Ch. 4 Flashcards
Def: Core Competencies
Unique strengths
Embedded deep within a firm
Allow a firm to differentiate its products and services from those of its rivals
What is the benefit of a firm’s core competencies?
Creating higher value for the customer or
Offering products and services at lower cost
V>C
Competitive Advantage is driven by _____ _________.
Competitive advantage is driven by core competencies
Def: Resources
Any assets that a firm can draw on (intangible and tangible)
Def: Capabilities
Organizational and managerial skills; things we know
Def: Activities
Distinct and fine-grained business processes
leverage our core competencies through
What is the Resource Based View (RBV)?
A model that sees certain types of resources (VRIO) as key to superior firm performance
What does VRIO stand for?
Valuable (V) Rare (R) Costly to Imitate (I) Organized to Capture Value (O) (supports SWOT)
Tangible v. Intangible goods
Can sell tangible(hold more liquidity) goods, but not intangible
Resources vary from firm to firm within an industry = creates CA
Value of a company is based on their _________ ___________.
Value of a company is based on their Market Capitalization.
Market Capitalization =
Market Capitalization = # of outstanding shares * price/share
Def: Isolating Mechanisms
Barriers to imitation that prevent rivals from competing away the advantage a firm has.
They protect resources, capabilities, or competencies that underlie a firm’s competitive advantage.
What are the 5 isolating mechanisms?
- Better expectations of future resource value (vision for future performance of the market)
- Path dependence (constrained by decisions that were made in the past)
- Causal ambiguity (idk)
- Social complexity
- Intellectual property (IP) protection
A firm may be able to protect its competitive advantage – even for long periods of time – when its managers have consistently: (three points)
- Better expectations about the future value of resources.
- Have accumulated a resource advantage that can be imitated only over long periods of time.
- When the source of their competitive advantage is causally ambiguous or socially complex.
Def: Dynamic Capabilities
A firm’s ability to create, deploy, modify, reconfigure, upgrade, and leverage its resources over time – in the quest for competitive advantage.
Dynamic Capabilities helps prevent a core rigidity, what is core rigidity?
- A former core competency that turned into a liability as the environment changed
- So good at something for so long that you can’t let go of it “we’ve always done it that way”
- So rigid in your belief that you miss opportunities
Def: Resource stocks
The firm’s current level of intangible resources
Def: Resource flows
The firm’s level of investments to maintain or build a resource
Def: Value Chain
Internal activities a firm engages in when transforming inputs into outputs
- Each activity adds incremental value
- This concept can be applied to any firm, good or service
What is the goal of the value chain?
The value chain helps to assess which parts add value and which do not.
Def: Primary firm activities
add value directly by transforming inputs into outputs as the firm moves a product or service horizontally along the internal value chain
Def: support activities
add value indirectly and are necessary to sustain primary activities
Purpose of the SWOT analysis
Leverage internal strengths to exploit external opportunities
Mitigate internal weaknesses and external threats
How to use the SWOT to your advantage
- Evaluate the pros and cons of each strategic alternative.
- Select one or more alternatives to implement.
- Carefully explain decision rationale.
- Including why other strategic alternatives were rejected
