Chapter 4: Evaluating a Company's Resources, Capabilities, and Competitiveness

Vocabulary flashcards covering evaluating strategy performance, resources and capabilities, competence levels, VRIN analysis, SWOT framework, and remedies for supplier cost disadvantages.

Financial Strength & Profitability

One of the two primary indicators used by managers to determine how well a company's strategy is working, evaluated by whether the company is recording gains in financial strength.

Competitive Strength & Market Standing

One of the two primary indicators of strategic performance, evaluated by whether the company's competitive position in the marketplace is improving.

Gross Profit Margin

A specific financial ratio metric that serves as a valid indicator of overall strategic performance, unlike less direct metrics such as webpage views or internal time-to-market ratios.

Benchmarking

A tool used to identify the "best practices" in performing an activity and to emulate those practices from rival firms.

Activity-Based Costing

An accounting system used to evaluate cost competitiveness by determining the costs of each primary and support activity in a company's value chain to reveal the internal cost structure.

Resources & Capabilities

A company's competitive assets that determine its competitiveness and ability to succeed in the marketplace.

Tangible Resources

Physical or quantifiable assets, such as technological assets including patents, copyrights, innovation technologies, and production technology.

Intangible Assets

Non-physical competitive assets such as reputational assets, relationships, and company culture.

Resource Bundle

A linked and closely integrated set of competitive assets centered around one or more cross-functional capabilities, such as Warby Parker's design capability combining creative design, market research, engineering, and supplier relations.

Dynamic Capabilities

The ongoing capacity or ability of a company to modify, deepen, or reconfigure its existing resources and capabilities in response to changing environments or market opportunities.

Distinctive Competence

A competitively important activity that a company performs better than its rivals, representing a competitively superior internal strength.

Core Competence

A proficiently performed internal activity that is central to a company's strategy and competitiveness, often situated a level below a distinctive competence.

VRIN Test

A test used by managers to evaluate the competitive power of a resource by examining if it is Valuable, Rare, Inimitable (hard to copy), and Nonsubstitutable.

SWOT Analysis

A simple but powerful framework for sizing up a company's internal Strengths, internal Weaknesses, external Opportunities, and external Threats to provide the basis for crafting strategy.

External Threats (SWOT)

External factors that can harm a firm's market standing, including shifts in buyer needs, entry of potent new competitors, costly new regulations, and restrictive trade policies.

Internal Weaknesses (SWOT)

Internal competitive liabilities or deficiencies—such as the lack of a well-known brand name or the lack of a distinctive competence—which are classified as internal weaknesses rather than external threats.

Remedying Supplier-Related Cost Disadvantages

Strategic measures a firm can take when facing supplier-induced cost disadvantages: pressuring suppliers for lower prices, switching to lower-priced substitute inputs, or collaborating closely with suppliers on mutual cost-saving opportunities.