Deck 3: The Internal Organization

Question 1

Why is it important for a firm to study and understand its internal organization?

Answer 1

As they analyze their internal environment, a manager should think of the firm as a bundle of heterogeneous resources and capabilities that can be used to create an exclusive market position. This means that firms should no longer focus only on the traditional sources of competitive advantage (e.g., labor costs, access to capital, and raw materials) as these advantages can be overcome through an international strategy and the relative free flow of global resources. Instead, firms should seek out those resources and capabilities that other firms do not have, at least not in the same combinations. A firm's resources are the source of its capabilities, some of which can lead to core competencies that enable a firm to perform value-creating activities better than its competitors or that its competitors cannot duplicate.

Question 2

What is value? Why is it critical for the firm to create value? How does it do so?

Answer 2

Value is represented by the bundle of performance characteristics and attributes that a firm provides to customers in the form of goods or services for which customers are willing to pay. Broadly speaking, value can be provided by a product's/service's low cost, highly differentiated features, or a combination of the two (when these strategies are superior to those offered by competitors).
Ultimately, it is critical that a firm be able to create customer value because it is the source of a firm's potential to earn above-average returns. Therefore, in the rapidly changing environments of the twenty-first-century competitive landscape, firms must evaluate continuously the degree to which their core competencies create customer value. What the firm intends to do to create value affects its choice of business-level strategy and its organizational structure.

Question 3

What are the differences between tangible and intangible resources? Why is it important for decision makers to understand these differences? Are tangible resources more valuable for creating capabilities than are intangible resources, or is the reverse true? Why?

Answer 3

Tangible resources are represented by assets that can be seen and quantified. They are not only represented by the firm's physical resources (such as plant and equipment), but also by other assets, such as the firm's borrowing capacity, the skills and attributes of its staff, and its technological capacities. Intangible resources (because they are less visible and more embedded in the firm's history) are more difficult for competitors to understand and imitate. These include such resources as scientific capabilities, knowledge within the firm, organizational routines, or the firm's reputation for quality.
Resources are the source of a firm's capabilities. Capabilities are the source of a firm's core competencies, which are the basis of competitive advantages. Intangible resources (as compared to tangible resources) are a superior and more potent source of core competencies. In fact, in the global economy, intellectual and systems capabilities are more important to the success of a corporation than are its physical assets, and the capacity to manage human intellect is now a critical executive skill. Intangible resources are less visible and more difficult for competitors to understand, purchase, imitate, or substitute, and thus firms prefer to rely on these resources as the foundation for their capabilities and core competencies. Therefore, unobservable (i.e., intangible) resources provide a better platform for competitive advantage than do tangible resources. And unlike tangible resources, the use of intangible resources can be leveraged for even greater benefits to firm performance.

Question 4

What are capabilities? How do firms create capabilities?

Question 5

What four criteria must capabilities satisfy for them to become core competencies? Why is it important for firms to use these criteria to evaluate their capabilities' value-creating potential?

Question 6

What is value chain analysis? What does the firm gain by successfully using this tool?

Question 7

What is outsourcing? Why do firms outsource?

Question 8

How do firms identify internal strengths and weaknesses? Why is it vital that managers have a clear understanding of their firm's strengths and weaknesses?

Question 9

What are core rigidities? What does it mean to say that each core competence could become a core rigidity?

Question 10

Mini Case
Is Strengthening the Superdry Brand a Foundation to Strategic Success?
Note: each chapter Mini-Case is prepared as an auto-graded Guided Case Analysis activity in MindTap™. More information below.
British-based SuperGroup is the owner of Superdry and its carefully branded product lines. The Superdry brand is at the heart of the business. The brand is targeted to discerning customers in their teens and 20s who seek to purchase "stylish clothing that is uniquely designed and well made." Superdry is dealing with recent performance issues. In addition to upper-management turnover, analysts believe SuperGroup expanded too quickly, without the supporting infrastructure. The organization has brought in a new executive team, and additional turnaround strategies include appealing to an older demographic and expanding internationally.
-What influences from the external environment over the next several years do you think might affect Superdry's ability to compete?

