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

Only capabilities that are valuable, common, costly to imitate, and substitutable can be strategic capabilities.

Although an organization's good reputation is a valuable resource that takes years of superior marketplace competence to achieve, it is not a good basis for building a competitive advantage because it can be destroyed almost instantly by bad publicity.

Primary activities in the value chain create value, whereas support activities in the value chain generate costs.

If a core competence is emphasized when it is no longer competitively relevant, it can become a core rigidity.

Which event played a role in the loss of Apple's innovative abilities some years ago?

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.

A firm should outsource only activities where it cannot create value or where it is at a substantial disadvantage compared to competitors.

The Chapter 3 Strategic Focus makes the point that the management development process at GE was valuable, rare, but easy to imitate and substitutable.

Competitive advantage typically comes from

It is increasingly difficult for a firm to develop and sustain a competitive advantage because of the effects of globalization and

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) How sustainable is ERPI's competitive advantage?

The more core competencies a firm has, the more likely it is to generate a sustained competitive advantage.

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 physical locations are best an example of

Organizational culture is

Value consists of

The proper matching of what a firm can do with what it might do allows the firm to

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

Examples of support activities include all of the following EXCEPT

Firms achieve strategic competitiveness and earn above average returns when their unique core competencies are effectively acquired, bundled, and leveraged to take advantage of opportunities in the external environment in ways that create value for customers.

The overall lesson from the Strategic Focus about GE's capabilities was the importance of _________as a core competence