ISM Lecture 1

13 flashcards · Other · by Daniel F.

1. Competitive advantage

   When the firm can create more value than its rivals, and when this firm’s rivals cannot replicate the source of value that the firm creates

2. three theories on how to create a competitive advantage

   Industry-Based View Resource-Based View Institution-Based View

3. Industry-Based View of competitive advantage

   Porter shows the importance of industry when explaining firm performance link economist's description of market to firm level strategy the firm must position itself against these five external, environmental forces competitive advantage comes from the firm’s ability to structure itself to face this

4. Porters 5 forces

   The threat of entry What is the threat that new entrants appear in the market? Start-ups are one threat, diversification are another The threat of rivalry How competitive is the industry? How intensive is the competition in our industry? Are we a monopolist, or one of many? Are there exit barriers? The threat of substitutes Can competitors substitute our product? How is the substitute priced? Is our offering unique, or not? The threat of powerful suppliers The threat of powerful buyers Where is…

5. Resource-Based View

   focuses on the internal resources of the organization in considering the source of competitive advantage unique clusters of resources determine profitability Performance differences are explained by looking inside the organization

6. What constitutes as resources

   factors that are owned or controlled by the firm inputs that allow the firm to carry out its activities firm-specific assets, such as patents, trademarks, brand-name and reputation, culture, and specific knowledge can be tangible (physical) or intangible (intellectual/technological)

7. Amit & Schoemaker (1993): resources and capabilities

   Resources: What the firm has. They are firm-specific but tradable. Capabilities: a special type of resource, specifically an organizationally embedded non-transferable firm-specific resource whose purpose is to improve the productivity of the other resources possessed by the firm valuable across multiple markets embedded in organizational learning tacit (cannot be written down)

8. VRIN or VRIO framework

   Valuable: must generate value for the firm. Rare: ideally, unique if it is to generate value. Inimitable: can not be copied. Non-substitutable: can not be substituted. Organisational support: organization's ability to exploit its resources

9. How to sustain a competitive advantage

   A good CA persist in the face of efforts of duplication and neurtralisation This resistance can be increased with isolating mechanism Impediments to Imitation Early-Mover Advantages

10. Impediments to Imitation

    Legal restrictions Patents, copyrights and trademarks Superior access to inputs and customers Buying shelf space, having a secret recipe Market size and Scale Economies Large-scale operations reduce costs per unit, smaller competitors cant match Intangible Barriers to Imitation causal ambiguity (difficulty in understanding the source of success) path dependence (historical circumstances) social complexity (relationships and culture)

11. Early-Mover Advantages

    Leaming Curves Early movers gain operational experience, allowing them to refine processes before competitors enter the market Reputation and Buyer Uncertainty People prefer what they know Buyer Switching Costs Create switching costs Network Effects Consumers often place higher value on a product if other consumers use

12. Relation of firm and institution.

    formal institutions = such as laws and regulations informal institutions = like cultural values and norms how they explain firm performance North (1990): Institutions as "Rules of the Game" institutions shape economic performance by reducing uncertainty in human interactions Institutions Reduce Transaction Costs: Institutions lower the costs associated with measuring attributes of goods/services and enforcing agreements Path Dependence: Institutional development is influenced by historical cont…

13. Institution Based View

    Meyer and Rowan (1977): Formal Structures as Myths and Ceremonies organizations adopt formal structures not purely for efficiency but to conform to societal norms and gain legitimacy Legitimacy Over Efficiency: Organizations incorporate institutionalized practices to appear rational and legitimate, even when these practices do not enhance operational efficiency e.g. environmental certifications Isomorphism: Organizations tend to become similar to others in their institutional environment due to…