Chapter 3 Flashcards

1
Q

What is competitive advantage

A

When a company’s profitability is greater than the average profitability of all companies in the industry

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2
Q

What does it mean when the company has a sustained competitive advantage

A

When the company is able to maintain an above average profitability years

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3
Q

What is the primary objective of strategy

A

Achieve a sustained competitive advantage which will result to a superior profitability and profit growth

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4
Q

What are distinctive competencies

A

Firm specific strengths which allow a company to differentiate its products from rivals and achieve a lower costs to the rivals

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5
Q

What are the two complementary sources of distinctive competencies

A
  1. Resources
  2. Capabilities
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6
Q

What are resources

A

Assets of the company

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7
Q

What is process knowledge

A

Knowledge of internal rules, routines and procedures of an organization that managers can leverage to achieve organizational objectives

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8
Q

What is social complex

A

Something that is characterized by or is the outcome of the interaction of multiple individuals

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9
Q

What is tacit

A

A characteristic of knowledge or skills that cannot be documented or codified

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10
Q

What is organizational architecture

A

Combination of the organizational structure of a company, its control systems, its incentive systems and its organizational culture and human capital strategy

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11
Q

What is intellectual property

A

Knowledge, research, and information that is owned by an individual or organization

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12
Q

What are the two types of resources

A
  1. Tangible
  2. Intangible
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13
Q

What does it mean to have tangible resources

A

Physical entities

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14
Q

What does it mean to have intangible resources

A

Non physical entities that are created by employees

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15
Q

What are examples of intangible assets

A

Companys reputation, knowledge, experience, intellectual properties

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16
Q

What is the VRIO Framework

A

Allows managers to think about the quality of resources

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17
Q

What are the acronyms of VRIO

A
  1. Value → Resources valuable to exploit opportunities and counter threat
  2. Rarity → resources valuable to exploit opportunities and counter threats
  3. Inimitability → Are the resources easy or hard to copy
  4. Organization → Is the company organized and managed where it enables to exploit its resources and capture the value they produce
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18
Q

What are capabilities

A

Resource coordinating skills and productive use that reside with the company’s rules, routines and procedures

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19
Q

What are companies capabilities

A

Product of its organizational structure, process, control systems and hiring strategies

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20
Q

What are distinctive competiencies

A

Shape strategies that the company pursues which lead to a competitive advantage and superior profitability

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21
Q

What are three things that the company’s profitability depend on

A
  1. Value
  2. Price
  3. Costs
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22
Q

What is a company’s value

A

Value place on the products (utility)

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23
Q

What is the price

A

What is being charged for the product

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24
Q

What are costs

A

Price of creating products

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25
Q

What is value creation

A

Value customers place on a product reflect the utility being derived from it, it is based off of price and function of the product

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26
Q

What are the basic factors of production

A

Resources such as land, labour, management, plants and equipment

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27
Q

What are advanced factors of production

A

Resources such as process knowledge, organizational architecture and intellectual property that contribute to a company’s competitive advantage

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28
Q

Why is a company’s barriers to imitation high?

A

Prices knowledge is often tacit, hides from view within the firm and socially complex and implementing new rules from outside to within is bhard to do

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29
Q

What is causal ambiguity

A

The way that one thing will lead to an outcome that is not understand

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30
Q

What is the value chain consist of

A
  1. Production
  2. Marketing
  3. Product Development
  4. Service
  5. Information Systems
  6. Material Management
  7. Human Resources
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31
Q

What are primary activities

A

Include the design, creation and delivery of the product, the products marketing and support

32
Q

What are the primary activities that are broken down into four functions

A
  1. Research and development
  2. Production
  3. Marketing and sales
  4. Customer Service
33
Q

What are support activities

A

Value chain that provides inputs that allow primary activities to take place

34
Q

What are the four functions of the support activities

A
  1. Materials Management
  2. Human Resources
  3. Information Systems
  4. Company Infrastructure
35
Q

What are the four factors that help a company build and sustain a competitive advantage

A
  1. Superior Innovation
  2. Superior Quality
  3. Superior Customer Responsiveness
  4. Superior Efficiency
36
Q

