Week 2 - The Internal Organization and Business-Level Strategy Flashcards
(183 cards)
1
Q
What is a competitive advantage?
A
A competitive advantage is when a firm implements a strategy that competitors cannot duplicate (brand loyalty, unqiue technology, etc), leading to above-average returns. (Core competenices are often the source of competitive advantage)
2
Q
What 3 factors affect the sustainability of a competitive advantage?
A
The rate that core competences become outdated, availability of substitutes, and imitability of the core competence.
3
Q
What is a global mindset?
A
A global mindset is the ability to think and act effectively across cultures and countries, including cultural awareness and adaptability.
4
Q
How do firms create value?
A
Firms create value by innovatively bundling and leveraging their resources to form capabilities and core competencies.
5
Q
What three conditions affect the analysis of the internal organization? (An international organization is an entity (company, non-profit) created by multiple countries to work together on common issues or goals.)**
The analysis of the internal organization involves examining the internal components and dynamics of a business to understand its strengths, weaknesses, resources, and capabilities
A
Uncertainty, complexity, and intra-organizational conflict. (Conflicts can arise between different departments, teams, or individuals due to differing goals, interests, or perspectives. )
6
Q
What are tangible resources?
A
Tangible resources are assets that can be observed and quantified, such as financial, physical, and technological resources. (Land, building, vehicles, equipment, etc)
7
Q
What are intangible resources?
A
Intangible resources are deeply rooted assets in a firm’s history, such as human resources, innovation resources, and reputational resources. (patent, trademark, brand, copyright)
8
Q
Define core competencies.
A
Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals.
9
Q
What are the four criteria of sustainable competitive advantage?
A
Valuable capabilities, rare capabilities, costly-to-imitate capabilities, and non-substitutable capabilities.
10
Q
What is value chain analysis?
A
A means of evaluating each of the activities in a company’s value chain to understand where opportunities for improvement and potential competitive advantages lie.
11
Q
What is outsourcing?
A
Outsourcing is the purchase of a value-creating or support function activity from an external supplier to mitigate risks and increase flexibility.
12
Q
Why is analyzing the internal organization important for firms?
A
It helps identify strengths and weaknesses reflected by resources, capabilities, and core competencies, which are essential for achieving competitive advantage.
13
Q
Why is it important for a firm to study and understand its internal organization? (repeat question)
A
Understanding the internal organization helps firms identify their strengths and weaknesses through resources, capabilities, and core competencies.
- This knowledge is crucial for achieving competitive advantage and aligning internal capabilities with external opportunities.
14
Q
What is value? Why is it critical for the firm to create value? How does it do so?
A
Value is the worth of a product based on its performance and the features customers are willing to pay for.
Creating value is critical because it leads to customer satisfaction and competitive advantage. Firms create value by innovatively bundling and leveraging resources to form capabilities and core competencies.
15
Q
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?
A
Tangible resources: are observable and quantifiable assets (e.g., financial, physical, technological).
Intangible resources are deeply rooted in a firm’s history and harder to imitate (e.g., human, innovation, reputational resources).
Understanding these differences helps decision-makers allocate resources effectively.
Intangible resources are often more valuable for creating capabilities because they can provide unique advantages that are difficult for competitors to replicate.
16
Q
What are capabilities? How do firms create capabilities?
A
Capabilities are the skills and processes used to complete organizational tasks that create value for customers. Firms create capabilities by integrating and applying their resources effectively to meet specific tasks or objectives.
17
Q
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?
A
- Valuable capabilities: allow firms to exploit opportunities or neutralize threats.
- Rare capabilities: Few competitors possess them.
- Costly-to-imitate capabilities: Difficult for competitors to develop.
- Non-substitutable capabilities: No strategic equivalents exist
Using these criteria is important for evaluating capabilities’ potential to create value and sustain competitive advantage over time.
18
Q
How do firms identify internal strengths and weaknesses? Why is it important that managers have a clear understanding of their firm’s strengths and weaknesses?
A
Using value-chain analysis. It’s important for strategic decision-making, enabling firms to leverage strengths and address weaknesses effectively.
19
Q
What are core rigidities? What does it mean to say that each core competence could become a core rigidity?
A
Core rigidities are outdated core competencies that can hinder a firm’s ability to adapt to changes in the environment. Saying that a core competence could become a core rigidity means that what was once a strength may become a limitation if the firm cannot evolve or respond to new market demands.
