STRATEGY Session 4/5 Resource-Based View and Competitive Advantage
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Questions and Answers

What can be used as an indication of brand value?

  • Employee turnover rates
  • Product diversification
  • Market share analysis
  • Share price evolution (correct)
  • Which factor can create time compression diseconomies?

  • Historical resource development (correct)
  • Long-term contracts
  • Market expansion strategies
  • High employee turnover
  • Which of the following is NOT considered an intangible resource?

  • Employee qualifications
  • Raw materials (correct)
  • Patents
  • Brand equity
  • What is a key element of competitive advantage mechanisms?

    <p>Ability to create unique resources</p> Signup and view all the answers

    In the resource-based view, what is crucial for maintaining a competitive edge?

    <p>Adapting quickly to market changes</p> Signup and view all the answers

    What is a characteristic of a competitive advantage according to the content?

    <p>It is rare and inimitable.</p> Signup and view all the answers

    What is the primary focus of inter-firm alliances?

    <p>Financial performance of alliance partners.</p> Signup and view all the answers

    What does the Resource-Based View suggest about firm collaborations?

    <p>Firms seek resources that they cannot develop internally.</p> Signup and view all the answers

    According to Institutional Theory, why might a firm pursue collaboration?

    <p>To gain legitimacy in the market.</p> Signup and view all the answers

    What was the aim of the alliance formed between ABB and Samsung?

    <p>To combine complementary technologies.</p> Signup and view all the answers

    How do Coca Cola and the World Wildlife Fund's collaboration exemplify a strategic alliance?

    <p>It enhances both social and environmental legitimacy.</p> Signup and view all the answers

    Which of the following best describes the nature of strategic alliances?

    <p>They are purposive relationships between independent firms.</p> Signup and view all the answers

    In the context of the Resource-Based View, which of the following can be considered a complementary resource?

    <p>Strong distribution channels.</p> Signup and view all the answers

    What is a key feature of Coca-Cola’s partnership with WWF?

    <p>Advancing global environmental goals</p> Signup and view all the answers

    What defines a competitive advantage in a market?

    <p>Ability to earn persistently higher profits</p> Signup and view all the answers

    Which of the following is NOT considered a resource for Cost Leadership Strategy?

    <p>Creative skills</p> Signup and view all the answers

    According to Signaling Theory, what must companies be able to communicate effectively?

    <p>Their unique products and services</p> Signup and view all the answers

    What capability is essential for a Differentiation Strategy?

    <p>Research and development capabilities</p> Signup and view all the answers

    Which of the following represents a source of competitive advantage?

    <p>Strong brand reputation</p> Signup and view all the answers

    What role does collaboration play in strategic alliances?

    <p>Pooling resources to enhance capabilities</p> Signup and view all the answers

    What process is crucial for companies adopting the Cost Leadership Strategy?

    <p>Cost control routines and processes</p> Signup and view all the answers

    What must firms do to achieve differentiation in their products?

    <p>Leverage unique resources and capabilities</p> Signup and view all the answers

    What kind of skills are associated with a Differentiation Strategy?

    <p>Creative and marketing capabilities</p> Signup and view all the answers

    What does the VRIO analysis primarily assess in an organization's capabilities?

    <p>The value and rarity of capabilities</p> Signup and view all the answers

    Which of the following elements is NOT part of a SWOT analysis?

    <p>Risks</p> Signup and view all the answers

    In the context of competitive advantage mechanisms, which capability is considered superior?

    <p>Possessing unique resources that are difficult to imitate</p> Signup and view all the answers

    What is a primary focus when identifying a firm's resources in the value chain?

    <p>Cataloging the firm's assets and capabilities</p> Signup and view all the answers

    How do strategic alliances primarily benefit companies?

    <p>By pooling resources to achieve common goals</p> Signup and view all the answers

    What role does benchmarking play in understanding an organization’s capabilities?

    <p>It compares organizational capabilities against industry standards</p> Signup and view all the answers

    In the context of strategic management, which aspect do capabilities address?

    <p>How resources are managed effectively</p> Signup and view all the answers

    Which statement accurately reflects the relationship between resources and capabilities?

    <p>Capabilities are built from leveraging resources effectively</p> Signup and view all the answers

    Which of the following contributes to building brand value according to competitive advantage mechanisms?

    <p>Establishing emotional connections with customers</p> Signup and view all the answers

    What is a potential disadvantage of forming strategic alliances?

