Internal Analysis: Distinctive Competencies,, Competitive Advantage, And Profitability

Question 1

Discuss competitive advantage, value creation and profitability

Answer 1

-the profitability of the company depends on:
*the value customers place on the product
*the price of the product
*the cost of creating the product
When the company raises the value of their product, they are able to:
*raise the price of the product to match the value
*reduce the price to attract more customers
-competition from rivals

Question 2

List the Primary activities of value chain (4)

Answer 2

• research and development
• production
• marketing and sales
• customer service

Question 3

List the Supporting activities of value chain (4)

Answer 3

• materials management
• human resources
• information systems
• company infrastructure

Question 4

What are the components of competitive advantage (4)

Answer 4

Superior quality
Superior efficiency
Superior innovation
Superior customer customer responsiveness

Question 5

Define barriers to imitation

Answer 5

• Making it difficult for competitor to copy a company’s distinctive competencies. The greater the barrier, the more sustainable a company’s competitive advantage is
• Resources that can be imitated:
• firm specific and value tangible resources (easiest to copy)
• intangible resources e.g. Brand names (protected by law), marketing and technical knowhow
• imitating capabilities is difficult because:
• they are not visible to outsiders
• no one individual knows all the processes and procedures of company

Question 6

Discuss the capabilities of competitors and industry dynamism

Answer 6

-The capabilities of competitors is determined by:
*the nature of competitors’ prior strategic commitments
*ability of an enterprise to identify, value, asimilate, and use new knowledge
-Most dynamic industries are those that possess high rates of product innovation
*

Question 7

Reasons for failure of companies

Answer 7

Inertia
Prior strategic commitments
The icarus paradox

Question 8

List the steps to avoid failure (4)

Answer 8

1. Focus on the building blocks of competitive advantage
2. Institute continuous improvement and learning
3. Track the best industrial practice and use benchmarking
4. Overcome inertia
5. The role of luck

Question 9

Describe Distinctive competencies

Answer 9

• firm specific strengths that allow company to differentiate its products and/or achieve lower costs thats its rivals
• resources in a company can be tangible or intangible resources
• capabilities are company skills used to coordinate its resources and putting them to productive use
• require
• firm specific and valuable resource, and the capabilities to take advantage of that resource
• firm specific capability to manage resources
• distinctive competency is strongest when company possesses both the above