20
Q
<b>What is business-level strategy?</b>
A
An integrated and coordinated set of commitments and actions a firm uses to gain a competitive advantage by exploiting core competencies in a specific product market.
21
Q
<b>Why must every firm implement a business-level strategy?</b>
A
To gain a competitive advantage, although not all firms will use corporate-level, merger and acquisition, international, and cooperative strategies.
22
Q
<b>Does a firm operating in a single-product market need a corporate-level strategy?</b>
A
No, it does not need a corporate-level strategy for product diversity or an international strategy for geographic diversity.
23
Q
<b>What do diversified firms use in addition to a business-level strategy?</b>
A
<ul><li>Corporate-level strategies, with separate business-level strategies for each product market they compete in.</li></ul>
24
Q
<b>Why are customers important for a successful business?</b>
A
Customers are the foundation for a successful business, and firms must create value to retain them.
25
What considerations should a firm evaluate when selecting a business-level strategy?
Who will be served, what needs will be satisfied, and how those needs will be satisfied.
26
What is strategic competitiveness?
It occurs when a firm successfully meets the needs of a specific customer group using its competitive advantages in specific product markets.
27
How do firms strengthen relationships with customers?
By delivering superior value, which increases customer satisfaction.
28
What does "reach" refer to in customer relationships?
The firm's access and connection to customers, with the objective of extending reach and adding customers.
29
What is "richness" in the context of customer interactions?
The depth and detail of the two-way flow of information between the firm and customers.
30
What does "affiliation" mean regarding customer relationships?
It refers to facilitating useful interactions with customers and enhancing their satisfaction.
31
What is market segmentation?
- The process of dividing customers into groups based on their needs, clustering those with similar needs into identifiable groups.
32
Why is it important for firms to anticipate changes in customer needs?
Failing to anticipate changes may lead to losing customers to competitors who provide more value.
33
What are core competencies?
The range of capabilities that companies draw from to produce products that satisfy customer needs.
34
What is the primary purpose of a business-level strategy?
To create differences between the firm’s position and those of its competitors.
35
What is a business model?
It describes what a firm does to create, deliver, and capture value for its stakeholders.
36
What are examples of different types of business models?
Franchise model (e.g., McDonald's), subscription model (e.g., Netflix), freemium model (e.g., Dropbox), advertising model (e.g., Google), peer-to-peer model (e.g., Airbnb).
37
What are the five types of business-level strategies?
Cost leadership, differentiation, focused cost leadership, focused differentiation, integrated cost leadership/differentiation.
38
What are the two types of competitive advantages a firm can seek?
Cost competitive advantage and distinctiveness competitive advantage.
39
What characterizes a cost leadership strategy?
An integrated set of actions to produce acceptable products at the lowest cost relative to competitors.
40
What are the risks associated with a cost leadership strategy?
Processes may become obsolete, focus on cost reduction might neglect customer perceptions, and competitors may imitate the strategy.
41
What is a differentiation strategy?
An integrated set of actions to produce products that customers perceive as different in important ways.
42
Why is continuous product innovation important in a differentiation strategy?
It helps maintain differentiation without significantly increasing costs.
43
How does customer loyalty affect rivalry with existing competitors in a differentiation strategy?
- Customers become less sensitive to price increases for products that are meaningfully differentiated.
44
How does a firm using a differentiation strategy manage supplier costs?
It can absorb higher costs due to premium pricing and may pass increased costs onto customers.
45
What creates barriers for potential entrants in an industry?
Customer loyalty and the uniqueness of differentiated products.
46
What do potential entrants need to overcome when entering a market with strong customer loyalty?
Significant investments of resources and patience to build customer loyalty.
47
How do brand-name products protect firms from substitutes?
Loyal customers make them less vulnerable to alternatives that are cheaper or better.
48
What risks do firms without brand loyalty face?
Losing customers to substitutes or innovations that better meet their needs.
49
How does a differentiation strategy relate to brand loyalty?
- Successfully differentiated products build brand loyalty, reducing customer likelihood to switch to substitutes.
50
What is the price differential risk in a cost leadership strategy?
Customers may find the price difference too large, leading to vulnerability against better-value competitors.
51
What is value perception risk in a differentiation strategy?
A firm’s differentiation may lose value if competitors imitate features at lower prices.
