Which four conditions are necessary for resources to be a source of competitive advantage quizlet?

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The strategic management process consists of three primary processes: analysis (chapters 2 & 3), strategy formulation (chapters 4-9) and implementation (chapters 10-13).

Analysis. Analysis involves the development of an understanding of the external environment (Chapter 2) and internal organization (Chapter 3). These analyses are completed to identify opportunities and threats in the external environment and to decide how to use the resources, capabilities, and core competencies in the firm's internal organization to pursue opportunities and overcome threats.

Formulation. With knowledge about its external environment and internal organization, the firm forms its vision and mission (Chapter 1) and makes decisions as to what strategies to utilize to provide returns to shareholders. These decisions involve the selection of business-level strategies (Chapter 4), which are the firm's actions designed to exploit its competitive advantage over rivals), and its corporate level strategy (Chapter 6), which is the firm's scope, which ranges from a single product market to unrelated, diversified firm competing in multiple product markets. The ability to utilize a strategy will be impacted by competing firms. This is described as the dynamics of competition (Chapter 5). Formulation involves the selection of mechanisms such as acquisition and restructuring the firm's portfolio of businesses (Chapter 7) and the use of cooperative strategies (Chapter 9) wherein firms form a partnership to share their resources and capabilities in order to develop a competitive advantage. The firm must also make decisions on the span, business level strategies, and mechanisms for international expansion (Chapter 8).

Implementation. Implementation is putting the formulated plan into action. Implementation is facilitated by different mechanisms used to govern firms (Chapter 10), the use of appropriate organizational structure and mechanisms to control the firm's operations (Chapter 11), the patterns of strategic leadership appropriate for the firms strategy and competitive environments (Chapter 12), and the use of strategic entrepreneurship (Chapter 13) as a path to continuous innovation.

The objective of all of these activities is to manage the firm in a manner that produces above average rates of return.

The demographic segment is concerned with characteristics of the population or society that makes up the general environment. Characteristics of interest are size, age, structure, geographic distribution, ethnic mix, and income distribution.

The economic segment refers to the nature and direction of the economy in which a firm competes or may compete in the future. Important characteristics include inflation and interest rates, trade deficits (or surpluses), budget deficits (or surpluses), individual and business savings and investment rates, and gross domestic product.

The political/legal segment is the arena in which organizations and interest groups compete for attention, resources, and a voice in overseeing the body of laws and regulations guiding interactions between nations. In other words, this segment is concerned with how firms and other organizations attempt to influence government and how governmental entities in turn influence them.

The sociocultural segment is concerned with the social attitudes and cultural values of different societies.

The technological segment is made up of the institutions and activities involved with creating new knowledge and translating that knowledge into new outputs, products, processes, or materials.

The global segment includes relevant new global markets and existing ones that are changing, important international political events, and critical cultural and institutional characteristics of relevant global markets. This segment recognizes that firms now compete in a competitive landscape where both competitors and customers are global, due in part to the rapid diffusion of both information and technology. Competitors will no longer be domestic; they can originate from industrialized, newly industrialized, or emerging countries. Customer demands and expectations have changed; they are based on an ever-increasing awareness of global products and services

A strategic group is a group of firms within an industry that generally follow the same (or a similar) strategy, competing along the same strategic dimensions (such as product quality, pricing policy, distribution channels, or level of customer service).

The strategic group concept is valuable to a firm's strategic decision makers because a firm's primary competitors are those within its strategic group (all group members are selling similar products to a similar group of customers), the strengths of the five competitive forces varies across strategic groups, and strategic groups that are similar (in terms of strategies followed and competitive dimensions emphasized) increases the possibility of increased competitive rivalry between the groups.

The notion of strategic groups can be useful for analyzing an industry's competitive structure. Such analyses can be helpful in diagnosing competition, positioning, and the profitability of firms within an industry. Strategic group analysis shows which companies are competing similarly in terms of how they use similar strategic dimensions. At the same time, research has found that strategic groups differ in performance, suggesting their importance. Strategic group membership also remains relatively stable over time, making analysis easier and more useful.

