Chapter 3 Flashcards
What is competitive advantage
When a company’s profitability is greater than the average profitability of all companies in the industry
What does it mean when the company has a sustained competitive advantage
When the company is able to maintain an above average profitability years
What is the primary objective of strategy
Achieve a sustained competitive advantage which will result to a superior profitability and profit growth
What are distinctive competencies
Firm specific strengths which allow a company to differentiate its products from rivals and achieve a lower costs to the rivals
What are the two complementary sources of distinctive competencies
- Resources
- Capabilities
What are resources
Assets of the company
What is process knowledge
Knowledge of internal rules, routines and procedures of an organization that managers can leverage to achieve organizational objectives
What is social complex
Something that is characterized by or is the outcome of the interaction of multiple individuals
What is tacit
A characteristic of knowledge or skills that cannot be documented or codified
What is organizational architecture
Combination of the organizational structure of a company, its control systems, its incentive systems and its organizational culture and human capital strategy
What is intellectual property
Knowledge, research, and information that is owned by an individual or organization
What are the two types of resources
- Tangible
- Intangible
What does it mean to have tangible resources
Physical entities
What does it mean to have intangible resources
Non physical entities that are created by employees
What are examples of intangible assets
Companys reputation, knowledge, experience, intellectual properties
What is the VRIO Framework
Allows managers to think about the quality of resources
What are the acronyms of VRIO
- Value → Resources valuable to exploit opportunities and counter threat
- Rarity → resources valuable to exploit opportunities and counter threats
- Inimitability → Are the resources easy or hard to copy
- Organization → Is the company organized and managed where it enables to exploit its resources and capture the value they produce
What are capabilities
Resource coordinating skills and productive use that reside with the company’s rules, routines and procedures
What are companies capabilities
Product of its organizational structure, process, control systems and hiring strategies
What are distinctive competiencies
Shape strategies that the company pursues which lead to a competitive advantage and superior profitability
What are three things that the company’s profitability depend on
- Value
- Price
- Costs
What is a company’s value
Value place on the products (utility)
What is the price
What is being charged for the product
What are costs
Price of creating products
What is value creation
Value customers place on a product reflect the utility being derived from it, it is based off of price and function of the product
What are the basic factors of production
Resources such as land, labour, management, plants and equipment
What are advanced factors of production
Resources such as process knowledge, organizational architecture and intellectual property that contribute to a company’s competitive advantage
Why is a company’s barriers to imitation high?
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
What is causal ambiguity
The way that one thing will lead to an outcome that is not understand
What is the value chain consist of
- Production
- Marketing
- Product Development
- Service
- Information Systems
- Material Management
- Human Resources