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

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) If the time for the competitor to produce a product similar to ERPI's were 2-3 months instead of 2-3 years, which portion of your assessment of ERPI's capabilities would change?

Describe the importance of internal analysis to the strategic success of the firm.

ACME Corp. is a leading provider of radios to the commercial market. Its products all rely on printed circuit board technology. ACME has protected its market leadership with continued advancements in this technology which it patents. A competitor has developed a radio for this market with equal performance but uses a software-based solution instead of circuit boards. ACME's technology leadership fails which capability test?

The need to meet quarterly earnings numbers disciplines managers to accurately examine the firm's internal organization.

Costly-to-imitate capabilities can emerge for all of the following reasons EXCEPT

The learning generated by making and correcting mistakes is generally unimportant to efforts to create new capabilities and core competencies.

Today, a substantially slimmed-down Polaroid is introducing a number of new products including GL20 Camera Glasses which have a built-in camera and LCDs. This wave of new product development is explained by

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 physical locations are best an example of

A company can earn above-average returns only when the value it creates is less than the costs incurred to create that value.

According to the Chapter 3 Strategic Focus, organic (internal) growth at P&G benefits the company by allowing it to draw on core competencies and capabilities to become stronger.

A veterinary practice has added a pet boarding and grooming facility. Most of the practice's competitors also provide these services. The veterinary practice is gaining competitive

Value is created when firms innovately bundle and leverage their resources to form capabilities and core competencies.

The foundation of many capabilities lies in the unique skills and knowledge of a firm's employees.

Knowledge transfer and access to resources within the value chain are enhanced by ________.

Examples of support activities include all of the following EXCEPT

By emphasizing core competencies when formulating strategies, companies learn to compete primarily on the basis of

"Motivating, empowering, and retaining employees" is an example of a capability that resides within the "Human Resources" functional area.

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

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) How sustainable is ERPI's competitive advantage?

At Southwest Airlines, the complex interelationship between its culture and human capital adds value for customers in ways that other airlines cannot, such as jokes on flights by flight attendants and cooperation between gate personnel and pilots.