Internal Analysis of Firms

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Questions and Answers

What is the primary benefit of a related diversification strategy?

Enables sharing or transferring of resources and capabilities (correct)

Enhances product quality through innovation

Minimizes operational costs through outsourcing

Reduces competition in the market

What does the concept of marketing resources and capabilities imply for firms?

Selling capabilities is essential for maintaining competitive advantage

They should exclusively keep their resources within the firm

Internal resource management is more important than external resource utilization

They can generate income by leasing out non-core resources (correct)

In what phase of strategic analysis can a SWOT analysis be conducted?

Before any other strategic tools are utilized

Only at the beginning to identify problems

Only at the end as a summary of findings

At both the beginning and the end of the strategic analysis process (correct)

Which of the following is a component of a SWOT analysis?

Strengths, Weaknesses, Opportunities, and Threats Signup and view all the answers

How does a SWOT analysis contribute to strategic management?

It highlights key management issues for strategy selection Signup and view all the answers

What is the ultimate repository of knowledge in a firm?

Human capital Signup and view all the answers

Why is the accumulation of intangible assets typically challenging?

They involve high investment and have appropriation issues. Signup and view all the answers

Which of the following is a key component of a successful human resources policy?

Long-term assessment of targets and continuous improvement Signup and view all the answers

What supports the flow of knowledge and organizational learning in a firm?

Flexible organizational structure Signup and view all the answers

How should a competitive strategy utilize resources and capabilities?

In the firm's current operations for competitive advantage Signup and view all the answers

What is critical for exploiting resources effectively?

Identifying strengths and addressing weaknesses Signup and view all the answers

What is a direction that a corporate strategy may take when utilizing surplus resources?

Diversification into new products or markets Signup and view all the answers

What is essential for reinforcing an organization's culture?

Values that favor specialist knowledge and continuous improvement Signup and view all the answers

Which activity is NOT classified as a primary activity in the value chain?

Procurement Signup and view all the answers

What is the main purpose of technology development in the value chain?

To improve and manage technologies Signup and view all the answers

Which of the following describes horizontal links in the value chain?

Interactions among internal activities Signup and view all the answers

Which type of link involves relationships between a firm's value chain and its suppliers or customers?

Vertical links Signup and view all the answers

What is a benefit of optimizing interrelations between activities in the value chain?

Reduced costs in undertaking other activities Signup and view all the answers

Which activity is associated with human resource management in the value chain?

Training and motivating personnel Signup and view all the answers

Which statement about competitive advantage is true?

It may arise from links between activities. Signup and view all the answers

What is the primary function of support activities in the value chain?

To enhance primary activities' efficiency Signup and view all the answers

What should a strategic profile be compared against to avoid misinterpretation of strengths and weaknesses?

Industry leaders or benchmarks Signup and view all the answers

What is a potential issue caused by a subjective evaluation in a strategic profile?

It could lead to underestimating competitor capabilities Signup and view all the answers

Why is a static strategic profile considered a limitation?

It does not consider changing market dynamics Signup and view all the answers

What is a core purpose of analyzing a firm's value chain?

Identify sources of competitive advantage Signup and view all the answers

Which of the following is NOT part of the primary activities in the value chain?

Market analysis Signup and view all the answers

What does a firm's value system encompass?

The firm's value chain and its suppliers and customers' value chains Signup and view all the answers

Which of the following best describes the role of primary activities in the value chain?

They are directly involved in delivering the product or service to the customer. Signup and view all the answers

In understanding costs within the value chain, what aspect is critical?

Evaluating the cost of operations versus the price customers are willing to pay Signup and view all the answers

What is the primary benefit of managing interrelations between the firm and its suppliers/customers?

It favors both parties involved. Signup and view all the answers

What crucial role does the information system play in a firm's operations?

It is essential for optimizing and coordinating activities. Signup and view all the answers

What is the effect of turbulent environments on a firm's strategy?

It encourages focus on internal aspects rather than external ones. Signup and view all the answers

What does the Resource-Based View primarily assess?

A firm's resources and capabilities for competitive advantages. Signup and view all the answers

What premise supports the uniqueness of firms in the context of resources and capabilities?

Firms are different due to their specific resources and capabilities. Signup and view all the answers

What should be the first step in analyzing a firm's resources and capabilities?

Identify and measure the firm's own resources and capabilities. Signup and view all the answers

What is meant by 'imperfect mobility' in the context of resources?

Only certain firms can access specific resources under unique conditions. Signup and view all the answers

Why might a firm discard some activities from its value chain analysis?

Because those activities do not show competitive advantages. Signup and view all the answers

What is the primary purpose of internal analysis in a firm?

To identify a firm's strengths and weaknesses Signup and view all the answers

Which of the following is NOT a characteristic to determine a firm's identity?