Question 11

Mini Case
Is Strengthening the Superdry Brand a Foundation to Strategic Success?
Note: each chapter Mini-Case is prepared as an auto-graded Guided Case Analysis activity in MindTap™. More information below.
British-based SuperGroup is the owner of Superdry and its carefully branded product lines. The Superdry brand is at the heart of the business. The brand is targeted to discerning customers in their teens and 20s who seek to purchase "stylish clothing that is uniquely designed and well made." Superdry is dealing with recent performance issues. In addition to upper-management turnover, analysts believe SuperGroup expanded too quickly, without the supporting infrastructure. The organization has brought in a new executive team, and additional turnaround strategies include appealing to an older demographic and expanding internationally.
-Does Superdry have one or more capabilities that are valuable, rare, costly to imitate, and nonsubstitutable? If so, what are they? If not, on which criteria do they fall short?

Question 12

Mini Case
Is Strengthening the Superdry Brand a Foundation to Strategic Success?
Note: each chapter Mini-Case is prepared as an auto-graded Guided Case Analysis activity in MindTap™. More information below.
British-based SuperGroup is the owner of Superdry and its carefully branded product lines. The Superdry brand is at the heart of the business. The brand is targeted to discerning customers in their teens and 20s who seek to purchase "stylish clothing that is uniquely designed and well made." Superdry is dealing with recent performance issues. In addition to upper-management turnover, analysts believe SuperGroup expanded too quickly, without the supporting infrastructure. The organization has brought in a new executive team, and additional turnaround strategies include appealing to an older demographic and expanding internationally.
-Will the actions that Superdry is taking solve its problems? Why or why not?

Question 13

Mini Case
Is Strengthening the Superdry Brand a Foundation to Strategic Success?
Note: each chapter Mini-Case is prepared as an auto-graded Guided Case Analysis activity in MindTap™. More information below.
British-based SuperGroup is the owner of Superdry and its carefully branded product lines. The Superdry brand is at the heart of the business. The brand is targeted to discerning customers in their teens and 20s who seek to purchase "stylish clothing that is uniquely designed and well made." Superdry is dealing with recent performance issues. In addition to upper-management turnover, analysts believe SuperGroup expanded too quickly, without the supporting infrastructure. The organization has brought in a new executive team, and additional turnaround strategies include appealing to an older demographic and expanding internationally.
-What value does Superdry create for its customers?

Question 14

Mini Case
Is Strengthening the Superdry Brand a Foundation to Strategic Success?
Note: each chapter Mini-Case is prepared as an auto-graded Guided Case Analysis activity in MindTap™. More information below.
British-based SuperGroup is the owner of Superdry and its carefully branded product lines. The Superdry brand is at the heart of the business. The brand is targeted to discerning customers in their teens and 20s who seek to purchase "stylish clothing that is uniquely designed and well made." Superdry is dealing with recent performance issues. In addition to upper-management turnover, analysts believe SuperGroup expanded too quickly, without the supporting infrastructure. The organization has brought in a new executive team, and additional turnaround strategies include appealing to an older demographic and expanding internationally.
-What actions would you recommend the management of Superdry take to resolve its problems and turn around the performance of the firm?

Question 15

Several companies use their brand as a competitive advantage. Ask the class, given their knowledge about the global economy, which brands they believe have the strongest likelihood of remaining a source of advantage in the twenty-first century? Why? What effects do they believe the Internet's capabilities will have on this brand, and what should the owner of the brand do in light of them?

Question 16

Students should visit the manager of a local store to obtain the following information. Using the definition presented in the chapter, define value for the manager. Ask the manager if the definition is consistent with how her or his firm thinks of value. If there is a difference, ask the manager to assess why the difference exists.

Question 17

Have students consider a group (e.g., a fraternity or sorority, Toastmaster's, or a volunteer organization) in which they hold membership. Using the categories shown in Tables 3.1 and 3.2, list what they perceive as the group's tangible and intangible resources. Show the
list to another member of the group. Does that person agree with your assessment of the group's resources? If not, what might account for the differences? If differences do exist between you and your colleague, what is the meaning of such differences in terms of trying to form the group's capabilities?

