Internal Analysis

Question 1

What is a Distinctive Competency?

Answer 1

Any unique strength that allows a Firm to:
* Differentiate its products; or
* Achieve substantially lower costs relative to Rivals.

Hill et. al, Strategic Management Theory — P. 83.

Question 2

From where do Distinctive Competencies arise?

Answer 2

• Resources: Control over tangible or intangible, and preferrably scarce, assets.
• Capabilities: Ability to operationally exploit resources for maximal gain .

Both are necessary for the creation of a Distinctive Competency.

Hill et. al, Strategic Management Theory — P. 83.

Capabilities are intangible. They reside not in individuals, but in the way individuals interact, cooperate, and make decisions within the context of an organisation.

Question 3

What is the Role of Distinctive Competencies in Competitive Strategy?

Answer 3

• Distinctive Competencies influence which strategies the Firm will adopt; but equally,
• The Firm’s strategies determine which Distinctive Competencies it will develop.

Hill et. al, Strategic Management Theory — P. 85.

Question 4

What determines a Firm’s profitability?

Answer 4

The combination of a product’s:
* Value: The utility users place on it.
* Price: The sum charged for it.
* Cost: The expenses associated for it.

Hill et. al, Strategic Management Theory — P. 85.

Always remember: the more value users place on a product, the more pricing options the Firm has.

Question 5

What are the two General Pricing Options Firms can pursue?

Answer 5

• High Cost, High Price: The higher cost of superior design creates higher value, which enables higher prices.
• Low Cost, Low Price: The lower cost of efficient scale enables lower prices, which creates higher value.

Ideally, you improve the product while realising scale, but this rare.

Hill et. al, Strategic Management Theory — P. 87.

An intelligent pricing strategy requires reliable data on cost and demand at different levels of output.

Question 6

What is a Value Chain?

Answer 6

The idea that a Firm’s activities sequentially transform inputs into outputs, adding value at every step.

Hill et. al, Strategic Management Theory — P. 89.

Refer to the Wheel of Competitive Strategy for an overview of these activities.

Question 7

What Strategies can a Firm use to increase its Profitability?

Answer 7

• Superior Quality: This increases value.
• Superior Efficiency: This decreases costs.
• Superior Innovation: This may increase value or decrease costs.
• Superior Customer Service: This increases value.

Increases in value constitute greater differentiation.

Hill et. al, Strategic Management Theory — P. 93.

Question 8

What are the Two Types of Quality?

Answer 8

• Quality as Reliability: The product provides utility for longer.
• Quality as Excellence: The product provides greater utility.

Hill et. al, Strategic Management Theory — P. 94.