Strategic Management Concepts Quiz

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Questions and Answers

What is the main purpose of a SWOT analysis?

To analyze a company's financials and determine its market value.

To identify strengths, weaknesses, opportunities, and threats, and use them to create a strategic plan. (correct)

To assess the competitive landscape and identify direct competitors.

To list all the possible opportunities and threats facing a company.

Which of the following is NOT a danger of a SWOT analysis?

Creating a long list of items without prioritizing them.

Developing strategic options using a TOWS matrix. (correct)

Using SWOT as a substitute for detailed analysis.

Overgeneralizing statements based on unsupported opinions.

What is a key distinction between dynamic capabilities and ordinary capabilities?

Dynamic capabilities are necessary for efficient day-to-day operations.

Dynamic capabilities are only used for developing new products and services.

Dynamic capabilities are only relevant for large, multinational companies.

Dynamic capabilities are focused on adapting to changing environments. (correct)

Which of these is an example of a 'sensing capability'?

Conducting a customer satisfaction survey. Signup and view all the answers

Which of the following is NOT a method for developing internal capabilities?

Acquiring existing capabilities from outside the company. Signup and view all the answers

How do 're-configuring capabilities' differ from 'seizing capabilities'?

Re-configuring capabilities involve adapting existing capabilities, while seizing capabilities involve creating new ones. Signup and view all the answers

What does 'stretching capabilities' refer to?

Developing new capabilities based on existing strengths. Signup and view all the answers

What is the primary focus of a SWOT analysis compared to an analysis of dynamic capabilities?

SWOT focuses on identifying the company's current state, while dynamic capabilities analysis focuses on its future potential. Signup and view all the answers

What does the resource-based view (RBV) of strategy primarily emphasize?

The distinctive capabilities of an organization as the source of competitive advantage. Signup and view all the answers

Which of the following best describes 'resources' in the context of an organization?

The assets that a company possesses or can access, like equipment or capital. Signup and view all the answers

What are 'capabilities' often referred to as?

The competences of the organization. Signup and view all the answers

What can happen to capabilities that were once effective as industries change?

They can become rigid and hinder change, becoming a weakness. Signup and view all the answers

What are 'threshold capabilities' primarily needed for?

To meet necessary requirements for competing and achieving parity. Signup and view all the answers

What is the hallmark of 'distinctive capabilities'?

They are valuable to customers and difficult for competitors to imitate. Signup and view all the answers

In the context of resources and capabilities, what does the phrase 'what we have' primarily refer to?

The assets that an organization can call upon. Signup and view all the answers

In the context of resources and capabilities, what does 'what we do well' refer to?

The organization's capabilities and use of assets. Signup and view all the answers

What is the main characteristic of tacit knowledge?

Difficult to formalise and communicate. Signup and view all the answers

Which of the following is NOT a criterion in VRIO analysis?

Imitable Signup and view all the answers

What does the value chain primarily describe?

The categories of activities that create a product or service. Signup and view all the answers

What is the distinction between primary and support activities in a value chain?

Primary activities are directly involved in creating or delivering a product/service, while support activities improve the effectiveness of primary activities. Signup and view all the answers

What is the primary function of core competencies within a business?

To deliver customer value and differentiate the business. Signup and view all the answers

According to the VRIO framework, when are strategic capabilities considered valuable?

When they capitalize on opportunities, neutralize threats, and offer customer value. Signup and view all the answers

What does the value system represent in the context of this text?

The inter-organisational links and relationships necessary to create a product/service. Signup and view all the answers

What does 'rarity' signify in the context of the VRIO framework?

Capabilities unique to one organisation or possessed by only a select few. Signup and view all the answers

Which of the following is NOT a described use of the value chain?

Identifying activities where the organisation can obtain funding. Signup and view all the answers

Why might the rarity of a capability be considered temporary?

Because patents expire, key people might leave, or brands can be devalued. Signup and view all the answers

What is the main way competitive advantage can be derived from the value system?

