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

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.

Understanding how to leverage the firm's unique bundle of resources and capabilities is a key outcome decision makers seek when analyzing the internal organization.

A financial management firm has existed for over 70 years. Some of its original clients' grandchildren are now clients of the firm themselves. The partners and staff of the firm have spent most or all of their careers with the firm. Many have even married into each other's families. This firm has capabilities that would be costly to imitate because of its

Case Scenario : 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 the above Case Scenario) Which of the following represents the maximum level of performance ERPI should expect to achieve?

Core competencies are the activities a company performs especially well compared with competitors and through which the firm adds unique value to its goods and services.

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.

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.

Complete the following about the difference between tangible and intangible resources. Tangible resources are ____ constrained because they are _____ to leverage.

A major U.S. manufacturer of children's toys believes its main competitive advantage lies in its continuing development of innovative toys and games. The company is facing increasing competition on price and it is strongly considering outsourcing to offshore firms as a means of reducing costs. The LAST function this firm should consider outsourcing is

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

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

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

Firms that have strong positive relationships with suppliers and customers are said to have _________________, an essential ingredient to creating value.

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

The Chapter 3 Strategic Focus illustrates the challenge facing strategic managers in making decisions about the appropriate use of their companies' resources and capabilities. While a number of firms have successfully used resources and capabilities to earn above average returns, others have not been so successful.

Resources are the source of capabilities, some of which lead to the development of core competencies; in turn, some core competencies may lead to 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.

Because the firm combines tangible and intangible resources to create capabilities,

Case Scenario : 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 the above Case Scenario) Which of the following best describes ERPI?

A decision that results in failure