Chapter 4

Groupon

A daily-deal website, offering group coupons Grew quickly -260 million subscribers, 500,000 merchants -$6 billion buyout offer (Google 2011), was declined It was valuable, and rare, but not costly to imitate. -More specialized local startups began

Resource Immobility:

A firm has resources that tend to be "sticky" and that do not move easily from firm to firm

Resource Heterogeneity:

A firm is bundle of resources and capabilities that differ across firms

core rigidity:

A former core competency that turned into a liability as the environment changed

The Dynamic Capabilities Perspective:

A model that emphasizes a firm's ability to: -Modify and leverage its resource base -Gain and sustain competitive advantage in a constantly changing environment

What is the Resource Based View (RBV)?

A model that sees certain types of resources (VRIO) as key to superior firm performance

Resources:

Any assets that a firm can draw on

Resources, Capabilities and Activities Help Deliver...

Core Competencies

Activities:

Distinct and fine-grained business processes

What Is the Value Chain?

Internal activities a firm engages in when transforming inputs into outputs - each activity adds incremental value

A resource is valuable if...

It enables the firm to exploit an opportunity. It enables the firm to offset a threat. It enables a firm to increase its economic value creation (V - C)

A Resource Is Organized to Capture Value If...

It has an effective organizational structure. It has coordinating systems.

How does causal ambiguity act as an isolating mechanism for organizations?

It makes it difficult for the competitors to understand why a company has been so successful. Causal ambiguity describes a situation in which the cause and effect of a phenomenon are not readily apparent

Capabilities:

Organizational and managerial skills

Examples of support activities:

R&D Information Systems HR Accounting and Finance Processes, policies, procedures

What are the 2 critical assumptions of the RBV?

Resource Heterogeneity Resource Immobility

Examples of primary activities:

Supply chain management Operations Distribution Marketing and Sales Post-Sales Service

Resources fall into two categories:

Tangible Intangible

Resource stocks:

The firm's current level of intangible resources

Resource flows:

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

What Are Core Competencies?

Unique strengths embedded deep within a firm

VRIO:

Valuable Rare Costly to Imitate Organized to Capture Value

The perfectly competitive industry structure differs from the resource-based model in its view that

all firms have access to the same resources.

Dynamic capabilities help prevent...

core rigidity

Dynamic Capabilities are a firm's ability to...

create, deploy, modify, reconfigure, upgrade, and leverage its resources over time

Core competencies allow a firm to ____________________ its products and services from those of its rivals

differentiate

Primary activities _______________ add value

directly

A firm will fail to create a sustained competitive advantage when the source of its competitive advantage is causally ambiguous. source of its competitive advantage is socially complex. resource bundles exhibit heterogeneity and immobility. fit between its internal strengths and the external environment is static.

fit between its internal strengths and the external environment is static. A firm must be able to change its resource base as the external environment changes. Rather than creating a static fit, the firm's internal strengths should change with its external environment in a dynamic fashion.

Support activities add value _______________

indirectly

primary activities transform ____________ into ____________ as the firm moves a product or service horizontally along the internal value chain.

inputs outputs

Barriers to imitation are...

isolating mechanisms

Intangible assets add great value to a firm primarily because the firm's knowledge and culture take time to develop and are generally difficult to imitate. reputation and brand equity are accumulated quickly and can be leveraged easily. tangible assets require a higher degree of capital than its intangible assets. capabilities are by nature typically tangible.

knowledge and culture take time to develop and are generally difficult to imitate. Competitive advantage is more likely to spring from intangible rather than tangible resources. A firm's brand name, reputation, culture, knowledge, and intellectual property must be built, often over long periods of time.

Core competencies can result in creating higher value for the customer OR

offering products and services at a lower cost

The competitive advantage that one firm has will be short-lived in an industry where perfect competition exists. resource heterogeneity is high. capabilities of a firm are not easily replicable. resource immobility is high.

perfect competition exists.

In a generic value chain, a firm's after-sales service will be referred to as its ________.

primary activity The primary activities add value directly as a firm transforms inputs into outputs—from raw materials through production phases to sales and marketing, and finally customer service. Primary activities are: supply chain management, operations, distribution, marketing and sales, and after-sales service.

The resource-based view of a firm assumes that the...

resource bundles of firms competing in the same industry are unique to some extent and thus differ from one another.

As a result of ________, a critical assumption in the resource-based model of a firm, the resource differences that exist between firms are difficult to replicate.

resource immobility resources tend to be "sticky" and don't move easily from firm to firm. Because of that stickiness, the resource differences that exist between firms are difficult to replicate and, therefore, can last for a long time.

Dynamic capabilities are essential for moving beyond a(n) ________ advantage.

short-lived

Due to path dependence strategic decisions have long-term consequences. competitors can easily imitate or create core competencies quickly. past decisions of a firm do not affect its current situation. the occurrence of time compression diseconomies becomes rare.

strategic decisions have long-term consequences. Strategic decisions have long-term consequences due to path dependence and time compression diseconomies; they are not easily reversible.

support activities are necessary to _____________ primary activities

sustain