Rarity versus Imitability Rarity is concerned about whether the resource or

Rarity versus imitability rarity is concerned about

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Rarity versus Imitability Rarity is concerned about whether the resource or capability is possessed by any other firm right now . Ex: SWA’s reputation as a fun, reliable low cost air travel provider
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VRIO Framework The question of Organization Examples: Formal and informal reporting structures, management controls, compensation policies, relationships, etc. These structure and control mechanisms complement other firm resources taken together, they can help a firm achieve sustained competitive advantage
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The VRIO Framework V aluable? R are? Costly to I mitate? Exploited by O rganization? Competitive Implications No Yes Yes Yes Yes Yes Yes Yes No No No Disadvantage Parity Temporary Advantage Sustained Advantage Economic Implications Below Normal Normal Above Normal Above Normal
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Internal Analysis Assumes: Firms may be different (heterogeneity) Differences may be enduring (immobility)
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The Resource-Based View Resources & Capabilities Competitive Advantage V aluable R are Costly to I mitate O rganized to Exploit CA will be sustained if: other firms’ costs of imitation are greater than benefit of imitation the firm is organized to exploit advantages
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Using VRIO to choose business Strategy Conduct a VRIO for GAP for: Diversity in product Breadth of shopping channels Curated top of the line online retail experience (Assume GAP is currently the market leader in online retailing) Vertical integration where self-owned factories can change product in 3 weeks rather than the industry standard 6 months
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External Analysis Porters Five Forces
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Porter’s five Forces Model 1. The threat of new businesses entering your market 5. The level of rivalry among existing firms in the industry
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Porter’s Five Forces Model If threats are high… expect _____ profits If threats are low…expect ______ profits In reality, most firms are somewhere in the middle From Barney & Hesterly (2008), Strategic Management and Competitive Advantage
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Threat of Entry Absolute cost advantages Proprietary learning curves Access to inputs Government policies Economies of scale Capital requirements Brand identity Switching costs From Carpenter & Sanders (2008) Strategic Management Concepts: A Dynamic Perspective
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Threat of Substitutes Switching costs Buyer inclination to substitute Price-performance tradeoff of substitutes From Carpenter & Sanders (2008) Strategic Management Concepts: A Dynamic Perspective
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Threat of Suppliers Supplier concentration Importance of volume to supplier Differentiation of inputs Impact of inputs on cost or differentiation Switching costs of firms in the industry From Carpenter & Sanders (2008) Strategic Management Concepts: A Dynamic Perspective
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Threat of Buyers Buyer concentration Importance of volume to customer Differentiation of inputs Impact of outputs on cost or differentiation Switching costs of customers From Carpenter & Sanders (2008) Strategic Management Concepts: A Dynamic Perspective
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Threat of Rivalry Exit barriers Industry concentration Fixed costs/value added Industry growth Product differences switching costs From Carpenter & Sanders (2008) Strategic Management Concepts: A Dynamic Perspective
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In Class Case Study Pick an industry
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External Analysis PESTEL Analysis
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