WPC 480 - Chapter 4

Success conditions to create competitive advantage

1. Better expectations of future resource value 2. Path dependence 3. Casual ambiguity 4. Social complexity 5. Intellectual property (IP) protection.

Support activities

1. Research and development 2. Information systems 3. Human resources 4. Accounting and finance 5. Firm infrastructure inducing processes, policies and procedures

Two critical assumptions

1. Resource heterogeneity 2. Resource immobility

Primary activities

1. Supply chain management 2. Operations 3. Distribution 4. Marketing and sales 5. After-sales service

VRIO

1. Valuable 2. Rare 3. Icostly to Imitate 4. Organized to capture the value of the resource

Intellectual property protection

A critical intangible resource that can provide a strong isolating mechanism, and thus help to sustain a competitive advantage.

Dynamic capabilites

A firm's 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 changes.

SWOT Analysis

A framework that allows managers to synthesize insights obtained from an internal analysis of the company's strengths and weaknesses with those from an analysis of external opportunities and threats to derive strategic implications.

Dynamic capabilities perspective

A model that emphasizes a firm's ability to modify and leverage its resource base in a way that enable it to gain and sustain competitive advantage in a constantly changing environment.

Resource based view

A model that sees certain types of resources as key to superior firm performances.

Social complexity

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

Casual ambiguity

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

Path dependence

A situation in which the options one faces in the current situation are limited by decisions made in the past.

VRIO Framework

A theoretical framework that explains and predicts firm-level competitive advantage.

Resources

Any assets that a firm can draw on when formulating and implementing a strategy.

Resource immobility

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

Resource heterogeneity

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

Isolating mechanisms

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

Activities

Distinct and fine-grained business processes that enable firms to add incremental value by transforming inputs into goods and services.

Primary activities

Firm activities that add value directly by transforming inputs into outputs as the firms moves a product or service horizontally.

Support activities

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

Costly to imitate

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

Valuable

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

Rare

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

Capabilities

Organizational and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically.

Intangible resources

Resources that do not have physical attributes and thus are invisible.

Tangible resources

Resources that have physical attributes and thus are visible.

Resource stocks

The firm's current level of intangible resources.

Resource flows

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

Value chain

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

Core competencies

Unique strength, embedded deep within a firm, that are critical to gaining and sustaining competitive advantage.