannot easily obtain, such as an exclusive patent, providing a direct foundation for competitive advantage.
Question 3
The ability of an entity to successfully recognize the need for change in its environment and respond by innovating its products, processes, and services is formally defined as:
- A) Dynamic capabilities
- B) Threshold resources
- C) Corporate infrastructure
- D) Inbound logistics
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Answer: A) Dynamic capabilities
Dynamic capabilities refer to an organization's capacity to purposefully adapt, change, and innovate in response to a rapidly changing external environment to sustain its competitive advantage.
Question 4
According to Johnson and Scholes, 'those components of strategy in which the organisation must excel to out-perform competition' are defined as:
- A) Key Performance Indicators (KPIs)
- B) Critical Success Factors (CSFs)
- C) Threshold Competences
- D) Support Activities
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Answer: B) Critical Success Factors (CSFs)
Critical Success Factors (CSFs) are the vital elements or goals that an organization must achieve exceptionally well to gain a competitive advantage and succeed strategically.
Question 5
An airline identifies 'rapid turnaround times at airport gates' as a Critical Success Factor (CSF). To measure its success in achieving this, it tracks the 'average number of minutes a plane remains at the gate between flights'. This specific measurement metric is known as a:
- A) Core Competence
- B) Key Performance Indicator (KPI)
- C) Unique Resource
- D) Value Chain Driver
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Answer: B) Key Performance Indicator (KPI)
While the CSF is the goal that must be achieved, the Key Performance Indicator (KPI) is the specific, quantifiable metric used to measure performance and progress towards that goal.
Question 6
A hospital wishes to improve its emergency room patient intake process. Instead of looking at other hospitals, management studies the highly efficient 'pit stop' routines of a Formula 1 racing team to find ways to reduce turnaround time. What type of benchmarking is this?
- A) Internal benchmarking
- B) Competitive benchmarking
- C) Functional (operational) benchmarking
- D) Strategic benchmarking
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Answer: C) Functional (operational) benchmarking
Functional or operational benchmarking involves comparing a specific process or function against the 'best-in-class' practitioner, regardless of whether they operate in a completely different industry.
Question 7
In Porter's Value Chain model, which Primary Activity involves receiving, handling, and storing raw materials or components until they are needed for production?
- A) Operations
- B) Inbound logistics
- C) Outbound logistics
- D) Procurement
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Answer: B) Inbound logistics
Inbound logistics encompass all activities related to receiving, storing, and internally distributing inputs (raw materials) to the production processes.
Question 8
A company purchases a fleet of new delivery trucks and optimizes its warehouse dispatch system to ensure finished goods reach retail stores within 24 hours. Under Porter's Value Chain, these activities are classified as:
- A) Inbound logistics
- B) Operations
- C) Outbound logistics
- D) Marketing and sales
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Answer: C) Outbound logistics
Outbound logistics involve the activities required to collect, store, and physically distribute the finished products from the factory or warehouse to the final buyers or retail outlets.
Question 9
According to Porter's Value Chain, which of the following is considered a 'Support (Secondary) Activity' rather than a Primary Activity?
- A) Service (after-sales)
- B) Marketing and sales
- C) Operations
- D) Human resource management
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Answer: D) Human resource management
The primary activities are Inbound Logistics, Operations, Outbound Logistics, Marketing & Sales, and Service. Human Resource Management, Procurement, Technology Development, and Firm Infrastructure are Support activities.
Question 10
A coffeehouse chain negotiates a new long-term contract with a supplier in Brazil to buy premium coffee beans at a significantly lower price. In Porter's Value Chain, the act of identifying and negotiating with this supplier falls under:
- A) Inbound logistics
- B) Procurement
- C) Operations
- D) Firm infrastructure
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Answer: B) Procurement
Procurement is a support activity that relates to the process of identifying sources of supply, negotiating contracts, and purchasing the inputs used in the firm's value chain. It is distinct from the physical handling of goods (inbound logistics).
Question 11
When assessing an entity's strategic position using the VIRO framework, what does the 'V' stand for in evaluating a resource?
- A) Variable
- B) Viable
- C) Value
- D) Volume
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Answer: C) Value
In the VIRO framework used for evaluating resources, 'V' stands for Value (Does the resource provide a competitive advantage by creating customer loyalty or allowing premium pricing?). The other letters stand for Inimitability, Rarity, and Organization.
Question 12
During a SWOT analysis, an apparel manufacturer realizes that changing societal trends towards casual home-wear will greatly increase the demand for its existing line of sweatpants. How should this changing societal trend be classified?
- A) Strength
- B) Weakness
- C) Opportunity
- D) Threat
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Answer: C) Opportunity
Changes in the external environment (like societal trends, economic shifts, or new technologies) that present favorable possibilities for the business to grow or increase profits are classified as Opportunities.
Question 13
A technology company has a highly centralized management structure that causes severe delays in decision-making, resulting in missed project deadlines. In a SWOT analysis, this structural flaw is classified as a:
- A) Strength
- B) Weakness
- C) Opportunity
- D) Threat
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Answer: B) Weakness
Strengths and Weaknesses focus on internal factors. A rigid, inefficient management structure that hinders the company's performance is an internal flaw, making it a Weakness.
Question 14
A local pharmaceutical company identifies that a new global trade agreement will soon allow massive international competitors to export cheap alternative medicines into the country without paying tariffs. In a SWOT analysis, this upcoming regulatory change is classified as a:
- A) Strength
- B) Weakness
- C) Opportunity
- D) Threat
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Answer: D) Threat
Changes in the external political, legal, or economic environment that pose a danger to the company's market share, profitability, or survival are classified as Threats.
Question 15
Which of the following activities in Porter's Value Chain is primarily responsible for ensuring that customers are aware of the product and providing them with a reason to purchase it?
- A) Operations
- B) Marketing and sales
- C) Service
- D) Corporate infrastructure
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Answer: B) Marketing and sales
Marketing and sales activities provide the means by which buyers are made aware of the product or service and are persuaded to purchase it, encompassing advertising, promotion, and pricing strategies.