460 exam 3

Path dependency

Accumulated learning and experiences Historical circumstances

A firms competitive advantage is mainly determined by....

the characteristics internal to the firm (resources and capabilities) and resides in a network of distinct activities

Strategic activity system

the conceptualization of a firm as a network of interconnected activities

Resource flows

the firms level of investment to maintain or build a resource

Primary activities in the value chain:

Supply chain management Operations Distribution Sales and marketing After sales service

How are resources, capabilities and activities related?

Activity: Manufacturing Manufacturing capabilities: Accurate assembling capability, total quality management, lean manufacturing capability, integration of advanced manufacturing technologies, etc.

How are intangible resource stocks acquired?

through investments over time in intangible resources

Time compressions diseconomies

trying to achieve the same outcome in less time, even with higher investments

The ______ describes the internal activities a firm engages in when transforming inputs into outputs.

value chain

What are the 4 main competitive industry structures?

Monopoly Monopolistic competition Perfect competition Oligopoly

Power of Suppliers

The bargaining power of suppliers captures the pressure that suppliers can exert on an industries profit potential

Resource stocks

The firm's current level of intangible resources -New product development -Engineering expertise -Innovation capability -Reputation for quality built through investments overtime

Resource based view

a model that sees certain types of resources as key to superior firm performance

Social Complexity

a situation in which different social and business systems interact with one another

VRIO Framework

a theoretical framework that explains and predicts firm-level competitive advantage

The most rigorous means of investigating the profit potential within a specific industry is to conduct ______.

an industry analysis

Resources are

assets that a company can draw on when crafting and executing a strategy

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

Isolating mechanisms are considered to be ______.

barriers to imitation

Isolating mechanisms

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

Sociocultural factors

capture a societies cultures, norms and factors. These are constantly in flux and leader need to closely monitor trends and consider implications

Technological factors

capture the application of knowledge to create new processes and products. Major innovations in process technology include lean manufacturing.

Core competencies allow a firm to ....

differentiate its products and services from rivals, creating higher value for customers or offering comparable value at lower prices

Primary activities

firm activities that add value directly by transforming inputs into outputs as a firm moves a product or service horizontally across the internal value chain.

Economic factors

in a firms external environment are largely macroeconomic, affecting economy wide phenomena. Leader need to consider: Growth rates Levels of employment Interest rates Price Stability ( inflation and deflation) Currency exchange rates

Social Complexity

interpersonal relations within an organization relationships with suppliers and customers interactions between social and business systems

Ecological factors

involve broad environmental issues such as the natural environment, global warming, and sustainable economic growth.

A firm can gain and sustain a competitive advantage only when

it has resources that satisfy all of the VRIO framework criteria

Entry barriers

obstacles that determine how easily a firm can enter an industry and often significantly predict industry profit potential

A resource is ______ if the number of firms that possess it is less than the number of firms required to reach a state of perfect competition.

rare

Power of buyers

relates the the pressure an industry's consumers can put on the producers margins by demanding lower prices or higher quality products

The core competencies of a business are generated by the interaction of______

resources and capabilities

What do the best firms in an industry seek to identify and manage on an ongoing basis as sources to respond to their external environment?

resources, capabilities, and core competencies

Political factors

result from the processes and actions of government bodies that can influence the decisions and behaviors of a firm

When a new firm enters an industry, what do incumbent firms often experience?

Incumbent firm spends more to satisfy customers Incumbent firms lower prices Industry profit potential declines

What are important factors in determining the intensity of rivalry among existing competitors?

Industry growth Exit barriers Competitive industry structure

Valuable resource

One of the 4 key criteria in the VRIO framework; A resource is valuable if it helps a firm exploit an external opportunity or offset an external threat

Intellectual property includes:

Patents, designs, copyrights, trademarks, trade secrets

Intangible resources:

Culture, Knowledge, Brand equity, Reputation, intellectual property

2 key forces to the five forces model

1) competition is viewed more broadly in the five forces model rather than narrowly defining it 2) firm profit potential is a function of the five forces: the threat of entry, power of suppliers, power of buyers, the threat of substitutes, and rivalry among existing firms

Power of suppliers reduces a firms ability to obtain superior performance because:

1) powerful supplier can raise the cost of production by demanding higher prices for inputs 2) they reduce profit potential by capturing part of economic value

Intellectual property protection

A critical intangible resource that can provide a strong isolating mechanism, and thus help to sustain a competitive advantage. Includes: patents, designs, copyrights, trademarks, and trade secrets.

dynamic capabilities

A firms ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources in its quest for competitive advantage

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

SWOT analysis

A framework that allows mangers to synthesize insights obtained from an internal analysis of the company's strengths and weaknesses (S-W) with those from an analysis of external opportunities and threats (O-T) to derive strategic implications

PESTEL model

A framework that categorizes and analyzes an important set of external factors (political, economic, sociocultural, technological, ecological and legal) that might impinge upon a firm. These factors can create both opportunities and threats for a firm.

casual ambiguity

A situation in which the cause and effect of a phenomenon are not readily apparent

Path dependance

A situation in which the options one faces in the current situation are limited by decisions made in the past also rests on the notion that time cannot be compressed at will

Isolating mechanisms include:

Better expectations of future resource value Path dependence Casual ambiguity Social complexity Intellectual Property (IP) protection

Which of the following are examples of resources for a firm?

