Chapter 4 INTERNAL ANALYSIS: RESOURCES, CAPABILITIES, AND CORE COMPETENCIES

What is Better expectations of future values?

-Buy resources at low cost -Southwest?

Core competencies create value by?

-Differentiation -Cost leadership Competitive advantage is driven by core competencies

How do you build core competencies?

-Resources -Capabilities -Activities

What are the two critical assumptions of resource-based view?

1. Resource heterogeneity 2. Resource immobility

What is intellectual property (IP) protection?

A critical intangible resource that can provide a strong isolating mechanism, and thus help to sustain a competitive advantage. -Incentive for risky and large-scale investments -Pfizer?

What is resource-based view?

A model that argues that rare and inimitable resources help firms maintain competitive advantage. Aids in identifying core competencies

What is social complexity?

A situation in which different social and business systems interact with one another. -Two or more systems interact to create multiple possibilities -3 people = 3 relationships -5 people = 10 relationships -Zappos?

What is causal ambiguity?

A situation in which the cause and effect of a phenomenon are not readily apparent. -Cause of success or failure is not apparent -Apple?

What is path dependence?

A situation in which the options one faces in the current situation are limited by decisions made in the past. -GM and the electric car?

What is isolating mechanisms?

Barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy.

What is the last step in Strategic Questions within the SWOT Matrix?

In final step, the strategist needs to carefully evaluate the pros and cons of each strategic alternative to select one or more alternatives to implement. Managers need to carefully explain their decision rationale, including why other strategic alternatives were rejected.

What is costly to imitate?

One of the four key criteria in the VRIO framework. A resource is costly to imitate if firms that do not possess the resource are unable to develop or buy the resource at a comparable cost.

What is rare?

One of the four key criteria in the VRIO framework. A resource is rare if the number of firms that possess it is less than the number of firms it would require to reach a state of perfect competition.

What is a valuable resources?

One of the four key criteria in the VRIO framework. A resource is valuable if it helps a firm exploit an external opportunity or offset an external threat.

What is organized to capture value?

One of the four key criteria in the VRIO framework. The characteristic of having in place an effective organizational structure, processes, and systems to fully exploit the competitive potential of the firm's resources, capabilities, and competencies.

What is resource stocks?

The firm's current level of intangible resources.

What is resource flows?

The firm's level of investments to maintain or build a resource.

What is the first step in Strategic Questions within the SWOT Matrix?

The first step is managers gather information for a SWOT analysis in order to link internal factors (Strengths and Weaknesses) to external factors (Opportunities and Threats).

What is the value chain?

The internal activities a firm engages in when transforming inputs into outputs; each activity adds incremental value.

What is the second step in Strategic Questions within the SWOT Matrix?

The second step is managers use the SWOT matrix to develop strategic alternatives for the firm using a four-step process

What are core competencies?

Unique strengths, embedded deep with in a firm, that are critical to gaining and sustaining competitive advantage

What does VRIO stand for?

Valuable Rare and costly to Imitate, and finally, the firm itself must be Organized to capture the value of the resource

What is value chain analysis?

Views a firm as a series of business processes that each add value to the product or service

Can a resource be both tangible and intangible?

Yes look at Google's HQ. It is a building so tangible resource. The location is in the heart of the Silicon Valley which is intangible resource.

What is core rigidity?

a former core competency that turned into a liability because the firm failed to hone, refine, and upgrade the competency as the environment changed

What are primary activities?

activities directly related to the value chain process by which products and services are created, marketed, sold, and delivered. Ex: -Supply chain management -Operations -Distributions -Marketing and sales -After-sales service

What is a SWOT analysis?

analysis of strengths, weaknesses, opportunities, and threats

What are Resources?

are any assets such as cash, buildings, machinery or intellectual property that a firm can draw on when crafting and executing a strategy.

What are Activities?

are distinct and fine-grained business processes such as order taking, the physical delivery of products or invoicing customers.

What are Capabilities?

are the organizational and managerial skills necessary to orchestrate a diverse set of resources and to deploy them strategically. They are by nature intangible. They find their expression in a company's structure, routine, and culture.

What is Resource immobility?

assumption in the resource-based view that a firm has resources that tend to be "sticky" and that do not move easily from firm to firm.

What is Resource heterogeneity?

assumption in the resource-based view that a firm is a bundle of resources and capabilities that differ across firms

What are support activities?

business activities that do not add value directly to a firm's product or service under consideration but support the primary activities that do add value. Ex: -Research and development (R&D) -Information systems -Human resources -Accounting and finance -Firm infrastructure

What is intangible resources?

have no physical attributes and are invisible. Ex: firm's culture, knowledge, brand equity, reputation, intellectual property

What is tangible resources?

have physical attributes and are visible. Ex: labor, capital, land, building, plant, equipment, and supplies

Which type is more likely to lead to competitive advantage, tangible resources or intangible resources?

intangible resources

What is Focus on the Weaknesses-Threats?

is to derive "defensive" alternatives by eliminating or minimizing an internal weakness to mitigate an external threat.

What is Focus on the Strengths-Opportunities?

is to derive "offensive" alternatives by using an internal strength to exploit an external opportunity.

What is Focus on the Weaknesses-Opportunities?

is to shore up an internal weakness to improve its ability to take advantage of an external opportunity.

What is Focus on the Strengths-Threats?

is to use an internal strength to minimize the effect of an external threat.

What is the VRIO framework?

tool to analyse a firms internal resources and capabilities to see if it could be a source of comp adv

What is dynamic capabilities perspective?

•A model that emphasizes a firm's ability to: -Adapt resources over time •Create, deploy, modify, reconfigure, upgrade, leverage •In consideration of the external environment -Technological change -Deregulation -Globalization -Demographic shifts

What does isolating mechanisms include?

•Better expectations of future values •Path dependence •Causal ambiguity •Social complexity •Intellectual property protection

Example of Core Competencies?

•IKEA -Designing modern functional home furnishings at low cost •Facebook -IT capabilities to provide reliable social network services globally on a large scale. •Netflix -Creating proprietary algorithms-based on individual customer preferences. •Beats Electronics -Marketing: perception of coolness