Through links and relationships within the value system. Signup and view all the answers

In what context does inimitability relate to building a sustainable competitive advantage?

Competences and the way they're integrated are more sustainable than individual resources. Signup and view all the answers

What is the purpose of VRIO analysis?

To evaluate if an organisation has resources and capabilities that can lead to a competitive advantage. Signup and view all the answers

What does 'Organisational support' refer to within the VRIO framework?

The suitability of an organisation's processes and systems to support its capabilities. Signup and view all the answers

Which of the following is NOT a key criterion for achieving sustainable competitive advantage, according to the text?

Novelty Signup and view all the answers

What is a core competence MOST likely to achieve?

Differentiated products or services, and greater customer value Signup and view all the answers

What criteria do resources and capabilities need to fulfill to provide sustainable competitive advantage?

Valuable, Rare, Inimitable, Supported by the Organisation Signup and view all the answers

Which of the following methods helps diagnose an organization’s resources and capabilities?

SWOT Analysis Signup and view all the answers

What should organizations do to maintain their competitive advantage in changing environments?

Adapt and change resources and capabilities Signup and view all the answers

Which approach allows an organization to identify detailed activities that support its resources and capabilities?

Activity Systems Mapping Signup and view all the answers

What aspect of capability development involves ceasing non-core activities?

Internal optimization strategy Signup and view all the answers

What does the analysis of profit pools aim to identify?

The levels of profit in different parts of the system Signup and view all the answers

What is the primary purpose of mapping activity systems?

To identify clusters of activities and their interrelations Signup and view all the answers

In which type of benchmarking does an organization compare itself to the best performers in any industry?

Best-in-class benchmarking Signup and view all the answers

What does the VRIO framework help identify?

Valuable, rare, inimitable, and organized resources for competitive advantage Signup and view all the answers

What is a crucial aspect of the 'make or buy' decision?

Evaluating existing capabilities and outsourcing options Signup and view all the answers

What does SWOT analysis primarily provide?

A summary of strengths, weaknesses, opportunities, and threats Signup and view all the answers

How does benchmarking typically benefit organizations?

By understanding performance relative to competitors Signup and view all the answers

What is a characteristic of superfluous activities?

They do not add value to the value chain Signup and view all the answers

Study Notes

Learning Outcomes

Identify organizational resources and capabilities, and how they relate to organizational strategies.
Analyze how resources and capabilities provide sustainable competitive advantage based on value, rarity, inimitability, and organizational support (VRIO).
Diagnose resources and capabilities using benchmarking, VRIO analysis, value chain analysis, activity systems mapping, and SWOT analysis.
Consider how resources and capabilities can be developed using dynamic capabilities.

Resources and Capabilities: Key Issues

What are resources and capabilities?
What types of resources and capabilities contribute to competitive advantage and superior performance?
How can resources and capabilities be evaluated?
How can resources and capabilities be developed and managed?

Resource-Based Strategy

The resource-based view (RBV) of strategy asserts competitive advantage and superior performance are explained by the distinctiveness of organizational capabilities.
It is sometimes called the 'capabilities view'.

Foundations of Resources and Capabilities

Organizational resources and capabilities contribute to long-term survival and potentially to competitive advantage.
Resources are organizational assets, including those obtained from partners and suppliers ('what we have').
Capabilities are the ways those assets are used and deployed ('what we do well').

Table 4.1: Resources and Capabilities

Resources (what we have)	Capabilities (what we do well)
Machines, buildings, raw materials, patents, databases, computer systems	Ways of achieving plant utilization, efficiency, productivity, flexibility, marketing
Balance sheet, cash flow, suppliers of funds	Ability to raise funds and manage cash flow, debtors, creditors
Managers, employees, partners, suppliers, customers	How people gain and use experience, skills, knowledge, build relationships, motivate others, and innovate

Redundant Capabilities

Capabilities, even if effective in the past, can become less relevant as industries evolve and change.
These capabilities can become rigidities, hindering change and becoming weaknesses.

