Strategic Management: Chapter 3 Internal Analysis

A company has competitive advantage when?
Its profitability is greater than the average profitability of all companies in its industry.
Sustained competitive advantage?
What a company is able to maintain above-average profitability over a number of years.
What is the primary objective of strategy?
Competitive advantage.
Distinctive Competencies?
Firm-specific strengths that allow a company to differentiate its products and/or achieve substantially lower costs to achieve a competitive advantage.
Distinctive competencies arise from?
Resources and capabilities.
Asset of a company.
Types of resources.
Tangible and intangible
Tangible resource?
Physical entities, such as land, buildings, equipment, inventory, and money.
Intangible resource?
Nonphysical entities such as brand names, company reputation, experiential knowledge, and intellectual property, including patients, copyrights, and trademarks.
Resources are most valuable when?
They enable a company to create a strong demand for its products and/or lower its costs.
Valuable resources are likely to lead to sustainable competitive advantage if?
They are rare, in that they are barriers to imitation.
A company’s skills at coordinating its resources and putting them to productive use.
A company’s profitability depends on what? (At the most basic level)
(1) Value customers place on products
(2) Price company charges for product
(3) Cost of creating product
Value Chain
The idea that a company is a chain of activities that transforms inputs into outputs that customers value.
Primary activities
Activities related to the design, creation, and delivery of the product, its marketing and its support and after-sales service.
Support activities
Activities of the value chain that provide inputs that allow the primary activities to take place.
Primary activities include:
Research and development, production, marketing and sales, and customer service.
Support activities include:
Material Management (logistics), HR, Info. systems, and company infrastructure.
Employee Productivity
The output produced per employee.
A product has superior quality when?
Customers perceive that its attributes provide them with higher utility than the attributes of products sold by rivals.
Customers evaluate quality in what two categories?
Quality as excellence and quality as reliability.
Product Innovation
Development of products that are new to the world or have superior attributes to existing products.
Process innovation
Development of a new process for producing products and delivering them to customers.
Customer response time
Time that it takes for a good to be delivered or a service to be performed.
Net profit/invested capital
Net profit
What is left over after the government takes its share in taxes.
Invested Capital
the amount that is invested in the operations of a company: property, plant, equipment, inventories, and other assets.
Barriers to imitation
Factors that make it difficult for a competitor to copy a company’s distinctive competencies.
Who states that, “A major determinant of the capability of competitors to rapidly imitate a company’s competitive advantage is the nature of the competitor’s prior strategic commitments.”
Pankaj Ghemawat
Absorptive capacity
The ability of an enterprise to identify, value, assimilate, and use knew knowledge.
Why companies fail?
Inertia, prior strategic commitments, the Icarus Paradox
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