The Internal Environment

Question 1

Define Value Creation

Answer 1

Customers are willing to exchange money for products and services (and firms are willing to exchange such products and services for money)

Question 2

Define Value Capture

Answer 2

The firm’s ability to access, retain, or otherwise benefit from the value created

Question 3

Value Creation and Value Capture are both critical to the firm’s success (True / False)

Answer 3

True

Question 4

What are competitive advantages?

Answer 4

Enable firms to create and capture more value than rivals can; unique to a firm but defined relative to rivals

Question 5

Firms must establish temporary competitive advantages repeatedly (True / False)

Answer 5

True

Question 6

Define resources

Answer 6

Tangible and intangible assets

Question 7

Define capabilities

Answer 7

the capacity to deploy resources in an coherent manner

Question 8

Name characteristics of capabilities

Answer 8

1. Routine
2. Knowledge-based
3. Dependent on employees’ interactions
4. Often develop within specific functional areas

Question 9

What is the VRIN Framework?

Answer 9

Characteristics of Resources and Capabilities that are possible sources of competitive advantage
1. Valuable
2. Rare
3. Inimitable (not easily copyable) - Historical, ambiguous cause, social complexity
4. Nonsubstitutable

Question 10

What is the Value Chain?

Answer 10

The process through which a firm converts raw materials into goods and services

Question 11

Describe primary and secondary activities of a value chain

Answer 11

Primary - the products physical creation, distribution, and after-sale service
Secondary - assist in the execution of primary activities

Question 12

Benefits to a firm analyzing the value chain are

Answer 12

1. Understand it’s costs relative to what is valued by its customers
2. Understand the parts of its operations that create value and enable value capture
3. Identify multiple means of strategy formulation and implementation
4. Make necessary changes regarding the performance and location of certain activities

Question 13

What is the 3 resource management process?

Answer 13

1. Structure: access resources and divest resources no longer useful
2. Bundle: Combine and integrate the firm’s resources
3. Leverage: Use the firm’s resources and capabilities to exploit market opportunities

Question 14

Define Outsourcing

Answer 14

Purchasing a value chain activity from an external supplier

Question 15

Name the Benefits of outsourcing

Answer 15

1. Allows a firm to concentrate on areas in which is is more competitive
2. Partners might perform the outsourced activities more effectively and efficiently
3. A firm can share risk with other firms

Question 16

Name reasons to avoid outsourcing

Answer 16

1. Critical or sensitive activities that are a source of competitive advantage to current or potential rivals should not be outsourced
2. Activities in which a firm itself can create and capture value should not be outsourced
3. Activities that provide a platform to new opportunities should not be outsourced