Chapter 4

Question 1

The AFI Strategy Framework

Answer 1

Part 1: Analysis (Getting Started)
Part 1: Analysis (External & Internal)
Part 2: Formulate (Business Strategy)
Part 2: Formulate (Corporate Strategy)
Part 3: Implementation
Goal: Gaining & sustaining competitive advantage

Question 2

What’s Inside The Firm?

Answer 2

Core competencies, resources, and capabilities

Question 3

Core Competencies

Answer 3

Unique strengths embedded within a firm allow the firm to differentiate from rivals. It is expressed through structures, processes, and routines.

Question 4

Examples of Core Competencies

Answer 4

• Five Guys
• Telsa
• Netflix

Question 5

Resources

Answer 5

Any assets that a firm can draw on

Examples: cash, buildings, machinery, or intellectual property

Question 6

Capabilities

Answer 6

Organizational and managerial skills

Examples: structure, routines, and culture

Question 7

Activities

Answer 7

Distinct and fine-grained business processes

Examples: Order-taking and invoicing

Question 8

Tangible Resources

Answer 8

Resources have physical attributes and are visible

Question 9

Intangible Resources

Answer 9

Resources do not have physical attributes and are invisible

Question 10

The Resource-Based View

Answer 10

This model aids in identifying core competencies

Question 11

Two Critical Assumptions of the RBV

Answer 11

Resource Based View (RBV)
- Resource Heterogeneity
- Resource Immobility

Question 12

Resource Heterogeneity

Answer 12

A firm is a unique bundle of resources, capabilities
and competencies

Question 13

Resource Immobility

Answer 13

Resources are “sticky,” and don’t move easily from firm to firm

Question 14

VRIO Framework

Answer 14

• Value
• Rarity
• Imitability
• Organization

a tool for evaluating firm resource endowments

Question 15

To be the basis of a competitive advantage, a resource must be

Answer 15

• Valuable
• Rare
• Costly to Imitate
• Organized to capture the value of the resource

Question 16

Pioneer of the VIRO framework

Answer 16

Jay Barney

Question 17

Isolating Mechanisms

Answer 17

Barriers to imitation

Question 18

Isolating Mechanisms Examples

Answer 18

• Better expectations of future resource value
• Path dependence: past decisions limit current options
• Causal ambiguity: cause and effect are vague
• Social complexity: social and business systems interact
• Intellectual property (IP) protection

Question 19

Core Rigidity

Answer 19

A former core competency turned into a liability causing a loss of competitive advantage.

Question 20

Dynamic Capabilities

Answer 20

A firm’s ability to adapt resources over time

Question 21

The Goal of Dynamic Capabilities

Answer 21

• Create a long-term competitive advantage
• Develop resources, capabilities, and competencies
• Create a strategic fit with the firm’s environment
• Change in a dynamic fashion

Question 22

Dynamic markets are due to

Answer 22

Technological change, deregulation, globalization,
demographic shifts

Question 23

Resource Stocks and Flows

Answer 23

A way to develop dynamic capabilities

Question 24

Resource stocks

Answer 24

The firm’s current level of intangible resources

Question 25

Resource flows

Answer 25

The firm’s level of investment to maintain or build a resource

Question 26

The Bathtub Metaphor

Answer 26

Inflows, Intangilible Resource Stocks, Outflows

Question 27

The Value Chain

Answer 27

Internal activities a firm engages in when transforming inputs into outputs

Question 28

Primary Activities

Answer 28

Firm activities add value directly

Question 29

Support Activities

Answer 29

Firm activities that add value indirectly

Question 30

Strategic Activity Systems

Answer 30

A network of interconnected activities

Question 31

How activity systems are updated

Answer 31

• Add new activities
• Remove activities that are no longer relevant
• Upgrade activities that have become somewhat obsolete