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Questions and Answers
Firms only earn below-average returns when the value they create is greater than the costs incurred to create that value.
False
Value chain analysis is used to analyze a firm's cost position in a domestic-only context.
False
Support functions are activities that create value for customers.
False
A firm can develop a capability and/or a core competence in only value chain activities.
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Value chain analysis is used to identify the means to implement a chosen strategy.
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Activities associated with supply chains should not be studied within a global context.
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Value chain activities are activities that support the work being done to produce, sell, distribute, and service products.
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Firms use value chain analysis to identify their capabilities and core competencies in order to serve themselves.
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Outsourcing always leads to a reduction in the complexity of a firm's operations.
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Not-for-profit agencies do not engage in outsourcing.
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Firms should outsource all activities where they lack competence.
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Outsourcing always involves the purchase of finished goods or services from an external supplier.
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Effective outsourcing can lead to a competitive disadvantage.
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Firms should outsource all activities to external suppliers.
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The trend towards outsourcing is slowing down in multiple global industries.
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Outsourcing allows firms to develop all technologies that might lead to competitive advantage.
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Outsourcing always leads to the loss of jobs within the focal firm.
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Firms can never enhance their innovation capabilities by outsourcing.
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Offshoring is the same as outsourcing.
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A firm's strengths are always reflected by its resources and capabilities.
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Having a significant quantity of resources is the same as having the 'right' resources.
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Firms should only outsource functions where they have weak capabilities.
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Firms can always build the needed capabilities and competencies by acquiring resources.
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Analyzing the internal organization is not necessary for identifying strengths and weaknesses.
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A firm's core competencies can never become core rigidities.
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Outsourcing is a tool used to focus on a firm's weaknesses rather than its core competencies.
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A firm's total set of resources being unconstrained always leads to more focused and productive decision makers.
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New competitors figuring out a better way to serve a firm's customers can never lead to a core competence becoming a core rigidity.
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A firm's core competencies can be assumed to be a permanent competitive advantage.
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The value-creating ability of core competencies is always taken for granted.
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When using their unique core competencies to create unique value for customers that competitors can duplicate, firms have established one or more competitive advantages.
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Customers are not the ones firms seek to serve when using value chain analysis to identify their capabilities and core competencies.
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A capability must allow the firm to perform an activity in a manner that provides value inferior to that provided by competitors to become a core competence.
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Evaluating a firm’s capability to execute its value chain activities and support functions is a simple task.
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There is an obviously correct model or rule universally available to help in the process of using value chain analysis.
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A firm should strengthen its resources and capabilities in all value chain activities and support functions.
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Identifying and assessing the value of a firm’s resources and capabilities does not require judgment.
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A firm can create value for customers and capture that value by performing an activity in a manner that provides value equal to that provided by competitors.
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Study Notes
Value Chain Analysis
- Helps firms understand value-creating and non-value-creating parts of their operations
- Identifies multiple means to facilitate implementation of a chosen strategy
- Analyzes cost position and identifies core competencies
- Examines supply chains in a global context
Value Chain Activities and Support Functions
- Value chain activities:
- Produce, sell, distribute, and service products to create value for customers
- Examples: manufacturing, marketing, sales, logistics
- Support functions:
- Activities that support value chain activities
- Examples: human resources, finance, research and development
Core Competencies and Competitive Advantage
- A firm develops a core competence when it establishes an ability to create unique value for customers
- Core competencies provide competitive advantages when they are difficult for competitors to duplicate
- Firms should evaluate their capabilities and core competencies relative to competitors
Building Core Competencies
- A capability becomes a core competence when it allows a firm to:
- Perform an activity superior to competitors
- Perform a value-creating activity that competitors cannot perform
- Firms should focus on building core competencies to create value for customers and capture that value
Outsourcing
- The purchase of a value-creating activity or support function activity from an external supplier
- Helps firms increase flexibility, mitigate risks, and reduce capital investments
- Useful for activities where the firm lacks competence or is at a substantial disadvantage compared to competitors
- Concerns associated with outsourcing include potential loss of innovation capability and job loss
Evaluating Core Competencies and Outsourcing
- Firms should carefully evaluate their core competencies and outsourcing decisions to ensure they are creating value for customers
- Outsourcing can help firms focus on their core competencies, but core competencies should not be taken for granted
- Core competencies can become core rigidities if not continuously evaluated and improved
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Description
Understand how firms analyze their operations to create value for customers, including identifying cost positions, core competencies, and supply chains in a global context.