    <p>Risk of losing competitive advantage through shared knowledge</p> Signup and view all the answers

    What is considered a credible signal that a firm produces high-quality products?

    <p>A well-known brand name</p> Signup and view all the answers

    Which of the following describes a method for correcting a firm's weaknesses?

    <p>Outsourcing activities that can be done better by others</p> Signup and view all the answers

    In the resource-based view, what does 'rarity' refer to?

    <p>The uniqueness of a firm's resources</p> Signup and view all the answers

    Which of the following is NOT a way to appraise a firm’s capabilities?

    <p>Scalability</p> Signup and view all the answers

    Which aspect relates to a firm's organized capabilities?

    <p>How well they coordinate their assets</p> Signup and view all the answers

    The concept of 'transferability' in assessing capabilities refers to what?

    <p>Ability to replicate resources across different markets</p> Signup and view all the answers

    What is a key consideration when developing strategy implications related to strengths?

    <p>Exploiting them effectively and fully</p> Signup and view all the answers

    Which of the following statements about strategic alliances is true?

    <p>They can provide access to new resources and capabilities</p> Signup and view all the answers

    Which mechanism is most likely to enhance a firm's competitive advantage?

    <p>Innovative use of technology</p> Signup and view all the answers

    Effectively addressing weaknesses in a firm can be best achieved by:

    <p>Investing in staff training and development</p> Signup and view all the answers

    Study Notes

    Lecture 5 - Internal Company Analysis

    • Lecture 5, Internal Company Analysis, by Prof. Dr. Eva Niesten
    • Use Edusign QR code to register attendance
    • Resources & Capabilities: Identifying, appraising, and accessing resources and capabilities
    • Data Sources: Statista, Google Finance, EPO
    • Strategy Types: Cost strategy, differentiation strategy, and signaling theory
    • Internal Analysis Methods: SWOT analysis, strategic capabilities, benchmarking
    • Strategy Frameworks: Examples of Amazon
    • Key Example: Amazon

    5.1 Resources & Capabilities

    • The firm's goals and values, resources and capabilities, and structure and systems are related to strategy through the firm-strategy interface
    • The industry environment comprises competitors, substitutes, and suppliers, and is related to strategy through the environment-strategy interface
    • Firm effects (up to 55%), industry effects (~20%), and other effects (~25%) influence business cycle effects and unexplained variance
    • Resource-Based View (RBV): Internal resources and capabilities are more stable for strategy than focusing on market or industry when the environment is volatile. Resources and capabilities are the primary sources of profitability across heterogeneous and immobile firms.

    5.1 Resources & Capabilities Definition

    • Resources: Productive assets owned by the firm.
    • Organizational Capabilities: Combining and integrating resources to create organizational skills and competences, i.e., what a firm can do.
    • Core Competences: Fundamental to a firm's strategy, performance, and competitive advantage.

    5.1 Resources & Capabilities - Components

    • Competitive advantage
    • Strategy
    • Organizational capabilities
    • Tangible resources (financial, physical)
    • Intangible resources (technology, reputation, culture)
    • Human resources (skills, communication, collaboration, motivation)

    5.2 Resources & Capabilities - Identification

    • Tangible Resources: Financial (borrowing capacity, internal funds generation), Physical (plant and equipment, size, location, technology flexibility, land and buildings, raw materials)
    • Intangible Resources: Technology (patents, copyrights, know-how, R&D facilities, technical and scientific employees), Reputation (brands, customer loyalty, company reputation, government relations), Human Resources (training, experience, adaptability, commitment, loyalty of employees, employee qualifications, pay rates, turnover)
    • Undervalued or omitted from a firm's balance sheet
    • Divergence between firm's balance sheet and stock-market valuations due to brand of the firm

    5.2 Resources & Capabilities – Appraisal

    • Determining if a resource, capability, or competency is valuable, rare, costly to imitate, and organized
    • If valuable and rare (but costly to imitate and organized): Sustainable competitive advantage
    • If valuable (but not rare, costly to imitate, and organized): Competitive parity
    • If not valuable: Competitive disadvantage
    • If not costly to imitate and not organized: Temporary competitive advantage

    5.2 Resources & Capabilities – Appraisal - Time Compression Diseconomies

    • Time is needed to build a resource or capability
    • Even if rivals know the advantage’s source, they might not be able to recreate the resource in a timely fashion
    • History or path dependence limits imitation