52
What is experience narrowing risk?
Positive experiences with cheaper alternatives can diminish customers' perception of the value of differentiated products.
53
How can counterfeiting impact a brand?
It can damage brand trust and lead to decreased differentiation and consumer distrust.
54
What is identifiability risk?
Failing to clearly differentiate products may lead to unmet customer expectations.
55
What does the focus strategy involve?
Producing products tailored to the needs of a specific customer segment.
56
What types of market segments can firms target with a focus strategy?
Specific buyer groups, segments of a product line, or different geographic markets.
57
What is an example of a focused cost leadership strategy?
IKEA offers stylish, affordable furniture for young buyers with unique designs and a pleasant shopping experience.
58
What is a focused differentiation strategy?
Offering unique products tailored to specific market segments, like Green Truck's all-organic meals.
59
What competitive risks do focused strategies face?
Competitors may "out-focus" them, enter the market segment, or customer needs may converge with broader market needs.
60
What is the integrated cost leadership/differentiation strategy?
Engaging in primary value-chain activities to achieve low costs with some product differentiation.
61
How does Target exemplify the integrated strategy?
By offering trendy merchandise at low prices with an enjoyable shopping experience.
62
What is a Flexible Manufacturing System (FMS)?
- A system that integrates resources to create differentiated products at low costs with minimal manual intervention.
63
How do information networks support firms?
- They connect companies with suppliers and customers, enhancing flexibility and meeting expectations for quality and delivery.
64
What is Total Quality Management (TQM)?
- Implementing tools and techniques to provide the best quality products and services, increasing customer satisfaction and reducing costs.
65
What are the competitive risks of the integrated cost leadership/differentiation strategy?
- Struggling to balance low production costs with necessary differentiation can lead to being "stuck in the middle."
66
What happens to firms that are "stuck in the middle"?
They typically earn average returns and struggle to compete effectively in the market.
67
How does a business-level strategy relate to core competencies?
- It is a coordinated set of actions that exploits core competencies to gain a competitive advantage in specific product markets.
68
What factors must firms consider when developing a business-level strategy?
Who they will serve, what needs they will satisfy, and how they will satisfy those needs.
69
What is the relationship between a firm’s customers and its business-level strategy in terms of who, what, and how? Why is this relationship important?
- Who: Refers to the customer groups the firm intends to serve.
- What: Relates to the needs of those customers that the firm seeks to satisfy.
- How: Involves the core competencies the firm will use to meet customer needs.
- This relationship is important because understanding these factors allows firms to tailor their strategies effectively and identify unique customer needs, creating opportunities for competitive advantage.
70
What is a business model and how do business models differ from business-level strategies?
71
What are the differences among the cost leadership, differentiation, focused cost leadership, focused differentiation, and integrated cost leadership/differentiation business-level strategies?
- Cost Leadership: Offers no-frills, standardized products for typical customers at the lowest cost.
- Differentiation: Provides unique products with valued features, allowing firms to charge premium prices.
- Focused Cost Leadership: Targets a narrow market segment with low-cost products.
- Focused Differentiation: Targets a narrow market segment with unique, tailored products.
- Integrated Cost Leadership/Differentiation: Combines low-cost production with some differentiated features, aiming for flexibility in operations.
72
How can firms use each of the business-level strategies to position themselves favorably relative to the five forces of competition?
73
What are the specific risks associated with using each business-level strategy?
- Loss of competitive advantage to newer technologies.
- Failure to detect changes in customer needs.
- Competitors imitating cost advantages.
- Customers may no longer see premium prices as justified.
- Inability to create sufficient value.
- Competitors offering similar features at lower costs.
- Counterfeiting threats.
- Competitors may "out-focus" by serving a more narrowly defined segment.
- Industry-wide competitors may enter the niche market.
- Customer needs may converge with broader market needs.
- Similar risks as focused cost leadership due to increased competition.
- Difficulty balancing low costs with differentiation.
- Risk of becoming "stuck in the middle," failing to satisfy either cost or differentiation.
74
What are competitors?
Firms operating in the same market, offering similar products, and targeting similar customers.
75
Define competitive rivalry.
The ongoing set of competitive actions and responses among firms maneuvering for advantageous market positions.
76
What is competitive behavior?
The set of competitive actions and responses a firm takes to build or defend its competitive advantages and improve market position.
77
What does competitive dynamics refer to?
