The Owner of a Store Retailing Fine Quality Fabrics for Home-Sewers

question 111

Multiple Choice

The owner of a store retailing fine quality fabrics for home-sewers bewails the fact that few young women know how to do fine tailoring, much less simple dressmaking. Many potential customers are unable to appreciate the premium quality of the fabrics available and are deterred by the high prices, as well as the complexity of fine sewing. In the past, the store had a strong demand for fabrics, large classes for women learning the fine points of sewing, and a reputation for excellent service and technical advice. Now the store is earning lower-than-average returns. This case is an example of

• A) the hazard of competitors being able to imitate a firm's core competency.
• B) the need for firms to stick to their core competencies through temporary downturns in market demand.
• C) the lack of intangible resources undermining the core competencies of the firm.
• D) core competencies that have become core rigidities.

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Definitions:

Security Market Line

A graphical representation in financial market theory that depicts the relationship between risk (measured as beta) and expected return for the entire market.

Beta

A way of measuring the level of erratic behavior, or systemic threat, in a security or investment group in perspective of the general market.

Expected Return

The average of all possible returns for an investment, weighted by their respective probabilities.

Portfolio Standard Deviation

A measure of the dispersion of returns from a portfolio, indicating the portfolio's risk.