Week 3

Question 1

How to measure competitive advantage (different ratios)

Answer 1

> Accounting measures
Profit ratios
Liquidity ratios
Leverage ratios
Activity ratios

Question 2

Economic measures of competitive advantage compares a firm level of return to its costs of capital instead of the average level of return in the industry. What factors are relevant?

Answer 2

Cost of dept
Cost of equity
Weighted average cost of capital

Question 2

Explain internal analysis: Resource based view

Answer 2

Check if competitive advantages is caused by some sort of fixed resources advantages

Question 3

RBV focuses on:

Answer 3

Resources (Tangible (products) and Intangible (reputation) assets that a firm controls) and Capabilities

Question 4

Assumptions of the RBV.

Answer 4

> Resource heterogeneity
- Different firms may posses different resources
Resource immobility
-May be costly for firms without certain resources to acquire or develop them
-some resources may not spread from firm to firm easily

Question 5

How to determine if a resource or capability has a compentative potential?

Answer 5

VRIO
>Value
>Rarity
>Imitability
>Organisation (is a firm organised to exploit full competitive potential of its resources?)

Question 6

Implications of the RBV

Answer 6

Responsibility on every employee

Managers can under/overestimate the uniqueness of the resources they control

Change Organization if there is an conflict between the resources and the organisation

Cultural culture and teamwork CAN ALSO BE a source of CA!

Question 7

RBV Critics

Answer 7

Tautological
Limited prescriptive implications
Context

Question 8

Business Model

Answer 8

Set of activities that a firm engages in to create and appropriate economic
value.

Question 9

Business Model Canvas

Answer 9

• Practical tool to balance some of the limitations of the RBV
• Great overview of essence firm heterogeneity
• Shows patterns between firm characteristics (e.g. resources) and
  strategies
  Business model canvas

Question 10

What aspects does the BMC Have?

Answer 10

Key Activities
Key Resources
Key partners
Channel
Costs
Consumer relationships
Customer
Revenue
Value proposition

Question 11

SWOT analysis

Answer 11

Strength
Weaknesses
Opportunity
Threats

Question 12

Competitive dynamics in an industry. Give the options of strategic actions firm B can do if firm A’s strategic action lead to competitive advantage

Answer 12

• No response (B has its own comp. adv.)
• Change of tactics
• Change of strategy (DSM, Coal>Chemical)