The total set of competitive actions and responses taken by all firms competing within a market.
78
What is the relationship between competitive actions and performance?
Competitive actions and responses affect both firms' performance, influencing their ability to earn above-average returns.
79
What is competitor analysis?
The first step a firm takes to predict the extent and nature of its rivalry with each competitor.
80
What does market commonality refer to?
The number of markets in which firms compete against each other.
81
What is resource similarity?
The extent to which a firm’s tangible and intangible resources compare favorably to a competitor’s in type and amount.
82
Describe Quadrant I firms. (Competitor Analysis Picture, figure 5.3)
Firms with high market commonality and high resource similarity; they are direct competitors.
83
Describe Quadrant III firms. (competitor analysis, figure 5.3)
Firms with low market commonality and low resource similarity; they are not direct competitors.
84
What influences the drivers of competitive behavior?
Market commonality and resource similarity influence awareness, motivation, and ability.
85
Define awareness in the context of competitive behavior.
The extent to which competitors recognize their mutual interdependence resulting from market commonality and resource similarity.
86
What does motivation refer to in competitive behavior?
The firm's incentive to take action or respond to a competitor’s attack, related to perceived gains and losses.
87
What does ability relate to in competitive behavior?
Each firm’s resources and the flexibility they provide to attack or respond to competitors.
88
**What is resource dissimilarity?**
The differences in the types or amounts of resources that two competing firms possess.
89
**What are strategic actions?**
Significant resource commitments that are hard to reverse.
90
**What are tactical actions?**
Moves that fine-tune strategy, requiring fewer resources and are easier to implement and reverse.
91
**Give an example of a strategic response.**
Cigna’s $54 billion acquisition of Express Scripts in response to CVS’s acquisition of Aetna.
92
**What are first-mover benefits?**
Advantages gained by being the first to take competitive action, such as customer loyalty and market share.
93
**What is the role of organizational slack in becoming a first mover?**
Extra resources not currently used that help firms to invest in research, development, and marketing.
94
**Who is a second mover?**
A firm that responds to the first mover’s competitive action, typically through imitation.
95
**What is a late mover?**
A firm that responds to a competitive action a significant time after the first and second movers.
96
**How does organizational size affect competitive actions?**
Smaller firms are quicker and more flexible, while larger firms engage in more overall competitive actions but may have fewer types.
97
**Define quality in the context of competition.**
Quality exists when a firm's products meet or exceed customer expectations.
98
**What is market dependence?**
The extent to which a firm derives its revenues or profits from a particular market.
99
**How does reputation affect competitive rivalry?**
Positive or negative traits assigned to a rival based on past behavior influence competitive responses and market interactions.
100
**What do competitive dynamics concern?**
Ongoing actions and responses among all firms competing within a market for advantageous positions.
101
How do competitive dynamics differ across market types?
They differ in slow-, fast-, and standard-cycle markets.
102
Define slow-cycle markets.
Markets where competitors lack the ability to imitate the focal firm’s competitive advantages, allowing firms to sustain advantages for long periods.
103
What happens in slow-cycle markets after a firm exploits its competitive advantage?
Competitors will eventually respond with a counterattack.
104
Define fast-cycle markets.
Markets where competitors can rapidly and inexpensively imitate the focal firm’s capabilities, leading to unsustainable competitive advantages.
105
What characterizes the pace of competition in fast-cycle markets?
The pace is almost uncontrolled, relying on innovations as growth engines.
106
Define standard-cycle markets.
Markets where competitors can imitate advantages, but the imitation is moderately costly and competitive advantages are partially sustainable.
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What do firms seek in standard-cycle markets?
Large market shares, customer loyalty through brand names, and careful control of operations.
108
How does innovation influence competition?
Innovation is crucial for strategic success in all market types (slow, fast, standard) and can be incremental or radical.
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What is competitive rivalry?
The ongoing set of competitive actions and responses occurring between competitors for an advantageous market position.
110
What is competitive behavior?
The set of competitive actions and responses an individual firm takes while engaged in competitive rivalry.
111
What is the purpose of competitor analysis?
To predict competitors’ actions and responses.
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What factors influence competitive actions?
Market commonality, resource similarity, awareness, motivation, and ability.
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What are first-mover benefits?
Advantages gained by being the first to take competitive action, often leading to loyal customers and above-average returns.
