Developing Competitive Advantage Through Internal Analysis

Pick the correct statement regarding the VRIO analysis.

It is a way to distinguish resources and capabilities from core competencies.

Pick the correct statement regarding value.

It is measured by a product's performance characteristics and by its attributes for which customers are willing to pay.

Pick the point that explains core competencies.

They distinguish a company competitively and reflect its personality.

Pick the statement that best describes capabilities.

A firm's capacity to deploy resources that have been purposely integrated to achieve a desired end state

Why do repetition and practice increase the value of a firm's capabilities?

A knowledge base is grounded in organizational actions that may not be explicitly understood by all employees.

Select the right description of a valuable resource.

A resource that allows a firm to exploit opportunities or negate threats in the environment EXPLANATION A resource or capability is said to be valuable if it allows the firm to exploit opportunities or negate threats in the environment. If a resource does not allow a firm to minimize threats or exploit opportunities, it does not enhance the competitive position of the firm.

What is a valuable resource?

A resource that allows a firm to negate threats in the environment

What is a rare resource according to the VRIO criteria?

A resource that is not widely possessed by other competitors

According to the VRIO criteria, what does the concept of imitation include?

Any form of acquiring the lacking resource

Choose the best description of tangible assets.

Assets that can be seen and quantified

How can a firm that possesses a valuable and rare resource gain a competitive advantage?

By effectively using the resource

Select the accurate point that characterizes capabilities.

Capabilities are often based on developing, carrying, and exchanging information through a firm's human capital. EXPLANATION Critical to forming competitive advantages, capabilities are often based on developing, carrying, and exchanging information and knowledge through a firm's human capital. Knowledge possessed by human capital is among the most significant of an organization's capabilities and may ultimately be at the root of all competitive advantages. But firms must also be able to use the knowledge that they have and transfer it among their operating businesses.

What is true of capabilities?

Capabilities are often developed in specific functional areas or in a part of a functional area.

What characterizes capabilities?

Capabilities can be tangible, like a business process that is automated, but most of them tend to be tacit and intangible.

What allows firms to create value for customers?

Exploiting internal resources and capabilities and meeting the demanding standards of global competition

Which example best illustrates the intangible resources of an organization?

Fine Systems Inc. is a laptop manufacturer known for its innovative methods of developing products.

According to the VRIO criteria, when is a resource said to be inimitable?

If it is difficult for another firm to acquire the resource

Pick the correct statement regarding resources.

They cover a spectrum of individual, social, and organizational assets.

What happens when a firm possesses capabilities to exploit a valuable but widely held resource?

It leads to competitive parity for the firm.

Which of the following best describes core competencies?

The activities through which a firm adds unique value to its goods or services over a long period of time

Exxel Corp. has the ability to deal with its employees efficiently by motivating them, by enhancing teamwork, and by encouraging innovation and change. This ability enables the firm to outshine its competitors. The firm's leaders inspire employees to participate in discussions regularly and provide valuable suggestions for the growth of the company. The firm allows its employees to grow along with it. In this case, which of the following is being discussed regarding the organization?

The core competencies of Exxel Corp.

What are capabilities?

They are a firm's capacity to deploy resources that have been purposely integrated to achieve a desired end state. EXPLANATION Capabilities are a firm's capacity to deploy resources that have been purposely integrated to achieve a desired end state.

What are core competencies?

They are resources and capabilities that serve as a source of a firm's competitive advantage over rivals.

When is a resource or capability said to be valuable?

When it allows a firm to exploit opportunities EXPLANATION A resource or capability is said to be valuable if it allows the firm to exploit opportunities or negate threats in the environment. If a resource does not allow a firm to minimize threats or exploit opportunities, it does not enhance the competitive position of the firm.

In the context of VRIO criteria, when does a valuable but widely held resource lead to competitive parity for a firm?

When the firm possesses the capabilities to exploit the resource EXPLANATION The fourth and final VRIO criterion is organization. It determines whether a resource or capability is the source of competitive advantage which recognizes that mere possession or control is necessary, but not sufficient to gain an advantage. A valuable but widely held resource only leads to competitive parity for a firm if they also possess the capabilities to exploit the resource. Likewise, a firm that possesses a valuable and rare resource will not gain a competitive advantage unless it can actually put that resource to effective use.