Term
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Definition
| when profitability is greater than average profitability than companies in industry |
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Term
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Definition
firm-specific strengths that allow a company to differentiate its products from those offered by rivals and/or achieve substantially lower costs
arise from: resources and capabilities |
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Term
| roots of competitive advantage |
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Definition
| competencies, resources, capabilities |
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Term
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Definition
assets of company
tangible: physical entities; land, building, inventory, money
intangible: brand name, reputation, knowledge of employees
valuable when:
- they create demand for products
- lower its costs |
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Term
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Definition
a company's skills at coordinating its resources and putting them to productive use
valuable when: - they create strong demand
- lower its costs |
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Term
| distinction between resources & capabilities |
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Definition
- without capabilities to use resources effectively, firm may not be able to create a distinctive competency
- firm may not need firm-specific and valuable resources to create a distinctive competency (as long as it has unique capabilities) |
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Term
| three factors of company profitability |
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Definition
1) value customers place on products
2) price company charges for products
3) cost of creating products |
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Term
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Definition
U = utility to customer
P = price
C = cost of production
U-P = consumer surplus
P-C = profit margin
U-C = value created |
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Term
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Definition
| refers to idea that a company is a chain of activities for transforming inputs into outputs that customers value |
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Term
| value chain - primary activities |
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Definition
design, creation, delivery of products
EX. R&D, Production, Marketing & Sales, Customer Service |
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Term
| value chain - support activities |
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Definition
Provide inputs that allow primary activities to take place
EX. Info systems, Logistics, HR, Company Infrastructure |
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Term
| building blocks of competitive advantage |
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Definition
allow company to differentiate its product offering and lower its cost structure
1. superior efficiency
2. quality
3. innovation
4. customer responsiveness |
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Term
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Definition
outputs/inputs
components of efficiency:
- employee productivity: output produced per employee
- capital productivity: sales produced per dollar of capital invested in a business |
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Term
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Definition
attributes of quality:
- quality of excellence
- quality as realiability
TQM - 1980s |
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Term
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Definition
product innovation - development of products that are new to the world or have superior attributes than existing products
process innovation - development of a new process for producing products |
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Term
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Definition
| time that it takes for a good to be delivered or a service to be performed |
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Term
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Definition
ROIC - NOPLAT/IC
ROS (net profit/sales) -> COGS/sales, SG&A/sales, R&D/sales
Capital turnover (sales/IC) -> working capital/sales, PPE/sales |
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Term
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Definition
factors that make it difficult for a competitor to copy distinctive competencies
imitating resources - easy; visible and can often be purchased on market
imitating capabilities - more difficult and hard for outsiders to discern; capabilities based on way in which decisions are made |
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Term
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Definition
| ability of an enterprise to identify, value, assimilate, and use new knowledge |
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Term
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Definition
- inertia: companies find it difficult to change their strategies to adapt to changing conditions
- prior strategic commitments
- the Icarus paradox - companies can become so specialized and inner-directed that they lose sight of market realities |
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Term
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Definition
- focus on building blocks of competitive advantage (efficiency, quality, innovation, customer responsiveness)
- institute continuous improvement and learning
- track best industrial practice and use benchmarking
- overcome inertia |
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