Bus. 345 Ch. 4

  1. Competitive advantage

    4 generic building blocks
    • 1. Efficiency
    • 2. Quality
    • 3. Innovation
    • 4. Customer responsiveness
  2. Competitive advantage building block

    Efficiency def:
    the quantity of inputs that it takes to produce a given output (that is efficiency = outputs /inputs)
  3. Two important component of efficiency
    • 1. employee productivity
    • 2. capital productivity
  4. Employee productivity def:
    output per employee
  5. capital productivity def:
    output per unit of invested capital
  6. Competitive advantage building block


    superior quality def:
    when customers perceive that the attributes of a product provide them with higher value than attributes of products sold by rivals
  7. evaluating quality of product common measurement (two)
    1. quality of excellence

    2. quality of reliability
  8. Competitive advantage building block

    innovation def:
    the creation of new products or processes
  9. two main types of innovation
    1. product innovation def

    2. process innovation
  10. product innovation def:
    the development of products that are new to the world or have attributes superior to those of existing products
  11. process innovation def:
    the development of new process for producing products and delivering them to customers
  12. in the long run, innovation of products and process is the most important building blocks of competitive advantage
  13. Competitive advantage building block

    Customer responsiveness
    identifying and satisfying its customers’ needs
  14. customer response time def:
    the time that it takes for a good to be delivered or a service to be performed
  15. to outperform its rivals a company must have
    a. unique strengths


    b. distinctive competencies
  16. Two basis conditions determine a company’s profitability
    1. the amount of value customers place on the company’s goods or services

    2. company’s cost of production
  17. Value chain def:
    the idea that a company is a chain of activities for transforming inputs into outputs that customers value
  18. Value Chain

    the process of transforming inputs into outputs is composed of two activities
    • 1. primary
    • 2. support
  19. Value Chain

    Primary activities def:
    activities related to the design, creation, and delivery of the product, its marketing,and its support and after-sale service
  20. Value Chain

    primary activities four functions
    • 1. R&D: concerned with the design of
    • products and production processes

    2. Production: concerned with the creation of a good or service

    3. Marketing and sales: build brand loyalty, advertising 

    4. Customer service: provide after-sales service and support
  21. Value chain

    support activities def
    activities of the value chain that provide inputs that allow the primary activities to take place
  22. Value Chain

    support activities four functions
    1. Materials management (or logistics)

    a. function controls the transmission of physical materials through the value chain, from procurement through production and into distribution

    2. HR

    a. hiring the right people

    3. Information system

    4. Company infrastructure def:

    • a. company wide context within which all the other value creation activities take place: the
    • organization structure, controls systems, and company culture
  23. Company infrastructure def:
    company wide context within which all the other value creation activities take place: the organization structure, controls systems, and company culture
  24. learning effects def:
    costs savings that come from learning by doing
  25. flexible manufacturing technology, or lean production def:

    a range of manufacturing technologies designed to reduce setup times for complex equipment, increase the use of individual machines through better scheduling, and improve quality control at all stages of the manufacturing process
  26. mass customization def:
    the ability of companies to use flexible manufacturing technology to customize output at costs normally associated with mass production
  27. marketing strategy def:

    the position that a company takes with regard to pricing, promotion, advertising, product design, and distribution
  28. customer defection rates def:
    the percentage of a company’s customers who defect every year to competitors
  29. self-managing team def:
    a team wherein members coordinate their own activities, which might include making their own decisions about hiring, training, work, and rewards
  30. positioning strategy def:
    the specific set of options a company adopts for a product on four main dimensions of marketing: price, distribution, promotion, and advertising, and product features
  31. heavyweight project manager def:
    a project manager who has high status within the organization and the power and authority required to get the financial and human resources that a project team needs to succeed
  32. Distinctive competency def:
    a unique, firm-specific strength that enables a company to better differentiate its products and/or achieve substantially lower costs than its rivals and thus gain a competitive advantage

    a. this happens when a company is uniquely skilled at a value chain activity
  33. Resources def:
    financial,physical, social or human,  technological, and organizational factors that allow a company to create value for its customers
  34. company resources can be dividend into two types
    • 1.tangible
    • 2. intangible
  35. Tangible resources def:
    physical resources, such as land, buildings, plant, equipment, inventory, and money
  36. Intangible def:
    nonphysical entitities that are the creation of managers and other employees, such as brand names, the reputation of the company, the knowledge that employees have gained through experience, and the intellectual property of the company, including that protected through patents, copyrights, and trademark
  37. the more firm specific and difficult to imitate
    is a resource, the more likely a company is to have a distinctive competency
  38. Capabilities def:
    a company’s skills at coordinating its resources and putting them to productive use
  39. a company to have a distinctive competency it must at a minimum have either:
    1. a firm-specific and valuable resource and the capabilities (skills) necessary to take advantage of that resources

    • 2. a firm-specific capability to manage
    • resources
  40. a company distinctive competency is strongest when it possess both
    firm-specific and valuable resources and firm-specific capabilities to manage those resources
  41. barriers of imitation def:
    factors that make it difficult for a competitor to copy a company’s distinctive competencies
  42. the greater the barriers to imitation
    the more sustainable are a company’s competitive advantage
  43. easiest distinctive competencies for rivals to imitate are
    possession of firm-specific and valuable tangible resources
  44. what are two things difficult to imitate
    • 1. intangible resources
    • 2. imitating a company's capabilities
  45. Business level-strategies (two)
    • 1. Differentiation
    • 2. Low cost
  46. Competencies and Functional Strategies
    • 1. Quality
    • 2. Efficiency
    • 3. Customer Responsiveness
    • 4. Innovation
  47. Distinctive competencies arise from (two)
    • 1. resources
    • 2. capabilities
  48. Managers pursue improvement in value-chain functions by 4 functional level strategies
    • 1. increasing efficiency
    • 2. increasing quality
    • 3. increasing innovation
    • 4. achieving superior customer responsiveness
Card Set
Bus. 345 Ch. 4
Bus. 345 Ch. 4