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Chapter 4
Internal Analysis
| Question | Answer |
|---|---|
| Resources | Any assets, like cash, buildings, machinery, or intellectual property that a firm can draw on when crafting and executing a strategy Tangible or intangible |
| Capabilities | Organizational and managerial skills necessary to orchestrate a diverse set of resources and to deploy them strategically Intangible by nature Shown thru company structure, routines, and culture |
| How to get Capabilities | Acquire through mergers & acquisition Access through strategic alliance Create through routines developed through practice, learning, and experience |
| Core Competencies | Unique strengths embedded deep within a firm > differentiate from competitors > creates high customer value OR low cost of similar value Makes competitive advantage > nourish to maintain Combo of resource & capabilities NOT VISIBLE ONLY |
| Activities | Distinct, fine-grained business processes like order taking, shipping products, invoice customers Comes from core competencies |
| Dynamic Capabilities | Firm’s ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage |
| Resource Based View (RBV) | Resources are the key to superior firm performance Intangible > Tangible to create competitive advantage Critical Assumptions >Resource Heterogeneity >Resource Immobility |
| Critical Assumptions of RBV | Resource Heterogeneity - All firms have unique resources, capabilities, and competencies in the same industry Resource Immobility - Resources are stick - Don't move easily - Hard to imitate |
| VRIO Framework | Valuable Rare Imitation Too Costly Organized to Capture Value |
| VRIO Framework: Valuable? | Firm can use resource --> to exploit an opportunity --> offset an external threat Yes? --> Check rare No? --> Competitive Disadvantage |
| VRIO Framework: Rare? | Only one or few firms possess it Yes? --> Imitation No? Competitive Parity |
| VRIO Framework: Imitation Too Costly? | Firms that don't have the resource have a hard time acquiring or making the resource Two types of imitation > Direct Imitation > Substitution Yes? --> Organized No? --> Temporary Competitive Advantage |
| Direct Imitation | - Copied or imitation of valuable or rare resource - Happens when firms have difficulty protecting their advantage |
| Substitution | - Happens through strategic equivalence --> in-person purchase vs. online purchase |
| VRIO Framework: Organized to Create Value? | Must have an effective organizational structure and coordinating systems Yes? --> Sustainable Competitive Advantage No? --> Temporary Competitive Advantage |
| Dynamic Capabilities Perspective | A firm's ability to modify and leverage its resources to make and sustain a competitive advantage during - technological change - deregulation - globalization - demographic shifts |
| Core Rigidites | What dynamic capabilities perspective tries to avoid When you rely on a core competency without evolving, it can turn into a bad thing |
| Resource Stocks | Firm's current level of intangible resources |
| Resource Flows | Firm's level of investments to maintain and build a resource |
| Value Chain Analysis | Internal activities a firm engages in when transforming inputs into outputs When activities generate a value greater than costs to create them, creates a profit margin |
| Types of Value Chain Analysis Activities | Primary Activities Support Activities |
| Primary Activities | Add value directly Transforms inputs into outputs from raw materials through production phases to sales and marketing and finally customer service Supply Chain Management, Operations, Distribution, Marketing and Sales, After-sales services |
| Support Activities | Add value indirectly R&D, Information Systems, HR, Accy and Fin, firm infrastructure |
| Strategic Activity Systems | A firm is a network of interconnected activities that serve as foundation of competitive advantage Socially Complex Causally Ambiguous Needs to evolve to sustain advantage |
| How to evolve a strategic activity system? | Needs to be evolved as external environment changes and competitors evolve their own systems - Add new activities - Remove irrelevant activities - Upgrade stale activities |
| Isolating Mechanisms | BARRIERS TO IMITATION |
| Types of Isolating Mechanisms | - Better Expectation of Future Resource Value - Path Dependence - Causal Ambiguity - Social Complexity - Intellectual Property (IP) Protection |
| Better Expectation of Future Resource Value | - Look ahead to see how easily imitable the resource could be in the future - Seeing the value a resource COULD have in the future rather than the value it has right now |
| Path Dependence | Process where current options are limited by past decisions |
| Causal Ambiguity | The cause of a competitive advantage is hard to see A situation in which the cause and effect of a phenomenon are not readily apparent |
| Social Complexity | Situations in which different social and business systems interact --> Not individuals Hard to copy a complex social systems is difficult for competitors bc you can’t imitate or substitute |
| Intellectual Property (IP) Protection | Critical intangible resource that can sustain competitive advantage 5 major forms - Patents - Designs - Copyrights - Trademarks - Trade secrets |
Created by:
opon12
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