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What is a second mover?
A firm that responds to the first mover’s action, often imitating and improving upon it.
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What role does organizational size play in competitive actions?
Large firms launch fewer types of competitive actions, while smaller firms are quicker and more flexible.
116
Why is quality important in competition?
It is a necessary condition for establishing competitive parity and success in the global economy.
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How do firms predict a competitor's response?
By examining the type of action taken, the competitor's reputation, and its market dependence.
118
What happens in slow-cycle markets regarding competitive advantages?
Firms can maintain advantages for longer periods, focusing on protecting and extending proprietary advantages.
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What is a characteristic of fast-cycle markets?
Firms concentrate on developing temporary competitive advantages due to rapid imitation.
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What do firms in standard-cycle markets aim to achieve?
Economies of scale and moderate protection from competition, serving mass markets.
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Who are competitors?
Competitors are firms operating in the same market, offering similar products, and targeting similar customers.
122
How are competitive rivalry, competitive behavior, and competitive dynamics defined in the chapter?
- Competitive rivalry: Ongoing competitive actions and responses among firms seeking advantageous market positions.
- Competitive behavior: The set of competitive actions and responses a firm takes to build or defend its competitive advantages.
- Competitive dynamics: The total actions and responses taken by all firms competing within a market.
123
What is market commonality?
Market commonality refers to the number of markets in which firms compete against each other.
124
What is resource similarity?
Resource similarity is the extent to which a firm's tangible and intangible resources compare favorably to a competitor’s in terms of type and amount.
125
In what way are these concepts the building blocks for a competitor analysis?
Market commonality and resource similarity help firms analyze competitors to predict their actions and responses, establishing the framework for understanding competitive rivalry.
126
How do awareness, motivation, and ability affect the firm’s competitive behavior?
127
What factors affect the likelihood a firm will take a competitive action?
Factors include market commonality, resource similarity, and the firm's awareness, motivation, and ability.
128
What factors affect the likelihood a firm will initiate a competitive response to a competitor’s action(s)?
A firm is likely to respond if:
- The competitor's action strengthens their market position or competitive advantage.
- The action threatens the firm’s ability to maintain its core competencies.
- The firm’s market position becomes harder to defend.
129
What competitive dynamics can firms expect to experience when competing in slow-cycle markets? In fast-cycle markets? In standard-cycle markets?
130
What is competitive rivalry?
Competitive rivalry refers to the ongoing fighting between businesses and firms in a market.
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What are the key questions firms should ask about their competitors?
- Who are my competitors?
- What drives their behavior?
- What will they do?
- When will they do it?
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What happens when firms don’t have answers to these key questions about competitors?
They have blind spots, which makes it harder to anticipate competitors’ actions.
133
Who are competitors in the top-right quadrant of the Competitor Analysis Model?
Competitors with high market and resource overlap (e.g., Pepsi vs. Coca-Cola). They are direct and mutually acknowledged competitors.
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Who are competitors in the bottom-left quadrant of the Competitor Analysis Model?
Competitors with low market overlap and resource similarity. They pose the least threat.
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Who are competitors in the top-left quadrant of the Competitor Analysis Model?
Competitors operating in the same market but with different resources and strategies (e.g., Zara vs. Louis Vuitton).
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Who are competitors in the bottom-right quadrant of the Competitor Analysis Model?
Competitors with similar resources but operating in different markets.
137
Which competitors should you keep an eye on according to the Competitor Analysis Model?
Competitors in the top-right quadrant, with high market and resource overlap.
138
What are the three factors that drive competitors’ behavior?
1. Awareness
2. Motivation
3. Ability
2. Motivation
3. Ability
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What are potential types of competitive actions?
140
What is a strategic action?
A competitive move that requires a large commitment of resources and is difficult to reverse, such as introducing a new product or technology.
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What is a tactical action?
A competitive move requiring fewer resources, aimed at fine-tuning strategy, such as temporary price cuts to deter competitors.
142
How does the speed of competition differ in slow-cycle, fast-cycle, and standard-cycle markets?
- Slow-cycle markets: Competitors can't easily imitate a firm’s advantage; consumer needs change slowly.
- Fast-cycle markets: High velocity of change; competitors can copy advantages quickly and cheaply.
- Standard-cycle markets: Moderate speed; competitive advantages are partially sustainable and moderately costly to imitate.
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What characterizes slow-cycle markets?
