W06: Global distribution of firm activities

Question 1

Competitive advantage

Answer 1

The prolonged benefit gained from developing and
implementing a unique value-adding strategy that is not simultaneously (or shortly thereafter) imitated by current or potential rivals

If a firm consistently earns higher profits than the industry it possesses a sustainable competitive advantage

Question 2

Sources of competitive advantage

Answer 2

• Spend less money than competitors to develop, produce and sell your product or service
• develop and offer products or services with unique characteristics valued by your customer

Question 3

Value chain Analysis

Answer 3

Primary Activities

1. Inbound logistics
2. Operations
3. Outbound logistics
4. Marketing & Sales
5. Service

Secondary Activities

1. Firm Infrastructure
2. HR Management
3. Technology Development

Question 4

Where activities should be performed: Porter’s competitive advantage of nations - Takeaways

Answer 4

Takeaway
> each nation established a playing field for its industries
> This determines resources firms can rely on or develop and the ensuing firm advantages
> Can explain dominance in certain industries by firms from specific countries

–>Criteria for choosing countries most suitable for performing various value chain activities

Question 5

The Diamond Model by Porter

Answer 5

Government and chance acting on outside

Factor conditions
- Natural resources and created factor conditions

Demand conditions
- Size and sophistication of domestic demand

Related and supporting industries
- High quality, internationally competitive suppliers and supporting industries

Firm strategy, industry structure, and rivalry
- Highly competitive domestic industry prepares firms for facing foreign competition

Question 6

Who should perform the activities

Answer 6

Licensing
> Owner of intellectual property grants another firm the rights to use the property for a specified period of time in exchange for compensation

Franchising
> Firm allows another to use the entire business system in exchange for compensation
> More comprehensive and longer-term than licensing
> Business format franchising - transferring total business
> Master franchiser: Independent company authorized to establish, develop and manage entire franchising network in the market
> Risk: loss of control (McD example in India)