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Intangible resources
resources do not have physical attributes and are invisible
Examples of intangible resources
culture, knowledge, brand equity, reputation, intellectual property
Porter’s value chain
factor and demand conditions, intensity of focal industry, related and supporting industries
Resource heterogeneity
a firm is a unique bundle of resources, capabilities, and competencies, which differ across firms
Resource immobility
resources are “sticky” and do not move easily from firm to firm, difficult to replicate and longlasting
Isolating mechanisms
Casual ambiguity, social complexity, path dependence
Casual ambiguity
cause and effect are vague
Social complexity
social and business systems interact
Path dependence
past decisions limit current ones
Dynamic capabilities
modify and leverage resource base
gain and sustain CA
respond to a changing environment
VRIO
a resource must be valuable, rare, costly to imitate, organized to capture value of resource
Forward vertical integration
owning activities closer to the customer
Backward vertical integration
owning inputs of the value chain
Taper integration
backward or forward integrated, reliance on outside firms such as suppliers or distributors
Single business
lowest diversification
Dominant business
main business
Related-constrained
all businesses share competencies
Unrelated
no businesses share competencies
BCG growth matrix
a helpful restructuring tool that guides portfolio planning and each category has a different strategy
Question mark
earnings are low, increase market share or harvest/divest
Star
earnings are high, stable, growing, hold or invest for growth
Dog
earnings are low and unstable, harvest/divest
Cash cow
earnings are high and stable, hold
External transaction cost
searching for contractors and negotiating, monitoring, and enforcing contracts (SNME)
Internal transaction costs
·recruiting and keeping employees, setting up a shop floor
Advantages of vertical integration
lower costs, improving quality, facilitating scheduling, planning, investments, secure supplies and channels
Disadvantages of vertical integration
Increasing costs, reducing quality and flexibility
Advantages of the market
high incentive, flexibility
Disadvantages of the market
search costs, opportunism, incomplete contracting, enforcement of contracts
CAGE
cultural, administrative and political, geographic, economic
What does CAGE do?
Guide multinational enterprise decisions on which countries to enter
International economies give access to
communities of learning and location economies
International
a company sells the same products or services in both domestic and foreign markets
Multidomestic
low-cost reductions/ high-local responsiveness
Global standardization
high-cost reductions/ low-local responsiveness
Transnational
high-cost reductions/ high-local responsiveness
Cost reductions
key competitive weapon
Local responsiveness
tailoring to specific preferences
Liabilities of foreignness
unfamiliar culture and economic environment, hard to plan stuff
A theory for competitive advantage
resource based view assumptions
Resources that lead to CA are usually…
intangible
isolating mechanisms do what?
keep other firms from imitating products
big topic for dynamic capabilities
the ability to change, upgrade, or modify
what describes a valuable resource?
if it cuts costs
a resource is valuable if
it creates value for the company
taper integration is..
vertically integrated, but outsourcing at the same time
backward vertical integration is more about…
raw materials
Single business
>95%, Coca-cola
Dominant business
70%-95%, UPS
Related-constrained
<70%, Nike
Related-linked
<70%, Disney
Unrelated
<70%, Berkshire
Diversification discount
the actual value would be worth more if broken up
A firm is good at..
coordinating, holding knowledge, and transaction investments
A firm is not good at…
low-powered incentives
Location economies
being near what you need
Greenfield operations
starting from scratch
Liabilities of foreignness is the cost of
operating abroad
porter’s is used for…
national competitive adantage
competitive intensity
you need to have competitors
components of organizational design
structure, control, and culture
Simple
Used by small firms with low organizational complexity
Fuctional
employees are in groups
Multidivisional
used as a firm diversifies products and geography
Matrix
you have two lines of who you report to
Input control
direct behavior with rules, operations, and budgets
output controls
define results, but leave it to the people
Culture
shared values and norms of an organizations members
Simple structures have a low degree of
formalization and specialization
board of directors
look after owners and make sure agents are doing what they are supposed to do
What is the centerpiece of corporate governance
board of directors
inside directors
work for the CEO, decrease information of symmetry
Outside directors
make sure people do not act immorally
external governance mechanisms
acquisitions, industry analysis, auditors, government regulators (AIAG)
Adverse selection
you may select the wrong person
Moral hazard
after hiring, the person is trying to max their own benefits
what helps address the agency problem
corporate governance
Note 
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