Markets where competitors cannot easily imitate a firm’s advantage, and consumer needs change slowly.
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What characterizes fast-cycle markets?
Markets with rapid change, where copying a firm’s capabilities is not costly, and competitive advantages are short-lived.
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What characterizes standard-cycle markets?
Markets with moderate competition speed, where imitating a firm’s competitive advantage is moderately costly and partially sustainable.
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**What is a business-level strategy?**
It is an integrated and coordinated set of commitments and actions a firm uses to gain a competitive advantage by exploiting core competencies in a specific product market.
147
**What three questions guide a firm in developing a business-level strategy?**
1. Who will the firm serve?
2. What needs do those customers have?
3. How will the firm satisfy those needs?
148
**What is market segmentation?**
Dividing customers based on their specific needs.
149
What are the two options a firm has relative to competitors in developing a strategy?
1. Perform certain activities differently.
2. Perform different activities altogether.
2. Perform different activities altogether.
150
What are the five types of business-level strategies?
1. Cost leadership
2. Differentiation
3. Focused cost leadership
4. Focused differentiation
5. Integrated cost leadership/differentiation
2. Differentiation
3. Focused cost leadership
4. Focused differentiation
5. Integrated cost leadership/differentiation
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What is the cost leadership strategy?
Producing products with acceptable features at the lowest cost relative to competitors, often involving economies of scale and process innovation.
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What are the downsides of the cost leadership strategy?
153
What is the differentiation strategy?
Producing products that are perceived as unique by customers, allowing firms to charge premium prices.
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What are the downsides of the differentiation strategy?
- Customers may reject the price difference.
- Differentiation may fail to provide value.
- Risk of counterfeit products.
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What is the focused strategy?
Producing products that serve the needs of a specific customer segment, whether by buyer group, product line, or geographic market.
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What is integrated cost leadership/differentiation?
A strategy that combines cost leadership and differentiation to provide low-cost products that are also unique.
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What company is an example of cost leadership with minimal advertising?
Primark.
158
What company is an example of a differentiated leader, emphasizing branding and innovation?
Nike.
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What company exemplifies a blend of cost leadership and differentiation?
Zara, which is cost-efficient yet adjusts products based on trends.
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What company uses a focused differentiation strategy?
Patagonia, focusing on durable outdoor sportswear.
161
What company uses a focused cost leadership strategy?
Sloggi, focusing on affordable underwear for a narrow market segment.
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What are the two main takeaways for selecting a business-level strategy?
1. Consider the market scope the strategy targets.
2. Consider the competitive advantage the firm seeks to exploit.
2. Consider the competitive advantage the firm seeks to exploit.
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What should managers consider when selecting a business-level strategy?
Both the internal organization and the external environment.
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Why do we have firms?
Firms exist to reduce transaction costs and coordinate knowledge exchange and cooperation more efficiently than markets.
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How do firms create value?
By reducing transaction costs and enabling specialization in specific tasks.
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What are transaction costs?
A necessary cost of doing business (a deadweight loss) that firms minimize to create value.
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What are resources in a firm’s production process?
Inputs that a firm uses, which can be tangible or intangible.
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What are tangible resources?
Assets that can be observed and quantified, such as machinery, facilities, and patents.
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What are intangible resources?
Assets that are difficult to observe and quantify, like a firm's reputation, brand name, culture, and knowledge.
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What are capabilities?
The capacity for a set of resources to perform tasks or activities effectively and integratively.
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What are core competencies?
Capabilities that provide a firm with a competitive advantage by being unique and difficult for competitors to imitate.
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What is the VRIN analysis?
A method to identify a firm's core competencies by checking if the capability is Valuable, Rare, Costly-to-Imitate, and Nonsubstitutable.
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What does it mean for a capability to be valuable?
It enables the firm to exploit opportunities or neutralize threats in the environment.
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What does it mean for a capability to be rare?
It is not widely possessed by many competitors.
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What does it mean for a capability to be costly-to-imitate?
Other firms cannot easily replicate the capability due to reasons like path dependence, causal ambiguity, or social complexity.
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What does it mean for a capability to be nonsubstitutable?
There is no strategic equivalent for the capability; it cannot be replaced with another.
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What is a sustainable competitive advantage?
When a firm possesses core competencies that meet the VRIN criteria, giving it a lasting edge over its rivals.
