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

True Colors, Inc., sells interior and exterior household paints. It is planning to outsource most production of its paint offshore. The top management of True Colors is concerned that its middle managers may not possess the skills needed to successfully implement outsourcing. Consequently, all the following are high priority training topics for True Colors managers EXCEPT

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) Imagine that ERPI's historic growth strategy has focused on making one sale and then moving on to the next target company. After several years of building market share using this approach, what new resources has ERPI developed?

Capabilities are often developed in specific functional areas such as manufacturing, R&D, and marketing.

An important capability of Ryanair is its excellent customer service, caring staff, and policy of having no hidden charges.

The three conditions that characterize difficult managerial decisions concerning resources, capabilities, and core competencies are

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

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

The Strategic Focus shows that GE's its success was primarily based on tangible rather than intangible resources.

Which of the following is NOT required for a firm to achieve strategic competitiveness and earn above-average returns from its core competencies?

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

Which of the following is TRUE about outsourcing?

Judgment is the capability of making successful decisions when no obviously correct model or rule is available or when relevant data are unreliable or incomplete.

Case Scenario : 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 the above Case Scenario) Mangler's reputation among its customers is an example of

Case Scenario : Heartsong LLC. Heartsong LLC is a designer and manufacturer of replacement heart valves based in Peoria, Illinois. While a relatively small company in the medical devices field, it has established a worldwide reputation as the provider of choice high-quality, leading-edge artificial heart valves. Most of its products are sold to large regional hospital systems and research hospitals. Specialty heart centers are another emerging, but fast-growing, market for its valves. While Heartsong would like to grow quickly, its growth is constrained by the need to finance larger production runs and then carry this additional inventory. For products like those of Heartsong, vendors typically do not collect payment until the unit is actually used in surgery. Moreover, heart valves are usually required on short notice which means that they must be either onsite, or inventoried at a nearby location. If nearby, then transport of the unit to a hospital or heart center occurs within a matter of hours, and sometimes minutes. For this reason, accelerated growth would require Heartsong to both finance increased production of its heart valves, along with carrying increased levels of inventory that are in fact sitting on their customers' shelves. In fact, inventory-carrying cost is its single largest cost outside of research and development. While profitable growth is necessary if Heartsong is to continue extending its competitive advantage through increasingly greater investments in basic heart valve R&D, it is not clear that the company can internally support all these increased financial commitments (R&D, manufacturing, and inventory). Doc Watson, the CEO of Heartsong, is considering an outside contractor, EdFex, to handle the inventorying, warehousing, and delivery of its valves. EdFex has secure, high-tech warehouses in most major population centers around the country, and can ensure delivery of a product to these markets from its warehouses in less than one hour. -(Refer to the above Case Scenario) What are the implications of an EdFex outsourcing arrangement for the capabilities underlying Heartsong's competitive advantage?

An investor is considering buying a restaurant that has been in operation for a number of years. The restaurant has a highly-reputed chef, and many long-term kitchen and wait staff who work together smoothly. It has a reputation for dishes of consistently high quality and an appealing dining atmosphere.

Resources are bundled to create capabilities which in turn are the source of core competencies which are then the basis of competitive advantages.

Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals.

Judgment is the capacity for making a successful decision when

Costly-to-imitate capabilities are those which other firms cannot easily develop as they have no strategic equivalent.

Tangible resources include