Type of customer feedback Signup and view all the answers

What does the 'scope of the firm' primarily refer to?

The range of products and markets the firm serves Signup and view all the answers

Which metric is NOT typically used to measure the size of a firm?

Market share Signup and view all the answers

What is a crucial factor in analyzing how a firm is perceived locally?

Geographical scope Signup and view all the answers

Which aspect relates to the firm's ownership structure?

Type of ownership Signup and view all the answers

How important are technological processes in a firm's internal analysis?

They are critical for determining competitive advantage Signup and view all the answers

Which variable does NOT typically fall under the internal analysis metrics?

Market conditions Signup and view all the answers

Study Notes

Internal Analysis: A Firm's Internal Diagnosis

Internal aspects of a firm (efficient plants, technology, localization, brands, distribution) are more important for competitiveness than external factors.
Internal analysis aims to identify strengths and weaknesses to achieve competitive performance.
Competitive analysis determines how a company excels to stay in the market.
Understanding a firm involves identifying its nature and essential characteristics.
Key variables for firm analysis (like number of clients and revenue) are crucial, particularly for technological companies.
Firm identity encompasses a firm's purpose and defining traits.

A Firm's Identity

Firm purpose determines its nature and characteristics.
Age (startup, adolescent, developed, mature), size (small, medium, large), and scope (combination of products/markets, functions/needs, target customer groups) are key defining factors.

Functional analysis of a Firm's strategic profile

Functional analysis examines specialized firm activities (production, marketing, finances, HR).
Strategic profile uses internal analysis to identify strengths and weaknesses across functional areas.
Drafting the profile involves making a list of variables, relevant to the industry and company, to perform a comprehensive diagnosis.
Variable evaluation uses a Likert scale (1-5) to rate performance (very negative, negative, neutral, positive, very positive).

The Value Chain

Value chain analysis divides a firm into key operational steps needed to deliver a product or service.
Primary activities (inbound logistics, operations, outbound logistics, marketing/sales, after-sales service) directly relate to the product or service.
Support activities (procurement, technology development, human resource management, firm infrastructure) facilitate primary activities.

Value Chain Interrelations

Optimization (best performance) and coordination reduce costs and improve efficiency between activities.
Horizontal links connect various internal activities.
Vertical links connect a firm's value chain to its suppliers and customers.
Just-in-time systems help coordinate suppliers and production systems efficiently.
Information systems are key for optimizing inter-activity coordination.

Analysis of Resources and Capabilities

A resource-based view assesses firm potential for establishing competitive advantage through resources and capabilities.
Resources are tangible (physical) and intangible (knowledge based).
Capabilities are a firm's skillsets and organizational routines for completing specific activités.

Identifying Resources

Tangible resources (recorded on balance sheets) are easier to identify and measure.
Intangible resources (knowledge, brands, reputation) are more difficult to quantify.

Identifying Capabilities

Core capabilities/distinctive competences differentiate a firm from competitors.
Functional capabilities (technical and management) are designed to manage specific firm tasks.
Cultural capabilities (related to values and behavior) manage organizational changes by firms.

Dynamic Capabilities

Dynamic capabilities allow firms to integrate, reconfigure, adapt, and develop resources and capabilities for effective strategic adaptation in response to environmental changes.

Criteria for Obtaining and Sustaining Competitive Advantages

Scarcity refers to the availability of a resource to other competitors.
Relevance relates the use of a resource to compete in a particular industry.
Durability refers to lasting competitive advantages.

Transferability of Resources

Resources are transferable if there's a market mechanism (purchase/sale).
Intangible resources (knowledge, brand) have high transferability costs.

Imitability

Casual ambiguity makes resources or capabilities hard to imitate.
Causal ambiguity arises from the difficulty other firms have imitating the source of another firm's competitive advantage.
Resources or capabilities are less imitable with increasing complexity and the time needed to acquire them.

Exploiting Resources and Capabilities

Exploiting resources and capabilities effectively through appropriate corporate strategies is crucial to achieving success.
Corporate strategy can explore alternative activities and markets with existing resources and capabilities.
Firms benefit and expand business with resource exploitation methods involving internal development and external acquisition.

SWOT Analysis

SWOT analysis provides an overview of both internal and external factors affecting firm strategy. Strengths, weaknesses, opportunities, and threats are assessed.

Limitations of SWOT analysis

SWOT analysis provides a snapshot in time and doesn't consider future trends.
It lacks integration between internal and external analysis areas.

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Description

This quiz explores the importance of internal analysis in a firm's competitiveness. It covers key aspects such as a firm's identity, strategic profile, and factors that define its strengths and weaknesses. Test your understanding of how internal elements contribute to a firm's success in the market.