Unit 4

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Questions and Answers

What is the main benefit of generating synergies in a related diversification strategy?

Increasing the geographical scope of the firm

Transferring resources and capabilities between businesses (correct)

Enhancing the firm's brand recognition

Minimizing the firm's operational costs

How does internationalization impact a firm's resource utilization?

It broadens resource availability across countries (correct)

It solely focuses on internal resource optimization

It reduces the firm's competitive advantage

It restricts firms to local resources only

What is a key characteristic of resources that can be marketed by a firm?

They require significant investment to develop

They form the foundation of the firm's competitive advantage

They are not the cornerstone of the firm’s competitive advantage (correct)

They are exclusively tailored to the firm's needs

What is the primary purpose of performing a SWOT analysis?

To summarize internal and external factors affecting strategy Signup and view all the answers

At what point can a SWOT analysis be conducted in the strategic analysis process?

Both at the beginning and end of the process Signup and view all the answers

Which activity is NOT considered a primary activity in the value chain?

Technology development Signup and view all the answers

What is the main purpose of procurement in the support activities?

To purchase necessary factors for production Signup and view all the answers

Which type of link arises from interactions between two or more internal activities?

Horizontal links Signup and view all the answers

Which of the following is an activity included in human resource management?

Training and motivation of personnel Signup and view all the answers

How can competitive advantage be gained through optimization?

By reducing costs in other activities Signup and view all the answers

Which activity group is responsible for the design and administration of a firm's operations?

Firm infrastructure Signup and view all the answers

In which situation would vertical links be most relevant?

When coordinating with suppliers and customers Signup and view all the answers

What is a key factor that can lead to competitive advantage through coordination?

Efficiency in undertaking activities Signup and view all the answers

What is the primary focus of cultural capabilities within an organization?

Attitudes and values of individuals Signup and view all the answers

How do organizational routines contribute to a firm's capabilities?

They form a structured approach to coordinating actions. Signup and view all the answers

What is the role of managerial skill in an organization?

To create and enhance organizational routines Signup and view all the answers

Which statement accurately describes dynamic capabilities?

They help in adapting internal and external competences to change. Signup and view all the answers

What is the challenge for management regarding organizational capabilities?

Transforming individual skills into collective capabilities. Signup and view all the answers

Which of the following best describes formal coordination mechanisms?

Established protocols for normalizing tasks and integrating efforts. Signup and view all the answers

What constitutes intellectual capital within a firm?

Intangible resources and capabilities that drive performance. Signup and view all the answers

What is the foundation of creating specific capabilities within an organization?

Individual resources and singular tasks. Signup and view all the answers

What distinguishes a multi-plant firm from a single-part firm?

A multi-plant firm operates several facilities, regardless of their geographic proximity. Signup and view all the answers

Which legal structure is specifically designed to limit owners' liability?

Limited liability companies Signup and view all the answers

What is the main aim of a firm's strategic profile?

To identify and analyze the firm's weak and strong points. Signup and view all the answers

What is one characteristic of intangibles that enhances their durability?

Susceptible to simultaneous use for different functions Signup and view all the answers

What method is used to evaluate the performance of variables in a firm's functional analysis?

Likert scale Signup and view all the answers

Which variable is NOT included in the functional areas of a firm's analysis?

Research and development Signup and view all the answers

Why are intangible resources often difficult to transfer between firms?

They are based on tacit, non-codifiable knowledge Signup and view all the answers

In the evaluation of variables, what does a score of 1 indicate?

Very negative performance Signup and view all the answers

What does the concept of 'imitability' refer to in the context of competitive advantage?

Capability of competitors to replicate resources or capabilities Signup and view all the answers

Which of the following factors does NOT impact the drafting of a firm's profile?

The firm's size Signup and view all the answers

What is a significant problem associated with the transferability of human resources?

They may lose significance without their former team Signup and view all the answers

What is a single-company regime?

A structure where a single firm handles all operations. Signup and view all the answers

What does 'causal ambiguity' help protect in a firm?

Inimitable resources from imitation by rivals Signup and view all the answers

What is a typical consequence when firms transfer specific intangible assets?

They become less valuable when moved to a new firm Signup and view all the answers

What makes complex capabilities more resistant to competitors acquiring them?

The need for a specific set of resources that are not easily transferrable Signup and view all the answers

Which of the following factors contributes to the high transaction costs in transferring resources and capabilities?

The need to transfer entire sets of resources Signup and view all the answers

What makes it difficult for an imitating firm to reproduce a valuable resource or capability?

