Resources and Capabilities in Business
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Questions and Answers

What should the stem of a multiple choice question primarily present?

  • A clear and definite problem (correct)
  • A broad topic of discussion
  • Irrelevant material to engage the reader
  • Complex concepts that are hard to understand

    • Which of the following is true about the options in a multiple choice question?

  • They should be worded in a confusing manner
  • They must use the phrase 'none of the above'
  • They should be mutually exclusive and plausible (correct)
  • They can give hints about the correct answer

    • What is a common mistake when constructing distractors for multiple choice questions?

  • Adding too many options
  • Including clues in distractors
  • Making the correct answer too obvious (correct)
  • Using complex language to confuse students

    • What should not be included in the 'info' section after a student answers a question?

    <p>References to the source of information</p> Signup and view all the answers

    What type of resources allow a company to create value for its customers?

    <p>Both tangible and intangible resources</p> Signup and view all the answers

    What primarily shapes a company's distinctive competencies?

    <p>The skills in coordinating resources</p> Signup and view all the answers

    Which of the following describes a characteristic of the correct answer in a multiple choice question?

    <p>It should be the best answer to the question posed</p> Signup and view all the answers

    Which of the following best describes consumer surplus?

    <p>The utility a consumer receives beyond the price paid</p> Signup and view all the answers

    Which factor is NOT one of the basic factors determining a company's profitability?

    <p>Market competition levels</p> Signup and view all the answers

    What is the outcome of building capabilities within a firm?

    <p>Improved management of resources</p> Signup and view all the answers

    What is product innovation primarily focused on?

    <p>Creating products perceived as more valuable by customers</p> Signup and view all the answers

    How does process innovation benefit a company?

    <p>By lowering production costs and increasing pricing options</p> Signup and view all the answers

    What aspect is integral to superior responsiveness to customers?

    <p>Superior quality and innovation</p> Signup and view all the answers

    What does enhanced customer responsiveness include?

    <p>Customer response time and after-sales service</p> Signup and view all the answers

    What is a result of superior responsiveness to customers?

    <p>Increased brand loyalty and premium pricing</p> Signup and view all the answers

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

    <p>Information systems</p> Signup and view all the answers

    What is one of the benefits of superior efficiency in a company's operations?

    <p>Lower cost structure</p> Signup and view all the answers

    Which activity falls under support activities in the value chain?

    <p>Human resources</p> Signup and view all the answers

    How can superior customer responsiveness benefit a company?

    <p>It can create a competitive advantage in both low cost and differentiation.</p> Signup and view all the answers

    Which of the following best describes the outcome of leveraging generic distinctive competencies?

    <p>Enhanced product utility to customers</p> Signup and view all the answers

    What is one reason companies struggle to adapt their strategies?

    <p>Inertia related to past strategic commitments</p> Signup and view all the answers

    Which of the following is NOT a building block of competitive advantage?

    <p>Market dominance</p> Signup and view all the answers

    What does the Icarus Paradox suggest about companies that have experienced past success?

    <p>They may lose sight of market realities.</p> Signup and view all the answers

    What approach can companies use to measure against their competitors?

    <p>Tracking best practices and benchmarking</p> Signup and view all the answers

    Which of the following should companies emphasize to overcome inertia?

    <p>Instituting continuous improvement and learning</p> Signup and view all the answers

    What primarily shapes a company's distinctive competencies?

    <p>Development of human capital</p> Signup and view all the answers

    Which factor is essential for creating value for customers?

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

    What aspect does NOT contribute to a company's profitability?

    <p>Employee turnover rate</p> Signup and view all the answers

    Which of the following best defines consumer surplus?

    <p>The excess of utility received over the price paid</p> Signup and view all the answers

    What is the key outcome of building capabilities within a firm?

    <p>Enhanced competitive advantage</p> Signup and view all the answers

    What does the difference between value and cost signify?

    <p>Value created</p> Signup and view all the answers

    Which statement is true regarding Toyota compared to General Motors?

    <p>Toyota has a larger value-price gap.</p> Signup and view all the answers

    What does a higher value-price gap indicate about a company?

    <p>It can charge consumers higher prices.</p> Signup and view all the answers

    What aspect must be superior for effective value creation?

    <p>Greater perceived utility compared to the production costs.</p> Signup and view all the answers

    Which of the following represents consumer surplus?

    <p>V - P</p> Signup and view all the answers

    What defines a competitive advantage for a company?

    <p>Profitability greater than the average of industry competitors</p> Signup and view all the answers

    Which measure is used to calculate a company's profitability?

    <p>Net profit divided by capital invested</p> Signup and view all the answers

    What largely contributes to the durability of a company's competitive advantage?

    <p>Barriers to imitation and industry dynamics</p> Signup and view all the answers

    What does 'absorption capacity' refer to in the context of competitive advantage?

    <p>Ability to identify, value, assimilate, and use knowledge</p> Signup and view all the answers

    Which factor relates to the strategic commitment in maintaining a competitive advantage?

    <p>Adopting a specific way of doing business</p> Signup and view all the answers

    What defines a firm's competitive advantage?

    <p>A firm's profitability exceeds the industry average.</p> Signup and view all the answers

    What is the primary goal of strategy in a firm?

    <p>To achieve a sustained competitive advantage.</p> Signup and view all the answers

    Which step focuses on understanding how companies create value for customers?

