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

Firms should outsource only activities where they can create the most value or where they are at an advantage compared to competitors.

Valuable capabilities allow the firm to exploit strengths or neutralize weaknesses in the internal environment.

Of Southwest Airline's competitors, Ryanair has been the most successful at imitating Southwest's low-cost strategy.

A firm with a unique organizational culture and proprietary processes developed over a long period of time

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

In the global economy, traditional factors such as labor costs, access to financial resources and raw materials, and protected or regulated markets are no longer sources of competitive advantage.

Firms and managers can learn from the failure resulting from a mistake-that is, what not to do when seeking competitive advantage.

____ can be viewed as the capacity to take action.

Coca-Cola's brand name is a tangible source of competitive advantage for the company.

The sustainability of a competitive advantage depends upon the imitability of the core competence, the availability of substitutes for the core competence, and the rate of obsolescence of the core competence.

Southwest Airlines has a complex interrelationship between its culture and staff that adds value in ways that other airlines cannot (such as jokes on flights or the cooperation between gate personnel and pilots). These examples illustrate which of the following criteria for sustainable competitive advantage?

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?

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) The Internet threatens to displace physical locations as a basis for competitive advantage. If Mangler's vast network of branch offices were an integral part of its core competencies, what might the branches become if the basis for competitive advantage in the MRO industry moves to the Internet?

Firms that achieve competitive parity can expect to

Value-creating primary activities include

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

Two concerns about outsourcing are the potential loss of a firm's innovative ability and the loss of jobs within companies that decide to outsource some of their work.

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) 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?

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

Compared to tangible resources, intangible resources are