04 - Firm Resources: Competitiveness and Growth

Question 1

VRIO-framework

Answer 1

• Value - Rarity - Imitability - Organization

Question 2

Primary resources

Answer 2

• Provide the basis for a firm to attain competitive advantage
• Are the tangible and intangible assets as well as the Human Resources that a firm uses to choose and implement its strategies

Question 3

Capabilities

Answer 3

• Firm specific abilities to use resource to achieve organizational objectives
• Are normally developed internally and depend on tacit knowledge

Question 4

Tangible assets definition and examples

Answer 4

those items that are observable and quantifiable

• Financial Assets
• Physical Assets

Question 5

Financial assets

Answer 5

include internal funds such as shareholders’ capital and retained profits, as well as external capital like loans provided by banks

Question 6

Physical assets

Answer 6

include plants, offices, infrastructure and equipment as well as inventories of raw materials, components and finished goods

Question 7

Intangible assets

Answer 7

are also found on companies’ balance sheets, but they are harder to value

• Technological resources
• Reputational resources

Question 8

Technological resources

Answer 8

include patents, trademarks and copyrights that entitle the firm to intellectual property rights and enable it to generate valuable products

Question 9

Reputational resources

Answer 9

are the firm’s goodwill, brand names and business relationships

Question 10

Goodwill

Answer 10

is the value of abilities to develop and leverage the firm’s reputation as a solid provider of goods and services, an attractive employer and/or a socially responsible corporate citizen

Question 11

Reputation

Answer 11

can be regarded as an outcome of a competitive process in which firms signal their attributes

Question 12

Human Resources

Answer 12

are embedded in the individuals working in an organization

• individual employees’ skills, talent and knowledge
• individual employees’ capacity and communication, and their abilities for interaction that are not captured by the firms’ formal systems and structures
• employees shared values, traditions and social norms within an organization

financial analysts may take human resources for granted

many MNEs regard them as a foundation of their capabilities

Question 13

Value Chain

Answer 13

• illustrates how the different activities of a firm come together to add value
• is a series of activities used in the production of goods and services that make a product or service more valuable
• value chain analysis forces managers to think about firm resources at a very micro, activity-based level

Question 14

The VRIO framework

Answer 14

Valuable

• Do the resources add value?
• Do they enable a firm to exploit an external opportunity or neutralize an external threat?

Rarity

• How rare are the resources?
• Can lead to a temporary competitive advantage

Imitability

• How difficult is it for competitors to imitate the resources
• Problem of causal ambiguity: difficulty of identifying the causal determinant of successful firlm performance

Organization

• Sustainable Competitive advantage: Ability to deliver persistently above average performance

Question 15

Benchmarking

Answer 15

compares resources against those of your competitor on two questions:

• Which resources are most important in conferring sustainable competitive advantage in your industry?
• Where are your strengths and weaknesses as compared to your competitors?

Question 16

4 Steps Benchmarking

Answer 16

1. Choose a benchmark organization to compary yourself with
2. Identify the relevant resources
3. Assess the importance of your resources (VRIO)
4. Score and assess the relative strengths

Question 17

Outsourcing

Answer 17

Turning over an organizational activity to an outside supplier that will perform it on behalf of the focal firm

Question 18

Offshoring

Answer 18

When activities are moved from a firm’s main country of operations to another country

Question 19

Long-term consequences of Outsourcing

Answer 19

• The offshore of high-end services has become controversial: starting wuith IT and now encompassing all sorts of “business process outsourcing” (BPO) to countries led by India
• Offshoring service providers are grdually moving up the value chain as original equipment manufacturers (OEM)
• OEMs become original design manufacturers (ODMs)
• Often have the ambition to become original brand manufactureres (OBM) and thereby become a competitive thread