    <p>Understand the process for creating value.</p> Signup and view all the answers

    What aspect is NOT part of the three-step process in internal analysis?

    <p>Customer loyalty assessment.</p> Signup and view all the answers

    In the context of competitive advantage, which of the following factors is associated with maintaining sustained profitability?

    <p>Creating distinctive competencies.</p> Signup and view all the answers

    Study Notes

    Resources & Capabilities

    • Resources are tangible and intangible assets that allow companies to generate value for their customers.
    • Tangible resources include physical assets like factories and equipment.
    • Intangible resources include non-physical assets like brand reputation, know-how and intellectual property.
    • Firms can create value by effectively managing their resources and capabilities, which differentiate them from competitors.
    • Firms with resources creating high demand for their products can develop distinctive competencies.
    • Capabilities are the firm’s ability to coordinate resources and put them to productive use.
    • Capabilities emerge from a company's organizational structure, processes, and controls.
    • Firms with firm-specific capabilities in managing resources also develop distinctive competencies.
    • Distinctive competencies, like efficiency, quality, innovation, and customer responsiveness, allow companies to create competitive advantage.

    Competitive Advantage & Profitability

    • A company's profitability depends on the value it creates for customers, the price it charges, and the cost of creating its products.
    • Value represents the utility consumers gain from a product.
    • Companies can maximize profits by creating products with high utility, charging high prices, or having low production costs.
    • Customer surplus is the difference between the value and price paid.
    • Companies with higher customer surplus have more pricing options.

    Innovation

    • Innovation creates new products or processes.
    • Product innovation creates products more valuable to customers or lowers production costs.
    • Process innovation lowers production costs or creates more valuable processes.
    • Both product and process innovation enhance a company's competitive advantage.

    Responsiveness to Customers

    • Superior responsiveness to customers helps companies create higher value than their competitors.
    • Companies can satisfy customer needs better by providing higher quality, innovating, customizing goods, offering faster response times, or providing better service and support.
    • Superior responsiveness leads to brand loyalty and allows higher premium pricing.

    The Value Chain

    • A company is a series of activities that transform inputs into outputs valued by customers.
    • The value chain consists of primary activities and support activities.
    • Primary activities are directly involved in creating and delivering products to customers.
    • These activities include R&D, production, marketing & sales, and customer service.
    • Support activities, like infrastructure, materials management, information systems, and human resources, support the primary activities.

    Building Blocks of Competitive Advantage

    • Companies can build a competitive advantage by developing distinctive competencies in efficiency, quality, innovation, and customer responsiveness.
    • Superior efficiency allows companies to have low cost structures.
    • Superior quality and innovation allow companies to differentiate themselves from competitors.
    • Superior customer responsiveness builds brand loyalty and allows higher premium pricing.

    Why Companies Fail

    • Companies find it difficult to change their strategies and structures.
    • Past commitments can restrict the company's ability to change and create competitive disadvantage.
    • Companies can be specialized or inner-directed based on success and lose sight of market realities, known as the Icarus paradox.
    • Companies can be classified as craftsmen, builders, pioneers, or salespeople.

    Avoiding Company Failure & Sustaining Competitive Advantage

    • Companies must focus on the building blocks of competitive advantage, including efficiency, quality, innovation, and customer responsiveness.
    • Companies must encourage continuous improvement and learning.
    • Companies must track best practices and benchmark against global competitors.
    • Companies must overcome barriers to change, and proactively adapt to market changes.
    • Companies must exploit opportunities to improve, but remember success is often a result of hard work, not just luck.

    Value Creation per Unit

    • Value creation is the difference between the value a customer places on a product and the cost to produce the product.
    • Customer surplus is the difference between the value and price of a product.
    • Profit margin is the difference between the price and cost of a product.

    Comparing Toyota & General Motors

    • Toyota has a larger value-price gap and a smaller cost compared to General Motors.
    • This means Toyota creates more value, allows for higher prices, and has a lower cost structure than General Motors.

    Analyzing Competitive Advantage & Profitability

    • A company has a competitive advantage when its profitability is higher than the average of its competitors.
    • Benchmarking compares company performance against its competitors and its historical performance.
    • Return On Invested Capital (ROIC) measures a company's profitability, calculated by dividing net profit by capital invested.
    • Net profit is the difference between total revenue and total costs.

    Durability of Competitive Advantage

    • The durability of a competitive advantage depends on barriers to imitation, competitor's learning capacity, and industry dynamics.
    • Barriers to imitation hinder others from replicating a company's distinctive competencies.
    • A company's ability to learn and adopt knowledge from competitors is called absorptive capacity.

    Internal Analysis: A Three-Step Process

    • Understand the process by which companies create value for customers and profit for themselves.
    • Analyze the company’s strengths and weaknesses driving profitability.
    • Identify opportunities for improvement in the company's strengths and weaknesses.

    Competitive Advantage

    • Competitive advantage: Firm's profitability is greater than the average of the industry
    • Sustained competitive advantage: Firm maintains above average and superior profitability for years.
    • The Primary Objective of Strategy: Achieving a Sustained Competitive Advantage resulting in Superior Profit and Profit Growth

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    Description

    This quiz explores the concepts of resources and capabilities that enable firms to generate value and gain competitive advantage. It covers both tangible and intangible resources, how firms manage these elements, and the significance of distinctive competencies. Test your knowledge on key business strategies related to resource management.

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