Exam 1

Question 1

Strategy

Answer 1

The integrated set of choices that positions the business in its industry so as to generate superior financial returns over the long run

Question 2

Resources and capabilities

Answer 2

Include all of the financial, physical, human, and organizational assets used by a firm to develop, manufacture, and deliver products or services to its customers.

Question 3

4 questions about resources and capabilities

Answer 3

1) value 2) rareness 3) imitability 4) organization

Question 4

Question of value

Answer 4

Do a firm’s resources and capabilities add value by enabling it to exploit opportunities and/or neutralize threats?

Question 5

Question of Rareness

Answer 5

How many competing firms already possess these valuable resources and capabilities?

Question 6

Question of Imitability

Answer 6

Do firms without a resource or capability face a cost disadvantage in obtaining it compared to firms that already possess it? Caterpillar and unique historical circumstances.

Question 7

Question of Organization

Answer 7

Is a firm organized to exploit the full competitive potential of its resources and capabilities? Xerox PARC not bringing innovations to market.

Question 8

Value Chain

Answer 8

An analytical tool that illustrates the sequence of activities that constitute the economic performance and capabilities of a firm.

Question 9

Barriers to Entry (threat of new entrants)

Answer 9

Supply-side economies of scale, scope, or experience; demand-side benefits of scale; customer switching costs; capital costs; incumbency advantages; unequal access to distribution channels; restrictive gov’t policy; high barriers to exit; slow industry growth.

Question 10

Bargaining Power of Suppliers Factors

Answer 10

suppliers are more concentrated; industry participants face switching costs; suppliers offer differentiated products; credible threat of forward integration; few substitutes for supplier products; suppliers do not depend heavily on the industry.

Question 11

Bargaining Power of Buyers Factors

Answer 11

Customers are more concentrated; customers face few switching costs; industry products are undifferentiated; credible threat of backward integration; industry purchases represent a significant fraction of their cost; customers earn low profits; customer’s quality is not substantially affected by the industry.

Question 12

Threat of Substitute factors

Answer 12

“closeness” of substitute; performance/price ratio of substitute.

Question 13

Rivalry Factors

Answer 13

product lacks differentiation; fixed costs are high and marginal costs are low; capacity must expand in large increments; product is perishable; competitors are numerous and roughly equal in size; industry growth is slow; exit barriers are high; rivals have diverse approaches.

Question 14

New entrants response

Answer 14

Exploit network effects and economies of scale. Create customer switching costs. Invest to preempt entry. Lock in distribution channels. Develop a reputation for retaliation. Exploit patent protection.

Question 15

Bargaining power of suppliers responses

Answer 15

Use standard instead of proprietary products; secure multiple sources; Encourage mutual dependence.

Question 16

Bargaining power of buyers responses

Answer 16

Build customer loyalty; target small customers; “lock in” customers to increase switching costs. Differentiate the product. Target customer segments that are less sensitive to price.

Question 17

Substitutes response

Answer 17

Cannabalize the business before others do; target consumers of substitutes with new product offerings; exploit complements.

Question 18

Rivalry among existing competitors response

Answer 18

Target less-competitive market segments; Differentiate the product; Create switching costs; seek to dominate a market segment.

Question 19

Value Chain Purpose

Answer 19

Intended to highlight the activities that the firm does differently from competitors, including what it does not do that competitors might.

Question 20

Primary Activities

Answer 20

Inbound logistics, operations, outbound logistics, marketing & sales, post-sales service.

Question 21

Secondary Activities

Answer 21

Procurement of inputs, development of technology and human resources, general firm infrastructure.