·         Understand what “management myopia” is. (Page 157) 

o   “A tendency to accept the status quo and ignore signals that change is needed.”

·         Understand the different approaches and frameworks for conducting internal analysis. (Pages 157-159)

o   SWOT Analysis – Compares Strengths, Weaknesses, Opportunities and Threats

o   Value Chain Analysis – Looks at a business as a chain of activities that transforms inputs into outputs.

·         Understand that traditional SWOT analysis has some important limitations and more comprehensive frameworks for conducting internal are available (i.e., understand how value chain analysis (VCA) and the resource-based view (RBV) of a firm are used to conduct a SWOT analysis, including how they enhance the quality of traditional SWOT analysis). (Page 158)

o   VCA- By looking at firm’s “value activities,” allows for more detailed analysis of Strengths and Weaknesses than traditional SWOT.

o   RBV – Improves upon SWOT by examining a variety of different yet specific types of resources and evaluating their potential for sustained competitive advantage.

·         Understand how to use SWOT analysis in strategic analysis. (Pages 160-163)

·         Explain the key limitations of traditional SWOT analysis. (Pages 163-164)

o   Overemphasize Strengths and downplay threats.

o   Can be static and can risk ignoring changing circumstances.

o   Can overemphasize a single strength or element of strategy

o   A strength is not necessarily a source of competitive advantage.

·         Define the term value chain. (Page.164)

o   “A perspective in which business is seen as a chain of activities that transforms inputs into outputs that customers value.”

·         Explain what value chain analysis is. (Page 164, EXHIBIT 6.4)

o   “An analysis that attempts to understand how business creates customer value by examining the contributions of different activities within the business to that value.”

·         Define the terms primary activities and support activities. (Pages 164-166)

o   Primary Activities – The activities in a firm involved in the physical creation of product, marketing, and transfer to the buyer, as well as after-sale support.

o   Support Activities – The activities that assist a firm as a whole by providing infrastructure or inputs that allow primary activities to take place.

·         Explain and define the three basic types of resources firms possess (i.e., tangible assets, intangible assets, and organizational capabilities) and outline examples of each of them. (Pages 171-173, EXHIBIT 6.8)

o   Tangible Assets – Easiest assets to identify, often found on a firm’s balance sheet.

§  Examples: Production Facilities, Raw Materials, Financial Resources, Real Estate, Computers.

o   Intangible Assets – A firm’s assets that you cannot touch or see, but that are often critical in creating competitive advantage.

§  Examples: Brand Names, Company Reputation, organizational morale, technical knowledge, patents and trademarks, accumulated experience.

o   Organizational Capabilities – Skills(the ability and ways of combining people, assets, and processes) that a company uses to transform inputs into Outputs.

§  Examples: Dell’s sales model, Apple’s pioneering and subsequent leverage of iPod and iTunes to become a leader in the digital music industry.

·         Explain why it is important to classify and assess a firm’s resources (i.e., tangible resources and intangible resources) and discuss the relevant characteristics and key indicators. (Page 172, EXHIBIT 6.8)

o   Classifying the resources as tangible or intangible with relevant characteristics and key indicators allows more focused analysis.

o   Relevant characteristics are facts about assets, and Key indicators are metrics used to value those characteristics.

§  Ex: Tangible Asset – Physical Resources

§        Relevant Characteristics – Reserves of raw materials

§        Key indicators – Market value of fixed assets/materials

·         Understand what makes a resource more, or less, valuable (i.e., understand the key guidelines strategists use to test the strategic value of their firm’s resources. (Pages 173-177, EXHIBIT 6.9, EXHIBIT 6.10)

o   4 Guidelines:

§  Is the resource or skill critical to fulfilling a customer’s need better that that of the firm’s competitors?

§  Is the resource scarce?  Is it in short supply or not easily substituted for or imitated?

§  Appropriability: Who actually gets the profit created by a resource?

§  Durability: How rapidly will the resource depreciate?

“A perspective in which business is seen as a chain of activities that transforms inputs into outputs that customers value.”

An analysis that attempts to understand how business creates customer value by examining the contributions of different activities within the business to that value.

The activities in a firm of those involved in the physical creation of the product, marketing and transfer to the buyer, and after-sale support.

The activities in a firm that assist the firma as a whole by providing the infrastructure or inputs that allow the primary activities to take place on an ongoing basis.

The most easily identified assets, often found on a firm’s balance sheet.  They include production facilities, raw materials, financial resources, real estate, and computers.

A firm’s assets that you cannot touch or see, but that are often critical in creating competitive advantage: Brand Names, Company Reputation, organizational morale, technical knowledge, patents and trademarks, accumulated experience.

Skills(the ability and ways of combining people, assets, and processes) that a company uses to transform inputs into outputs.

Characteristics that make resources difficult to imitate.  In the RBV context these are physically unique resources, path-dependent resources, causal ambiguity, and economic deterrence.

Evaluating the sustainability of advantages against key competitors.  Comparing the way a company performs a specific activity with a competitor or other company doing the same thing.