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Strategic Management
Chapter 4 - Internal Environment
42
Business
Undergraduate 4
05/30/2012

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Term
Resource Model of Above-Average Returns
Definition

Capabilities evolve and must be managed dynamically in pursuit of above-average returns.

Firms acquired different resources and develop unique capabilities.  These resources may not be mobile across firms and the differences in resources are the basis of competitive advantage

Term

Resource-Based Model - Step 1

 

Resources

Definition

Identify firm resources

Study strengths and weaknesses relative to rivals

Term

Resource-Based Model - Step 2

 

Capability

Definition
Determine what firm capabilities allow it to do better than rivals
Term

Resource-Based Model - Step 3

 

Competitive Advantage

Definition
Determine how firm's resources and capabilities may create competitive advantage to outperform its rivals
Term

Resource-Based Model - Step 4

 

Attractive Industry

Definition
Locate an attractive industry with opportunities that can be exploited by firm's resources and capabilities
Term

Resource-Based Model - Step 5

 

Strategy Formulation and Implementation

Definition
Select strategy that best exploits resources and capabilities relative to opportunities in environments to earn above-average returns
Term

Resource-Based Model - Step 6

 

Superior Returns

 

 

Definition
Maintain selected strategy in order to outperform industry rivals and earn above-average returns
Term
Resources
Definition

Resources are inputs into a firm's productions process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers

Intangible or Tangible

Term
Capabilities
Definition
A capability is the capacity for a set of resources to perform a task or an activity in an integrative manner
Term
Core Competencies
Definition
Core competencies are resources and capabilities that service as a source of sustained competitive advantage for a firm over its rivals
Term
Global mind set
Definition
A global mind set is the ability to study an internal environment in ways that are not dependent on the assumption of a single country, culture or context.
Term
Value
Definition
Value is measured by a product's performance characteristics and it's attributes for which clients are willing to pay
Term
Tangible Resources
Definition

Financial

Organizational

Physical

Technological

Term
Financial Resources
Definition

borrowing capacity

ability to generate internal funds

Term
Organizational Resources
Definition
Firm's formal reporting structure and its formal planning, controlling and coordinating systems
Term
Physical Resources
Definition

Sophistication and location of a firm's plant and equipment

Access to raw materials

Term
Technological Resources
Definition
Stock of technology, such as patents, trademarks, copyrights, and trade secrets
Term
Intangible Resources
Definition

Human

Innovation

Reputational

Term
Human Resources
Definition

knowledge

trust

managerial capabilities

organizational routines

Term
Innovation Resources
Definition

Ideas

Scientific capabilities

Capacity to innovate

Term
Reputational Resources
Definition

Reputation with customers

Brand name

Perceptions of product, quality, durability & reliability

Reputation with suppliers

Efficient, effective, supportive, and mutually beneficial interactions and relationships

Term

Core Competency

 

Valuable

Definition
Valuable capabilities help a firm to generate revenues by exploiting opportunities and / or reduce costs by neutralizing threats
Term

Core Competency

 

Rare

Definition
Rare capabilities are possessed by a few firms in a group of competitors
Term

Core Competency

 

Costly to Imitate

Definition

Capabilities than an firm's closest competitors have tried to duplicate or substitute for, but the cost exceeds the benefits.

Three reasons: historical, ambiguous, social complexity

Term

Core Competency

 

Organized to be Exploited

Definition

Firm is organized appropriately to obtain full benefits of the resources in order to realize a competitive advantage.

Appropriate structure, control systems and reward systems in place to support capabilities

Term
Value Chain Analysis
Definition
This allows the firm to understand the parts of its operations that create value and those that do not.  A firm earns above-average returns only when the value it creates is greater than the costs incurred to create the value
Term
Value Chain - Primary Activities
Definition
Primary activities are involved with a product's physical creation, its sale and distribution to buyers, and its service after the sale.
Term
Value Chain - Support Activities
Definition
Support activities provide the assistance necessary for the primary activities to take place
Term
Primary Activities
Definition
  • Inbound Logistics
  • Operations
  • Outbound Logisitics
  • Marketing and Sales
  • Service
Term

Support Activities

Definition
  • Procurement
  • Technology Development
  • Human Resource Mgmt
  • Firm Infrastructure
Term
Outsourcing
Definition

Outsourcing is the purchase of a value-creating activity from an external supplier who can perform these functions more efficiently

 

Term
Core Rigidities
Definition

They are former core competencies that  continue to be emphasized when it is no longer competitively relevant, then it becomes a weakness or core rigidity - and a seed of organizational inertia.

 

Term
Core Rigidities (2)
Definition
Changes in the external environment do not cause core competencies into core rigidities, rather,  strategic myopia and inflexibility on the part of the managers are the cause
Term
Inbound Logisitics - Primary
Definition
Materials handling, warehousing, and inventory control used to receive, store and disseminate inputs to a product
Term
Operations - Primary
Definition

Activities necessary to convert the inputs provided by inbound logistics into final product form. 

Machining, packaging, assembly, and equip maintenance

Term
Outbound Logisitics - Primary
Definition
Activities involved with collecting, storing and physically distributing the final product to the consumer.
Term
Marketing and Sales - Primary
Definition
To effectively market and sell products firms develop advertising and promotional campaigns, select appropriate distribution channels and select, develop, and support their sales force
Term
Service - Primary
Definition
Activities designed to enhance or maintain a product's value.  Firms engage in a range of service-related activities, including installation, repair, training, and adjustment
Term
Procurement - Support
Definition
Activities completed to purchase the inputs needed to produce the firm's products, including items fully consumed during the manufacturing process, raw materials, fixed assets etc
Term
Technological Development - Support
Definition

Activities completed to improve a firm's product and the process used to manufacture it. 

Takes many forms, such as process equipment, basic research and product design, and servicing procedures

Term
Human Resource Mgmt - Support
Definition
Activities involved with recruiting, hiring, training, developing, and compensating all personnel
Term
Firm Infrastructure - Support
Definition
Firm infrastructure includes activities as general mgmt, planning, finance, acctg, legal, and govt relations that are required to support the work of the entire value chain.  Through its infrastructure, the firm tries to effectively and consistently identify external opportunities and threats, identify resources and capabilities and support core competencies.
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