chapter 6

Question 1

Porter’s Five Forces

Answer 1

in this model, the attractiveness of an industry and firm’s opportunities and threats are identified by analysing five forces in a firm’s specific environment: (1) degree of existing rivalry, (2) threat of potential entrants, (3) bargaining power of suppliers, (4) bargaining power of buyers, and (5) threat of substitutes.

Question 2

exit barriers

Answer 2

costs or other commitments that make it difficult for firms to abandon an industry, eg. large fixed-asset investments, emotional commitment.

Question 3

entry barriers

Answer 3

conditions that make it difficult or expensive for new firms to enter an industry, eg. government regulation, large start-up costs.

Question 4

switching costs

Answer 4

factors that make it difficult or expensive to change suppliers or buyers, such as investments in specialised assets to work with a particular buyer or supplier.

Question 5

vertical integration

Answer 5

getting into business of one’s suppliers (backward integration) or one’s buyers (forward integration). eg. a firm that begins producing its own supplies or that buys its own distributor.

Question 6

oligopolistic industries

Answer 6

highly consolidated industries with a few large competitors.

Question 7

stakeholder

Answer 7

any entity that has an interest (“a stake”) in the organisation.

Question 8

stakeholder models

Answer 8

used to analyse the management issues from stakeholders that are likely to impact the firm’s financial performance.

Question 9

Porter’s model of a value chain

Answer 9

used to identify the firm’s strengths and weaknesses.

Question 10

inbound logistics

Answer 10

all activities required to receive, store, and disseminate inputs.

Question 11

operations

Answer 11

activities involved in the transformation of outputs.

Question 12

outbound logistics

Answer 12

activities required to collect, store, and distribute outputs.

Question 13

marketing and sales

Answer 13

activities to inform buyers about products and services and to induce their purchase.

Question 14

service

Answer 14

after-sales activities to keep the product or service working efficiently.

Question 15

primary activities

Answer 15

(1) inbound logistics, (2) operations, (3) outbound logistics, (4) marketing and sales, (5) service.

Question 16

support activities

Answer 16

(1) procurement, (2) human resource management, (3) technology development, (4) infrastructure.

Question 17

procurement

Answer 17

the acquisition of inputs, but not their physical transfer.

Question 18

human resource management

Answer 18

activities such as recruitment, training, hiring, and compensating personnel.

Question 19

technology development

Answer 19

activities involved in developing and managing equipment, hardware, software, procedures, and knowledge necessary to transform inputs into outputs.

Question 20

infrastructure

Answer 20

functions such as accounting, legal counsel, finance, planning, public affairs, government relations, quality assurance, and general management necessary to ensure smooth functioning of the firm.

Question 21

competitive advantage

Answer 21

must be rare, valuable, durable, and inimitable.

Question 22

tacit resources

Answer 22

resources on an intangible nature that can’t be readily codified.

Question 23

path dependent

Answer 23

when end results depend greatly on the events that took place leading up to the outcome.

Question 24

socially complex resources

Answer 24

resources or activities that emerge through the interaction of multiple individuals.

Question 25

causal ambiguity

Answer 25

the relationship between a resource and the outcome it produces is poorly understood.

Question 26

core competency

Answer 26

typically considered to be those that differentiate a company strategically. it arises from a firm’s ability to combine and harmonise multiple primary abilities in which the firm excels into a few key building blocks of specialised expertise. this makes it difficult to imitate. it also depends on building high-quality relationships across different functions and business units.

Question 27

Prahalad & Hamal’s tests

Answer 27

used to identify firms’ core competencies.

Question 28

core rigidities

Answer 28

firms that have well-developed knowledge sets along a particular trajectory may find it very hard to assimilate or utilise knowledge that appears unrelated to the trajectory they are following, potentially limiting the firm’s flexibility.

Question 29

dynamic capabilities

Answer 29

a set of abilities that make a firm more agile and responsive to change.

Question 30

strategic intent

Answer 30

a company’s long-term goal that is ambitious, builds upon and stretches the firm’s existing core competencies, and draws from all levels of the organisation. it guides the development of new businesses and markets and leverages corporate resources.

Question 31

firm’s purpose

Answer 31

is to create value, which entails improving operations and cutting costs but also leveraging corporate resources to create more performance for customers, more well-being for employees, and more returns for stakeholders. it is important for firms to have a forward orientation.