Exam 3: The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages

There are specific models and rules that can be followed when conducting a value chain analysis in order to determine the objectively correct answer.

Some resources, such as financial capital, have inherent value to the firm, while others are not inherently valuable.

Value chain analysis is a tool used to

A major reason outsourcing is being used is that

Which of the following is TRUE about outsourcing?

____ is measured by a product's performance characteristics and its attributes for which customers are willing to pay.

Case Scenario 2: ERP Inc. ERPI is a leading provider of enterprise integration software (EIS). EIS allows a firm to connect and integrate processes across all aspects of its business, regardless of where they are located around the world. ERPI is a product-focused company, whereas most competitors in its market space, like Oracle, operate as "solutions companies." Oracle and Microsoft have begun to devote considerable resources to the development of and acquisition of products to compete in the EIS space. Despite these recent threats, one benefit of its product-focused strategy is that ERPI's proprietary product is generally recognized as being 200% to 300% better than competitors' software. ERPI estimates it will take 2 to 3 years for competitors to develop the capabilities needed to bring a competing product to market. ERPI invests a considerable percentage of its profits in basic R&D to support its core products. As evidence of this, among its competitors the firm maintains the largest in-house programming staff dedicated solely to the development of advanced enterprise integration software. Installation and related consulting for EIS typically cost between $100 and $200 million, with the ERPI software component accounting for about 20% of the installed cost (the remaining 80% is spent on the actual installation, not counting the value of the customer's time). ERPI's target market consists of the world's largest manufacturing and industrial firms and it currently enjoys a 60 percent market share. -(Refer to Case Scenario 2) Which of the following represents the maximum level of performance ERPI should expect to achieve?

The quality of Hyundai vehicles has increased dramatically. Its cars now rank at the top of the list in vehicle quality, exceeding even Toyota. To management's surprise, this has not led to an increase in sales. From the standpoint of capabilities, what can we conclude about Hyundai's quality?

Value chain activities

Firms should seek to continually develop new core competencies because all core competencies have limited life spans.

____ is an example of a capability that is based in the functional area of distribution.

One benefit of outsourcing is that it allows a firm to focus on those few value chain activities where it can produce the greatest value.

____ is/are the source of a firm's ____, which is/are the source of the firm's ____.

The value of tangible assets such as the firm's borrowing capacity and its physical plant are high because they can be easily leveraged to derive additional value.

Internal analysis enables a firm to determine what the firm

Capabilities

Which of the following is NOT a factor affecting sustainability of a competitive advantage?

Valuable capabilities

Compared to tangible resources, intangible resources are ____ and ____.

Value is measured by the variable and fixed costs associated with the production and marketing of a particular product compared with the revenue and profits the product generates.