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What are a CEO's duties?
organizing and deploying the resources of the firm
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What does internal analysis tell us?
what a firm can do
what a firms strengths and weaknesses are compared to competitors.
determine if its resources and capabilities are likely sources of competitive advantage
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What use to be the most popular strategic management theory?
Structure Conduct Performance Model
(SCPM)
Change from this because we now understand a firms performance can be found at the firm level instead of the industry level
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What is a resource?
any asset or ability of a firm
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What is a capability?
those resources the firm uses to combine and get other resources.
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What are the four categories of resources?
- 1) Financial (cash, retained earnings)
- 2) Physical (plant and equipment, trademarks, reputation)
- 3) Human (skills and abilities)
- 4) Organizational (reporting structures, relationships)
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What are two critical assumptions of the Resource Based View?
resource heterogeneity
resource immobility
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What is resource heterogeneity?
different firms may have different resources
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What is resource immobility?
some resources may not spread from firm to firm easily. It can be costly to move them.
Most of the time a firm can get what it wants, it will just cost money.
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What do the assumptions of the Resource Based View mean?
one firm can be better at something than other firms and that the difference may be enduring
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What does VRIO framework?
It is the analysis tool of the RBV
Tells us if a resource is likely to be a source of a sustainable competitive advantage
- Value
- Rarity
- Imitability
- Organization
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Is the VRIO framework applied on a resource by resource basis?
yes
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True or false, in order to qualify for a sustained competitive advantage a firms resource must meet all four criteria of VRIO?
True
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What about VALUE?
does the resource result in an increase in revenue and does it help exploit an external opportunity or neutralize an external threat.
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What about RARITY?
is it rare enough to create a difference between focal firms and its competitors.
way to tell is if the firm is able to charge a premium price
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What about valuable and rare?
If Resources are:
- Not valuable competitive disadvantage
- Valuable, but not rare competitive parity
- Valuable and rare competitive advantage
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What about imitability?
intangible resources are more costly to imitate than tangible resources
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What are first mover advantages?
brand loyalty and market share are difficult to overcome
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What about path dependency?
development of a resource may depend heavily on other resources
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What about imitability and causal ambiguity?
Southwest Airlines, hard to know how they became that effective with human resources.
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What about imitability? social complexity
social relationships, intrinsic value in a firm
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What about imitability? Patents
They provide a period of protection
They also provide disclosure (negative)
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What about Value, Rarity, and Imitability?
If a firm's resources are:
Valuable, Rare, but not Costly to Imitate: Temporary competitive advantage
Valuable, Rare, and Costly to Imitate: Sustained competitive advantage
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What about organization?
management, control systems, hiring, policies
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What about Valuable, Rare, Costly to Imitate, and Organization?
No Value Disadvantage, below normal econ implications
Yes Value, No Rare No Parity, normal econ implications
Yes Value, Yes Rare, No Costly to imitate Temporary advantage, above normal econ implications
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continued
Yes Value, Yes Rare, Yes Costly to imitate, Yes Organization, Sustained Advantage, Above normal
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What is the descriptive of the VRIO?
firms analyze their current set of resources and capabilities
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What is the prescriptive of the VRIO framework?
should be applied to help firms formulate strategy
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According to VRIO, two reasons to pursue growth?
- 1) exploit current resources and capability advantages
- 2) develop new resources and capabilities in a new environment
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What is critical caveat?
a competitive advantage in one are might not work in another area
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What is the managers job in accordance with the VRIO framework?
put together the resources and capabilities to get the competitive advantage
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