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

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

Value chain activities are

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

Judgment is the capacity for making a successful decision when

Compared to tangible resources, intangible resources are

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

It is possible that Borders' core competencies of store locations and a desirable physical environment for customers became core rigidities eventually leading to the filing of bankruptcy as a result of

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

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) Which of the following best describes ERPI?

One criteria for a resource or capability to be a source of competitive advantage is that it allows the firm to perform a value-creating activity that competitors cannot perform.

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?

Compared to tangible resources, intangible resources are an inferior source of core competencies.

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

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

Gamma, Inc., has struggled for industry dominance with Ardent, Inc., its main competitor, for years. Gamma has gathered and analyzed large amounts of competitive intelligence about Ardent. It has observed as much of the firm's internal functioning and technology as it can legally, yet Gamma cannot understand why Ardent has a competitive advantage over it. The source of Ardent's success is

The Chapter 3 Strategic Focus shows that inability to effectively use a firm's resources and capabilities can contribute to a CEO's short tenure as happened with Christina Norman, former CEO of the Oprah Winfrey Network (OWN).

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

At IBM, human capital is critical to forming and using the firm's capabilities in customer relationships, scientific and research skills, and technical skills in hardware, software, and services.

Any core competency has the potential to lose its value creating ability.

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