Threshold and Distinctive Capabilities

Threshold capabilities: Necessary for organizations to compete and achieve parity with competitors in a given market ('qualifiers').
Distinctive capabilities: Required to achieve competitive advantage, offering value to customers and difficult for competitors to imitate ('winners').
A table showing threshold resources/competencies and distinctive resources/competencies.

Core Competences

Core competences are linked skills, activities, and resources that deliver value, differentiate a business from competitors, and can be extended and developed as markets change or new opportunities arise.

Strategic Capabilities and Competitive Advantage

The four criteria to assess capabilities for achieving sustainable competitive advantage: value, rarity, inimitability, and organizational support (VRIO).

VRIO (Value, Rarity, Inimitability, Organizational Support)

Value: Resources and capabilities are valued by customers and support response to opportunities and threats.
Rarity: Resources and capabilities are not (or are rarely) possessed by competitors.
Inimitability: Resources and capabilities are difficult and costly for competitors to imitate or obtain.
Organizational Support: Organizational structure supports the exploitation of valuable, rare, and inimitable resources and capabilities.

VRIO (2 of 5)

Strategic capabilities are valuable when they take advantage of opportunities, neutralize threats, provide value to customers, and are offered at a cost that allows acceptable profit.

VRIO (3 of 5)

Rare capabilities are unique to one organization or possessed by a few others.
Rarity may be temporary (e.g., patents expire, key personnel leave, brand reputation degrades).

VRIO (4 of 5)

Inimitable capabilities are difficult and costly for competitors to imitate, obtain, or substitute.
Competitive advantage may stem from unique resources (e.g., a key individual or IT system.)
Sustainable advantage often lies in competences—how resources are managed, developed, and deployed—and how competencies are linked and integrated.

Criteria for the Inimitability of Resources and Capabilities

Complexity: Organizational linkages (internal and external).
Causal Ambiguity: Characteristic and linkage ambiguity.
Culture and History: Taken-for-granted activities and path dependency.

VRIO (5 of 5)

Organizational support is crucial; the organization needs proper structure to exploit valuable, rare, and inimitable capabilities through processes and systems.

Organizational Knowledge

Organizational knowledge is company-specific, collective intelligence developed through formal systems and shared experiences.
Explicit knowledge (objective): Transmitted formally (e.g., manuals, market research).
Tacit knowledge (personal): Context-specific, difficult to formalize or communicate, and challenging to imitate (e.g., knowledge and relationships in an R&D team).

VRIO Analysis

VRIO analysis assesses the extent to which an organization has valuable, rare, inimitable, and organizationally supported resources and capabilities.

The Value Chain (1 of 2)

The value chain describes organizational activities creating a product or service.
Value chains consist of five primary activities (creation or delivery of a product or service) and four support activities (improving effectiveness/efficiency of primary activities).
Competitive advantage can be analyzed in any activity of the value chain.

The Value Chain (2 of 2)

Diagram illustrating the value chain with primary activities (inbound/outbound logistics, operations, marketing/sales, service) and support activities (firm infrastructure, human resource management, technology development, procurement).

The Value System (1 of 2)

The value system comprises interorganizational links and relationships necessary for creating a product or service.
Competitive advantage can be derived from linkages within the value system.

The Value System (2 of 2)

A diagram of the value system showing inter-organizational links/relationships (supplier, organization, channel, customer).

Uses of the Value Chain

Generic description of activities and how related activities contribute to consumer benefit.
Identifying organizational strengths and weaknesses within specific activities.
Analyzing competitive position using VRIO criteria to identify sources of sustainable advantage.
Looking for ways to enhance value or decrease costs in value activities (e.g., outsourcing).

Uses of the Value System

Understanding cost/price structures.
Identifying profit pools.
Making "make-or-buy" decisions.
Establishing strategic partnerships.