    5.2 Resources & Capabilities – Appraisal – Examples

    • Laphroaig whisky (rare and inimitable)

    5.2 Resources & Capabilities – Access

    • Strategic alliances between firms (exchange, sharing, or co-development of resources or capabilities to achieve mutual benefits)
    • Inter-firm alliances focus on financial performance of alliance partners
    • Public-private partnerships (collaboration between firms and governments)
    • Cross-sector partnerships (collaboration between firms and NGOs)

    5.2 Resources & Capabilities – Access – Theories

    • Resource-Based View: Accessing complementary resources and capabilities (knowledge, finance, markets, distribution channels, production capacity)
    • Institutional Theory: Gaining legitimacy (generalized perception that organizations or activities are desirable or appropriate in an institutional setting)

    5.2 Resources & Capabilities – Access – Examples

    • ABB and Samsung alliance on energy storage
    • Coca-Cola and WWF collaboration

    5.3 Resources for Business Strategy – Defining Competitive Advantage

    • When two or more firms compete in the same market, one firm possesses a competitive advantage over its rivals when they earn (or have the potential to earn) a persistently higher rate of profit.

    5.3 Resources for Business Strategy – Sources of Competitive Advantage

    • Cost advantage (similar product at lower cost)
    • Differentiation advantage (a unique product with a price premium)
    • Porter's generic strategies (cost leadership, differentiation, focus-cost leadership, differentiation, or focus)

    5.3 Resources for Business Strategy – Two Types of Strategies

    • Cost leadership (scale-efficient plants, access to capital, cost control routines, process innovation)
    • Differentiation (creative skills, research and development, product engineering skills, cross-functional coordination skills, marketing capabilities)

    5.3 Resources for Business Strategy – Signaling Theory

    • Communicating unique features of products and services
    • Companies need resources and capabilities to differentiate products and services

    5.3 Resources for Business Strategy – Signaling Timeline

    • Signaler produces high-quality product
    • Information asymmetry exists
    • Receiver wants high-quality product
    • Credible signals: Brand name, extended warranty, etc.

    5.4 Strategy Frameworks - Internal Analysis (SWOT)

    • Strengths and weaknesses are internal to the firm
    • Opportunities and threats are external to the firm
    • Questions: How can the firm use internal strengths to take advantage of external opportunities? How can the firm overcome internal weaknesses that prevent it from taking advantage of external opportunities? How can the firm use internal strengths to reduce the likelihood and impact of external threats? How can the firm overcome internal weaknesses that will make external threats a reality?

    5.4 Strategy Frameworks - Strategic Capabilities

    • Understanding how an organization compares to its competitors
    • How external factors fit with the internal environment (SWOT, VRIO Analysis)
    • Superior capabilities: Valuable, rare, inimitable to competitors, organized to exploit

    5.5 Amazon - Case Study

    5.5 Amazon - Value

    • Founded in 1995 as "Earth's Biggest Bookstore"
    • IPO in May 1997, raising USD 54 million
    • Market capitalization as of September 22, 2024: USD 2.01 trillion, industry codes are Electronic Shopping, Web Services, Internet Broadcasting, Wholesale Trade
    • Stock value in 2024 is 212,788.89% compared to 1997

    5.5 Amazon - Analysis

    • Benchmarking: Understanding how Amazon compares to competitors
    • VRIO Analysis: Valuable, rare, inimitable, organized
    • SWOT Analysis: Strengths, weaknesses, opportunities, treats

    5.5 Amazon - Resources

    • Resources: Financial (borrowing capacity, internal funds generation), Physical (plant and equipment, size, location, technology flexibility, land and buildings, raw materials), Technology (patents, copyrights, know-how, R&D facilities, technical and scientific employees), Reputation (brands, customer loyalty, firm reputation), Culture (organizations' value, traditions, social norms), Human Resources (training, experience, adaptability, commitment, loyalty of employees)
    • Distinctive capabilities (Selection, Price, Convenience)
    • Patents and trademarks (1-click)

    What's Next?

    • Next session: Case study analysis of BEYOND MEAT
    • Online tutorial on internal analysis in Excel
    • Anticipate case study discussion by reading or watching the materials on K2
    • Upload answers to case study questions

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    Related Documents

    Strategy Lecture 5 PDF

    Description

    Test your knowledge on the Resource-Based View of firms and the elements that contribute to competitive advantages. This quiz covers key concepts such as intangible resources and brand value. Challenge yourself with questions focused on strategic management.

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