The complexity and causal ambiguity of the capability. Signup and view all the answers

What is the implication of substitution in terms of competitive advantage?

Greater value is achieved when resources have no substitutes. Signup and view all the answers

Which factor enhances the joint value of a firm's resources and capabilities?

Complementarity between resources. Signup and view all the answers

What does the concept of control rights pertain to in terms of competitive advantage?

Possession of both tangible and intangible resources. Signup and view all the answers

What happens when an imitating firm tries to expedite the development of a vital capability?

The costs incurred will benefit the imitated firm. Signup and view all the answers

Why are complex capabilities more difficult to replicate than simpler ones?

They rely on a broad array of resources that interconnect intricately. Signup and view all the answers

What is implied when rival firms cannot access similar resources from the market?

The firms have a greater competitive advantage. Signup and view all the answers

How do control rights over intangible assets differ from tangible assets?

They can be less clear but are equally important in competitive advantage. Signup and view all the answers

Study Notes

Internal Analysis: A Firm's Internal Diagnosis

Firms' competitive ability often depends more on internal factors (e.g., efficient plants, technology, brand control) than external factors.
Internal analysis aims to identify strengths and weaknesses to improve competitive performance.
Key steps in competitive analysis include understanding the firm's nature, identifying crucial variables, and using metrics.
Metrics assess factors like client numbers and revenue.
Companies often evaluate how customers perceive them against competitors.

A Firm's Identity

Defining a firm's identity provides insight into foundational characteristics.
Identifying a firm's age and size is important for analysis.
Firms can be categorized in age groups such as start-ups, adolescent, developed, mature, or adult.
Firm size is described via indicators such as turnover, assets, and headcount.
Scope of a firm involves its dedicated products or markets and its target customer base.

Functional Analysis and Strategic Profile

Functional analysis examines specialized activities like production, marketing, or financing.
This aids in identifying strengths and weaknesses in each area.
Variables are used to develop a thorough understanding of areas of strength and weakness.
This involves evaluation of each variable via a Likert scale.

The Value Chain

Breaking down a firm into key operations reveals each activity's associated value contribution.
Primary activities are directly involved in the core process such as inbound logistics, operations, outbound logistics, marketing, and after-sales service.
Support activities indirectly support primary activities. (ex. procurement, technology development, human resource management, and infrastructure).
Interrelation of activities in the value chain (links) creates a firm's competitive advantage.

Analysis of Resources and Capabilities

Internal factors are more suitable for strategy in turbulent times, which is common for resource-based views.
Resources and capabilities are unique combinations of assets, skills, and organizational structures that businesses possess and control.
Using a strategic process (stages) helps evaluate internal factors.

Identifying Resources and Capabilities

Resources are the tangible or intangible factors a firm controls. (ex. assets, skills, and qualities).
Capabilities involve skills and organizational routines in performing tasks.
Analyzing firm characteristics reveal both tangible and intangible resources.

Identifying Capabilities

Capabilities are skills in performing activities, which can be developed based on a strategic assessment.
Core competencies refer to distinctive skills differentiating firms from competitors.
Organizational capabilities are developed through the collaboration of individuals and teams.

Dynamic Capabilities

Dynamic capabilities enable firms to adapt to rapidly changing environments.
This involves integrating, re-configuring, renewing resources and capabilities.
These allow companies to maintain a competitive edge over time.

Criteria for Competitive Advantage

Scarcity refers to the uniqueness or rarity of a resource or capability.
Relevance to an industry is determining if a resource or capability adds value.
Durability is the longevity of a resource or capability in the market, with the potential for sustaining a competitive advantage for a firm.
Appropriating rents is determining the degree of control over the rights of the firm's resources and capabilities.

Transferability, Imitability and Substitutability

Transferability measures how easily resources can transfer between companies.
The extent to which resources/capabilities are inimitable dictates the persistence of the competitive advantage. Imitability is measured in terms of causal ambiguity and complexity.
Substitution assesses if there are other resources with similar outcome.

Exploiting the provision of Resources and Capabilities

Improving the provision is essential, as it includes improving existing resources and acquiring new ones through external acquisition.
This involves evaluating and strengthening existing capabilities.
Internal development and external acquisition approaches are crucial for providing and improving resource and capability provisions.

SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats)

SWOT analysis synthesizes internal/external assessment to create a firm overview, aiming to strategize effectively.
It's an approach that identifies strengths, weaknesses, opportunities, and threats for a firm.

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