What does innovation mean

A

Act of creating new products or processes

37
Q

What are the two types of innovation

A
  1. Product innovation
  2. Process innovation
38
Q

What is product innovation

A

Developing products that are new to the world and have superior attributes to existing products which enable customers to perceive the product as having more value and increasing companies price option

39
Q

What is process innovation

A

Developing a new process of producing products and delivering them to customers which allow a company to create more value by lowering production costs

40
Q

What is quality

A

Product that can be thought of as a bundle of attributes

41
Q

What are attributes

A

Physical product including its form, features, performance, durability, reliability, style and design

42
Q

What does it mean when the product is to have superior quality

A

Customers perceive that its attributes provide them with higher utility than sold by rivals

43
Q

What are the two attributes that customers measure product against

A
  1. Related to quality as excellence
  2. Relates quality as reliability
44
Q

How do companies achieve responsiveness to customers

A

Achieving superior quality and innovation

45
Q

What is customer response time

A

Critical aspect of responsiveness and its the time it takes for a good to be delivered or a services to be performed

46
Q

How do you measure efficiency

A

Outputs/Inputs

47
Q

How do you measure efficiency

A

Employee productivity

48
Q

How to analyze financial performance

A

Looking at their profitability sows the return that a company is generating on its investments

49
Q

What is Return on Invested Capital

A

Best measurement because it focuses on the true operating performance of the company

50
Q

What is net profit

A

What is left over after the government takes its share in taxes

51
Q

What is invested capital

A

Amount that is invested in the operations of a company: Property, Plant, Equipment, Inventories and other assets

52
Q

What are the two main sources of invested capital

A

Interest bearing debt and shareholders equity

53
Q

What are the three factors to consider regarding the durability of a competitive advantage

A
  1. Barriers to Imitation
  2. The capability of competitors
  3. The general dynamism of the industry environment
54
Q

What are barriers to imitation

A
  1. When a company with competitive advantage will earn higher than average profits
  2. Profits = make the company valuable, distinctive and create superior value
55
Q

What is absorptive capacity

A

The ability of a company to identify, value, assimilate and use new knowledge

56
Q

What is a dynamic industry environment have

A
  1. A high rate of product innovation
  2. Shorter product life cycles
57
Q

Why do companies fail

A

When they lose their competitive advantage and profitability falls

58
Q

What happens to a failing company

A

When the profitability is substantially lower than the average profitability of its competitors: it has lost the ability to attract and generate resources and its profit margins and invested capital

59
Q

What are 3 reasons why companies fail

A
  1. Inertia
  2. Prior strategic commitments
  3. Icarus paradox
60
Q

What is inertia

A

Company is finding it difficult to adapt to a new environmental condition

61
Q

What are organizational capabilities

A

The way a company makes decision and manages it processes which are difficult to change

62
Q

What happens to the company’s prior strategic commitment when it fails?

A

May cause a loss of competitive advantage because its resources are not suited for the new industry

63
Q

What is the icarus paradox

A

When companies become so dazzled by their early success and believe more of the same type of effort as a to future success

64
Q

What are primary activities

A

Design, creation and delivery of the product

65
Q

What is research and development

A

Design of products and production processes

66
Q

What is production

A

Production refers to the creation of a good or service

67
Q

What is marketing and sales

A

Brand position and advertising of the market companies product

68
Q

What is customer service

A

Role of the service function of an enterprise to provide after sales service and support

69
Q

What is support activities

A

Provides inputs that allow the primary activities to take place

70
Q

What are materials management

A

Controls the transmission of physical materials through the value chain from procurement through production and into distribution

71
Q

What are Human Resources

A

Helps ensure that the company has a right combination of skilled people to perform its value creation activities effectively

72
Q

What are information systems

A

Digital systems for managing inventory, tracking sales, pricing products, selling products, dealing with customer service inquiries

73
Q

What are company infrastructure

A

Includes organizational structure, control systems, incentive systems and organizational culture

74
Q

What is benchmarking

A

Requires a company to measure how well its performing against other enterprises using strategically relevant data

75
Q

What is capital productivity

A

Sales produced by a dollar of capital invested in the business