chapter 3 strategic management

When VC analysis is used

, the firm understands its cost structure and identifies the activities through which it can create value

Primary activities:

: are involved with a product's physical creation, its sale and distribution to buyers, and its service after the sale

What are the differences between tangible and intangible resources

A. Tangible resources are assets that can be seen and quantified. Intangible resources are unobservable assets.

Why is it important for a firm to study and understand its internal environment?

A. To ascertain its strengths and weaknesses. B. There is a need to identify new sources of competitive advantage based on the firm's resources and capabilities as competitive advantages based on traditional factors—labor costs, access to financial resources and raw materials, and protected or regulated markets—can be overcome through an international strategy (see ch. 8) and the free flow of resources resulting from globalization

? Why is it important for decision makers to understand these differences? Are tangible resources linked more closely to the creation of competitive advantages than are intangible resources, or is the reverse true? Why?

The value of tangible resources is constrained because they are difficult to leverage (i.e., it is hard to derive additional business or value from a tangible resource) (p. 80). Intangible resources are a superior and more potent source of core competencies because they are less visible and more difficult for competitors to understand, purchase, imitate, or substitute (p. 81).

Tangible resources

are assets that can be observed and quantified.

a. Primary Activities:

i. Inbound Logistics: Receipt, storage, and distribution of inputs. ii. Operations: Transformation of inputs into final product. iii. Outbound Logistics: Collection, storage, distribution of final product to customers. iv. Marketing & Sales: All inducements to purchase. v. Service: Activities to enhance/maintain a product's value—installation, repair, training, etc.

b. Support Activities:

i. Procurement: Purchasing activities to obtain inputs to product a firm's products as well as fixed assets. ii. Technological development: Activities to improve a firm's product and processes. iii. Human resource management: Activities involved with recruiting, hiring, training, developing, and compensating all personnel. iv. Firm infrastructure: Activities such as general management, planning, finance, accounting, legal support, and government relations that are required to support the work of the entire value chain.

Intangible resources:

include assets that are rooted deeply in the firm's history, accumulate Some of a firm's resources are tangible while others are intangible.

A. Value Chain analysis is

is an analytic tool used to evaluate the firm's internal environment. It looks at the activities of the firm. The firm's activities are divided into 2 categories—primary activities and support activities. Primary activities trace the path of the product, whereas support activities facilitate the organization's operations (pp. 89-92).

Value

is measured by a product's performance characteristics and by its attributes for which customers are willing to pay. Firms create value by innovatively bundling and leveraging their resources to form capabilities and core competencies.18

Global mind-set

is the ability to analyze, understand, and manage an internal organization in ways that are not dependent on the assumptions of a single country, culture, or context.13 Because they are able to span artificial boundaries, those with a global mind-set recognize that their firms must possess resources and capabilities that allow understanding of and appropriate responses to competitive situations that are influenced by country-specific factors and unique cultures

Support activities:

provide the assistance necessary for the primary activities to take place.

Core rigidities are

seeds of organizational inertia that stifle innovation (pp. 95-96). Changes in the external environment cause core competencies to lose their competitive relevance; strategic myopia and inflexibility on the part of the firm's managers cause core competencies to become core rigidities (pp. 95-96)! B. The existence of core rigidities indicates that the firm is too anchored to its past, which prevents it from continuously developing new competitive advantages .

Outsourcing

the purchase of a value-creating activity or a support function activity from an external supplier. Not-for-profit agencies as well as for-profit organizations actively engage in outsourcing. 95 Firms engaging in effective outsourcing increase their flexibility, mitigate risks, and reduce their capital investments