Why is it important for a firm to study and understand its internal

Why is it important for a firm to study and

  • Carleton University
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  • davetd
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1. Why is it important for a firm to study and understand its internal organization? (p. 72-74) *As they analyze their internal environment, a manager should think of the firm as a bundleof heterogeneous resources and capabilities that can be used to create an exclusive market position. This means that firms should no longer focus only on the traditional sources of competitive advantage (e.g., labor costs, access to capital, and raw materials) asthese advantages can be overcome through an international strategy and the relative free flow of global resources. *Instead, firms should seek out those resources and capabilities that other firms do not have, at least not in the same combinations. A firm's resources are the source of its capabilities, some of which can lead to core competencies that enable a firm to perform value-creating activities better than its competitors or that its competitors cannot duplicate. Ch 3 REVIEW QUESTIONS & ANSWERS*What is value? Why is it critical for the firm to create value? How does it do so? (pp. 74-75)*Value is represented by the bundle of performance characteristics and attributes that a firm provides to customers in the form of goods or services for which customers are willing to pay. Broadly speaking, value can be provided by a product's/service's low cost, highly-differentiated features, or a combination of the two (when these strategies are superior to those offered by competitors). *Ultimately, it is critical that a firm be able to create customer value since it is the source ofa firm's potential to earn above-average returns. Therefore, in the rapidly changing environments of the 21st-century competitive landscape, firms must evaluate continuously the degree to which their core competencies create customer value. What the firm intends to do to create value affects its choice of business-level strategy and its organizational structure Ch 3 REVIEW QUESTIONS & ANSWERS*What are the differences between tangible and intangible resources? Why is it important for decision makers to understand these differences? Are tangible resources linked more closely to the creation of competitive advantages than intangible resources, or is the reverse true? Why? (pp. 78-80)*Tangible resources are represented by assets which can be seen and quantified. They are not only represented by the firm's physical resources (such as plant and equipment), but also by other assets, such as the firm's borrowing capacity, the skills and attributes of its
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staff, and its technological capacities. *Intangible resources (because they are less visible and more embedded in the firm's history) are more difficult for competitors to understand and imitate. These include such resources as scientific capabilities, knowledge within the firm, organizational routines, or the firm's reputation for quality.*Resourcesare the source of a firm's capabilities. Capabilities are the source of a firm's core competencies, which are the basis of competitive advantage. *Intangible resources (as compared to tangible resources)
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