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

Why is it important to prevent core competencies from becoming core rigidities?

Competitive advantage typically comes from

The critical executive skill of the current business age is the ability to

Organizational culture is

Define capabilities and how they affect the firm's strategic success.

The key to maintaining competitive advantage and earning above-average returns over the long run is to effectively manage current core competencies

A decision that results in failure

Capabilities can be developed quickly in response to changes in the new competitive landscape.

Case Scenario 3: B.B. Mangler. B.B. Mangler is a top U.S. business-to-business distributor of maintenance, repair, and service equipment, components, and supplies such as compressors, motors, signs, lighting and welding equipment, and hand and power tools. Customers include contractors, service and maintenance shops, manufacturers, hotels, government, and health care and educational facilities. Mangler's industry is typically referred to as MRO, which is an acronym for maintenance, repair, and supplies. Mangler states its strategy as having the "capacity to quickly offer an unmatched breadth of lowest total cost MRO solutions to business." Mangler's GoMRO sourcing center for indirect spot buys locates products through its unique database of 8,000 suppliers and 5 million products. Mangler also dominates the North American market in terms of its sheer local physical presence. It has 388 physical branches in the U.S. largest cities, including Puerto Rico (90% of sales), 184 in Canada, and five in Mexico. This physical presence also has garnered them a reputation for excellent, dependable service in their target markets, which in turn translates into a vast and loyal clientele. -(Refer to Case Scenario 3) Mangler's reputation among its customers is an example of

One criteria for a resource or capability to be a source of competitive advantage is that it allows the firm to perform a value-creating activity that competitors cannot perform.

A local restaurant, Farm Fresh Ingredients, has become highly successful through its menu based solely on organically-raised chicken, beef, and organic seasonal produce. It has opened new locations in other cities, and these new locations are becoming highly profitable. Farm Fresh can expect that, at best, its competitive advantage will be

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 best describes ERPI?

Outsourcing is the

Describe the four specific criteria that managers can use to decide which of their firm's capabilities have the potential to create a sustainable competitive advantage.

The challenge and difficulty of making effective decisions are implied by preliminary evidence suggesting that one-half of organizational decisions fail.

The strategic focus on Pepsi in Chapter 3 details the announcement of tests indicating levels of pesticides in Pepsi's soft drinks were 11 to 70 times greater than European-established limit. This announcements effects which of the firm's resources most directly?

What are the differences between tangible and intangible resources? Which category of resources is more valuable to the firm?

Analyzing the internal environment enables a firm to determine what it can do by identifying what opportunities exist.

How many core competencies should a firm seek to develop?

A major department store chain has a strict policy of banning photographs or videos of its sales floor or back room operations. It also does not allow academics to conduct studies of it for publication in research journals. In fact, some of its own top managers refer to the management's policies on secrecy as "verging on paranoid." These policies indicate that the top management of the firm believes the organization's core competencies are