Mapping Activity Systems (1 of 2)

Identifying higher-order strategic themes; how organizations meet critical success factors.
Identifying clusters of activities supporting these themes and how they fit together.
Mapping interrelated activity systems.

Mapping Activity Systems (2 of 2)

Diagram illustrating interconnected activities (e.g. recruitment, learning opportunities, internal evaluation).

Using Activity System Maps

Relationship to value chain. Understanding strategic capabilities in activities and linkages.
Importance of linkages and fit.
Relationship to VRIO.
Superfluous activities.

Benchmarking

Benchmarking is a method of understanding how an organization compares to others (typically competitors).
Two approaches to benchmarking:
- Industry/sector benchmarking: Comparing performance to similar organizations within the same industry/sector.
- Best-in-class benchmarking: Comparing performance to the best performer in any industry, even if dissimilar.

SWOT Analysis

SWOT analysis summarizes strengths, weaknesses, opportunities, and threats.
Internal analysis = strengths and weaknesses.
External analysis = opportunities and threats.

Uses of SWOT Analysis (1 of 2)

Identifying major strengths and weaknesses using chapter 4 analytic tools.
Scoring (e.g., +5 to -5) to assess the inter-relationship between environmental impacts and strengths/weaknesses.
Examining strengths and weaknesses relative to competitors.

Uses of SWOT Analysis (2 of 2)

Identifying key opportunities and threats using chapter 2 and 3 analytic tools.
Focusing on relevant opportunities and threats.
Summarizing results and drawing concrete conclusions.
Generating strategic options using a TOWS matrix.

Dangers in a SWOT Analysis

Long lists without prioritization.
Overgeneralizations.
Using SWOT as a substitute for detailed analysis.
Treating SWOT as an end goal instead of a tool to guide strategy.

Dynamic Capabilities

Dynamic capabilities are the means by which an organization renews and recreates its strategic capabilities to meet changing environmental needs.
They differentiate from ordinary capabilities that may be necessary for efficient operation but insufficient to sustain long-term superior performance.

Generic Dynamic Capabilities

Sensing capabilities: Continuously scanning and exploring new opportunities across markets and technologies (e.g., R&D, market research).
Seizing capabilities: Addressing opportunities through new products, processes, and activities.
Re-configuring capabilities: Renewing and re-configuring existing capabilities for new products and processes, often involving investment in new technology.

Developing Strategic Capabilities (1 of 2)

Internal capability development: Building and recombining capabilities, requiring creative entrepreneurial skills and a culture promoting capability innovation.
Leveraging capabilities: Identifying capabilities in one part of the organization and transferring them to other parts (best practice sharing).
Stretching capabilities: Building new products or services from existing capabilities.

Developing Strategic Capabilities (2 of 2)

External capability development: Adding capabilities through mergers, acquisitions, or alliances.
Ceasing activities: Stopping, outsourcing, or reducing non-core activities.
Monitoring outputs and benefits: Understanding sources of consumer benefit and enhancing relevant activities.
Awareness development: Recognizing what enhances strategy through training, development, and organizational learning.

Summary (1 of 3)

Organizations need threshold resources and capabilities to compete, but unique and distinctive capabilities are needed to achieve sustained competitive advantage.

Summary (2 of 3)

For sustainable competitive advantage, resources and capabilities need to meet the VRIO criteria (Value, Rarity, Inimitability, Organizational Support).
Techniques to diagnose capabilities include VRIO analysis, value chain analysis, and activity systems mapping.

Summary (3 of 3)

SWOT analysis provides a framework for understanding organizational strengths, weaknesses, opportunities, and threats.
Benchmarking helps understand the relative performance of organizations.
Managers need to adapt and change resources and capabilities in response to environmental changes, utilizing dynamic capabilities.

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Description

Test your knowledge on strategic management concepts such as SWOT analysis, dynamic capabilities, and the resource-based view (RBV) of strategy. This quiz covers key distinctions, examples, and the importance of various capabilities within organizations. Dive into the essentials for a solid understanding of strategic analysis!