Question 18

Refer to the third question. Ask students if it was easier to list the tangible or the intangible resources? Why? How confident are they with their assessments?

Question 19

What competitive advantage do individual students feel that the university or college possesses? What evidence can they provide to support this opinion? Does the class as a whole agree with the assessments? If not, why not?

Question 20

Ask students what effects they believe the Internet will have on the university or college within the next five years as it seeks to develop new competitive advantages. In their view, do the strategic decision makers in your educational institution understand the Internet's capabilities? If not, why not?

Question 21

Trust is identified in the chapter as a potential source of competitive advantage. Ask students if they have ever been involved in a situation in which trust was instrumental in accomplishing an organization's goals? If so, what outcomes were made possible because of trust?

Question 22

Can efforts to develop sustainable competitive advantages result in employees using unethical practices? If so, what unethical practices might be used to compare a firm's core competencies with those held by rivals? How do the Internet's capabilities affect actions taken to form competitive advantages that will help the firm in its efforts to outperform its rivals?

Question 23

Do ethical practices affect a firm's ability to develop brand as a source of competitive advantage? If so, how does this happen? Can you think of brands that are a source of competitive advantage at least in part because of the firm's ethical practices?

Question 24

What is the difference between exploiting a firm's human capital and using that capital as a source of competitive advantage? Are there situations in which the exploitation of human capital can be a source of advantage? If so, can you name such a situation? If the exploitation of human capital can be a source of competitive advantage, is this a sustainable advantage? Why or why not?

Question 25

Are there any ethical dilemmas associated with outsourcing? If so, what are they? How would you deal with outsourcing ethical dilemmas you believe exist?

Question 26

What ethical responsibilities do managers have if they determine that a set of employees has skills that are valuable only to a core competence that is becoming a core rigidity?

Question 27

Through the Internet, firms sometimes make a vast array of data, information, and knowledge available to competitors as well as to customers and suppliers. What ethical issues, if any, are involved when the firm finds competitively relevant information on a competitor's website?

Question 28

Firms are aware that competitors read information that is posted on their websites. Given this reality, is it ethical for a firm to include false information, for example, about its sources of competitive advantage on its website in hopes that the information will influence competitors to take certain actions as a result of viewing it?

Question 29

VIDEO QUIZ: Toyota
The media quiz offers additional opportunities for students to apply the concepts in the chapter to a real-world scenario as it is described in news reports.
Title: Toyota
RT: 2:28
Topic Key: Competitive Advantage, Core Competencies, Value Chain Analysis
Bloomberg journalist Kevin Buckland reports on Toyota Motor Corp.'s announcement to expand its alliance with Uber Technologies, Inc. The Japanese automaker is making a $500M investment in Uber as part of a plan to get self-driving cars on the road.
-Toyota has long held a competitive advantage as a respected auto manufacturer. Why is it now investing $500 million in the transportation services industry?

Question 30

VIDEO QUIZ: Toyota
The media quiz offers additional opportunities for students to apply the concepts in the chapter to a real-world scenario as it is described in news reports.
Title: Toyota
RT: 2:28
Topic Key: Competitive Advantage, Core Competencies, Value Chain Analysis
Bloomberg journalist Kevin Buckland reports on Toyota Motor Corp.'s announcement to expand its alliance with Uber Technologies, Inc. The Japanese automaker is making a $500M investment in Uber as part of a plan to get self-driving cars on the road.
-How does an alliance with Uber Technologies help Toyota create a sustainable core competence? Use the four-part criteria to evaluate this strategic move.

Question 31

VIDEO QUIZ: Toyota
The media quiz offers additional opportunities for students to apply the concepts in the chapter to a real-world scenario as it is described in news reports.
Title: Toyota
RT: 2:28
Topic Key: Competitive Advantage, Core Competencies, Value Chain Analysis
Bloomberg journalist Kevin Buckland reports on Toyota Motor Corp.'s announcement to expand its alliance with Uber Technologies, Inc. The Japanese automaker is making a $500M investment in Uber as part of a plan to get self-driving cars on the road.
-Where does Toyota's investment in Uber fit in terms of the firm's value chain?