Buildings, cash, intellectual property

The power of Blank______ is the pressure they can put on the margins of producers in the industry by demanding a lower price or higher product quality.

Buyers

The intensity of the rivalry among existing competitors is determined largely by the following factors:

Competitive industry structure Industry growth Strategic commitments Exit barriers

What are important strategic dimensions in mapping strategic groups?

Cost structure Expenditures on research and development Product and service offerings

What are important sources of entry barriers?

Credible threat of retaliation Capital requirements Economies of scale Network effects Government policy

entry barriers include

Economies of scale Network effects Customer switching costs Capital requirements Advantages independent of size Government policy Credible threat of retaliation

Support activities

Firm activities that add value indirectly, but are necessary to sustain primary activities

How did Five Guys capture competitive advantage in a competitive industry?

Five Guy's core competencies were to deliver a customized made-to-order burger and had cut fries using only the highest quality ingredients available

Accurate assembling capability orchestrates what resources:

Human: technicians working on the assembly line Equipment: top notch assembly line Supplies: Low defect assembly parts Individual and organizations learning experience related to assembling activities

Competitive advantage is more likely to spring from intangible or tangible resources?

Intangible resources

For a resource to be the basis of a competitive advantage, it must be:

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

Capabilities include which of the following?

a companies routines, cultures, and organizational structures

strategic position

a firm's strategic profile based on the difference between value creation and cost (V-C)

Tangible resources:

Labor, capital, Land, Buildings, plant, equipment, supplies

What are approaches for answering the question "How to enter?" when a firm is considering entering an industry?

Leverage existing assets Establishing a Niche Reconfiguring value chains

What contributes to consumer buying power

Low switching costs real time accurate, price comparisons

Which of the following best describes the core competency of the Five Guys Burgers and Fries company?

Making high-quality burgers without limiting costs

Along which of the following dimensions do strategic groups differ from one another?

Market segments Customer service Research and development Distribution Channels

Rather than creating a onetime and thus static fit, a firms internal strengths...

Need to change with its external environment in a dynamic fashion

The online auction site eBay has more than 100 million active users, so buyers are more likely to find what they are looking for while sellers are more likely to find buyers for the items they are offering. What is this an example of?

Network effect

What term describes the positive effect that one user of a product or service has on the value of that product or service for other users?

Network effect

Rivalry among existing competitors

One of Porter's five forces; high when competition is fierce in a market and low when competitors are more complacent.

______ activities add value directly by transforming inputs into outputs as the firm moves a product or service horizontally along the internal value chain.

Primary

Support activities in the Value Chain

Research and Development (R&D) Information systems Human resources Accounting and Finance Firm infrastructure including processes, policies and procedures

2 assumptions need to be met for the resource-based advantage

Resource Heterogeneity Resource immobility

______ describes a situation in which different social and business systems interact with each other.

Social Complexity

Non-market strategies

Strategic leaders activities outside market exchanges where firms sell products or provide services to influence a firms general environment through, for example, lobbying, public relations, contributions, and litigation in ways that are favorable for the firm.

Better expectations of future resources

allow a firm to gain competitive advantage by acquiring resources at a low cost to lay the foundation when future resources turn out to be more accurate than competitors

resource heterogeneity

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

Five Forces Model

a framework that identifies five forces that determine the profit potential of an industry and shape a firms competitive strategy

Industry

a group of incumbent companies that face more or less the same set of suppliers and buyers

Industry analysis

a method to (1) identify and industry's profit potential and (2) deriver implications for a firms strategic positions within and industry

dynamic capabilities perspective

a model that emphasizes a firms ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage in a constantly changing environment

casual ambiguity (slides)

causes of success are obscure and only imperfectly understood

Firms have a tendency to change the industry structure in their favor, making it more Blank______ through horizontal mergers and acquisitions, since this tends to be more profitable than a fragmented one.

consolidated

A firms ability to gain and sustain competitive advantage is a partially driven by...

core competencies

A(n) ______ is a unique strength, embedded deep within a firm, that is critical to gaining and sustaining competitive advantage.

core competency

Firm effects

firm performance attributed to the actions strategic leaders take (Up to 55% of firm performance)

Industry effect

firm performance is attributed to the structure of the industry in which the firm competes. ( roughly 20% of firms performance)

If the problem with a business strategy results in causal ambiguity, managers will ______.

have a difficult time developing a theory to deal with the problem

Threat of substitutes

the idea that products or services available from outside the given industry will come close to meeting the current needs of their customers

Value Chain

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

Legal factors

the official outcomes of political processes and manifested in laws, mandates, regulations and court decisions- all of which can have a direct bearing on a firms profit potential

Capabilities are

the organizational and managerial abilities to orchestrate a diverse set of resources and deploy them strategically

Threat of Entry

the risk that potential competitors will enter and industry - reduced the industry overall profit potential - increases spending among incumbent firms

Netwrok Effects

the value of a product or service for an individual increases with the number of total users

Costly to imitate

One of the 4 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

Rare resource

One of the 4 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

Organized to capture value

One of the 4 key criteria in the VRIO framework; The characteristic of having in place effective organizational structure, process, and systems to fully exploit the competitive potential of the firms resources, capabilities and competencies

What statements about industry dynamics is true?

Overtime, industry structures are not stable The five forces model is a static model

______ describes a process in which the options one faces in the current situation are limited by decisions made in the past.

Path Dependance