Strategic groups have several implications. First, because firms within a group offer similar products to the same customers, the competitive rivalry among them can be intense. The more intense the rivalry, the greater the threat to each firm's profitability. Second, the strengths of the five industry forces (the threats posed by new entrants, the power of suppliers, the power of buyers, product substitutes, and the intensity of rivalry among competitors) differ across strategic groups. Third, the closer the strategic groups are in terms of their strategies, the greater is the likelihood of rivalry between the groups. In the end, having a thorough understanding of primary competitors helps a firm formulate and implement an appropriate strategy

Competitor analysis can help the firm to understand and better anticipate competitors' future objectives, current strategies, assumptions, and capabilities. The firm should gather intelligence about its competitors as well as about public policies in countries across the world, which can serve as an early warning of threats and opportunities emerging from the global public policy environment that may affect the achievement of the company's strategy. Through effective competitive and public policy intelligence, the firm gains the insights needed to create a competitive advantage and to increase the quality of the strategic decisions it makes when deciding how to compete against its rivals.

Firms want to know how competitor intelligence is gathered to determine whether the practices employed are legal and, further, to assess whether these methods are ethical, given the firm's culture and the image it desires as a corporate citizen. The line between legal and ethical practices can be difficult to ascertain, especially when it comes to electronic transmissions. Often it is difficult for a firm to know how to gather intelligence and how to prevent competitors from gathering competitive intelligence that may threaten its own competitive advantage.

Openly discussing intelligence-gathering techniques that the firm employs goes a long way toward assuring that people understand the firm's convictions about what is ethical and acceptable for use and what is not ethical and is unacceptable for use when gathering competitor intelligence. The firm can frame these practices in terms of respect for the principles of common morality and the right of competitors not to reveal information about their products, operations, and strategic intentions.

Despite its importance, evidence suggests that a relatively small percentage of firms use formal processes to study competitors. Beyond this, some firms fail to analyze a competitor's future objectives when trying to understand its current strategy, assumptions, and capabilities, but it is important to study the present and the future when examining competitors. Failure to do so may lead to incomplete or distorted insights about competitors.

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 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.

Resources are the source of a firm's capabilities. Capabilities are the source of a firm's core competencies, which are the basis of competitive advantages. Intangible resources (as compared to tangible resources) are a superior and more potent source of core competencies. In fact, in the global economy, intellectual and systems capabilities are more important to the success of a corporation than are its physical assets, and the capacity to manage human intellect is now a critical executive skill. Intangible resources are less visible and more difficult for competitors to understand, purchase, imitate, or substitute, and thus firms prefer to rely on these resources as the foundation for their capabilities and core competencies. Therefore, unobservable (i.e., intangible) resources provide a better platform for competitive advantage than do tangible resources. And unlike tangible resources, the use of intangible resources can be leveraged for even greater benefits to firm performance

Outsourcing is the purchase of a value-creating activity from an outside supplier that can provide the greatest value. A firm is likely to engage in outsourcing when it identifies primary and support activities in which its resources and capabilities are neither sources of competence nor of sustainable competitive advantage. In such instances, firms should consider purchasing these activities from firms that can add value to the activity (relative to the firm's competitors).

Outsourcing has several advantages for firms but also carries some important risks as well. Outsourcing can potentially reduce costs and increase the quality of the activities outsourced. In this way, it adds value to the product provided to consumers. Thus, outsourcing can contribute to a firm's competitive advantage and its ability to create value for its stakeholders. However, the risk of the outsourcing partner's learning the technology and becoming a competitor is very real and should be taken seriously.

Outsourcing is important to firms competing in the 21st-century landscape because few, if any firms possess all of the resources and capabilities that are necessary for them to achieve competitive superiority in all necessary primary and support activities. By outsourcing activities in which it lacks the competence to create value and by nurturing a few core competencies, a firm increases its probability of developing a sustainable competitive advantage. To maximize value, firms should scan the entire globe to locate the source (supplier or performer) of the to-be-outsourced activity to locate the best producer in the world of the activity that is being outsourced. Given the increasing complexity of products/services offered (e.g., based on combined, sophisticated technologies), firms looking forward should anticipate that even more outsourcing of non-strategic activities is likely to be necessary.

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What are the four characteristics a resource must possess before it is capable of providing a firm with a sustained competitive advantage quizlet?