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Some concepts and definitions

Q: What distinguishes strategic assets from strategic liabilities ?

STRATEGIC ASSETS: - Capabilities that align with Resource-Based View (RBV) principles (e.g., valuable, rare). STRATEGIC LIABILITIES: - Capabilities that are costly for the firm and have restricted supply.

Q: How are strategic assets and strategic liabilities differentiated based on supply restriction ?

Capabilities that are supply restricted : - Not equally distributed among firms. - Cannot be easily converted to a benign state due to associated costs.

Q: What does the extended treatment of strategic liabilities involve?

COMPARATIVE APPROACH: - Proposes shifting to a comparative approach from an absolute internal perspective. - Allows for a more nuanced understanding of weaknesses.

58 important questions on Some concepts and definitions

What are the critical assumptions in the resource-based model concerning firm resources and mobility?

Firm resources and capabilities are unique and vary across different firms.
These resources tend to be "sticky," meaning they do not transfer easily between companies.

What are the criteria for evaluating the value of a resource?

VALUABLE:
- Increases willingness to pay or decreases costs.
RARE:
- Possessed by few firms.
- Physically unique.
DIFFICULT TO IMITATE (INIMITABLE):
- PATH DEPENDENCY: Accumulated over time.
- CAUSAL AMBIGUITY: Unclear understanding.
- SOCIAL COMPLEXITY: Based on trust, relationships, culture, reputation.
ORGANIZED TO CAPTURE VALUE:
- Effective organizational structure.
- Coordinating systems.

What does contemporary research primarily examine in relation to capability strengths and weaknesses?

- Primarily examines capability strengths, often overlooking weaknesses.

What is the focus of the study mentioned in the article regarding capability strengths and weaknesses?

Examines the direct and integrated effects of capability strengths and weaknesses on competitive advantage and relative performance.
Explores how environmental and firm-specific factors influence changes in drivers of competitive advantage over time.

What are the key findings related to the effect of weakness and strength sets on relative performance?

Weakness sets negatively affect relative performance.
Strength sets have an increasingly positive effect on relative performance.
Firms with high strength/low weakness perform well.
Firms with high strength/high weakness perform well but experience greater variance in outcomes.

How do strength and weakness sets change over time, especially in intensely competitive markets according to the article?

Strength and weakness sets change significantly over time, especially in intensely competitive markets.
This undermines the durability (sustainability) of competitive advantage.

What is the conclusion drawn in the article regarding achieving temporary competitive advantage in relation to RBV theory?

Achieving temporary competitive advantage is more challenging than previously thought.
The erosion of advantage occurs routinely due to dynamic and interactive rivalry.

What distinguishes strategic assets from strategic liabilities?

STRATEGIC ASSETS:
- Capabilities that align with Resource-Based View (RBV) principles (e.g., valuable, rare).
STRATEGIC LIABILITIES:
- Capabilities that are costly for the firm and have restricted supply.

How are strategic assets and strategic liabilities differentiated based on supply restriction?

Capabilities that are supply restricted:
- Not equally distributed among firms.
- Cannot be easily converted to a benign state due to associated costs.

What does the extended treatment of strategic liabilities involve?

COMPARATIVE APPROACH:
- Proposes shifting to a comparative approach from an absolute internal perspective.
- Allows for a more nuanced understanding of weaknesses.

In the RBV terminology, what does rarity represent?

Represents insufficient supply.
Some RBV work focuses on capabilities that produce absolute gains (value) and are in short supply (rare).

How is the concept of rarity considered in specific industries according to the revised perspective?

RARITY IN CONTEXT:
- Rarity can pertain to the presence of a capability or its level.
- In specific industries, rarity aligns better with the degree of effectiveness of a capability rather than its mere existence.

When utilizing a comparative approach, what indicates rarity of a capability and is crucial for competitive outcomes?

- The variance in the value of a capability across rivals indicates rarity and is vital for competitive outcomes.

How is a capability below parity characterized in Figure 1A, and what happens as the relative value decreases?

A capability below parity is considered a weakness.
The degree of weakness grows as the relative value decreases further below parity.

What is suggested by Figure 1B about the variance in R&D capability among competitors and its impact, even when the absolute value is high?

High absolute R&D value does not negate variance impact.
Low variance results in parity, while increased variance enhances R&D's impact on performance outcomes.

How do increasing capability strengths and weaknesses impact competitive advantage?

Increasing capability strengths lead to greater competitive advantage.
Increasing capability weaknesses contribute to competitive disadvantage.

What is the first part of the extension of strategic liabilities in terms of weaknesses?

- Weaknesses do not have to be absolutely costly; they only need to be less valuable than competitors’ capabilities.

What is the second part of the extension of strategic liabilities in terms of weaknesses?

- Weaknesses can be converted to parity or strength over time, providing a net benefit to the firm.

How do differences in rivals' capabilities impact competitive dynamics?

- Differences in rivals' capabilities create distinct market offerings, influencing competitive dynamics.

What does enhancing a firm's set of capabilities do for its competitive advantage and relative performance?

- Strengthening a firm's set of capabilities differentiates it from competitors, improving competitive advantage and relative performance.

What is the synergy created by enhanced strength sets in a firm?

- Enhanced strength sets create synergy, where the strengths complement each other, leading to increased effectiveness and performance.

How do differences in strength sets among firms enable unique responses in tailored strategies?

- Differences in strength sets enable firms to respond uniquely to the same market conditions, allowing for tailored strategies and potentially higher performance.

What is the potential impact of having multiple weaknesses on a firm's performance?

The marginal value of a weakness decreases with more weaknesses
Negative effects can compound as weaknesses interact

What factors contribute to the negative relationship between a firm's weakness set and relative performance?

Likelihood of being attacked by competitors
Inefficiencies leading to increased costs and decreased performance
Inability to exploit new opportunities for growth and competitive advantage

How can competitors' actions impact a firm's vulnerability and performance?

Competitors target a firm's weakest areas
Increased attacks can lead to reduced sales and diminished customer loyalty

How can inefficiencies resulting from capability weaknesses affect a firm's operations?

Operational inefficiencies may increase costs
Employee struggles can lead to decreased performance and customer dissatisfaction

In what way can weaknesses prevent a firm from capitalizing on new opportunities?

Lack of critical assets can hinder expansion into new markets
Inability to make valuable acquisitions may limit potential growth and competitive advantage

What are the effects of different integrations of strength and weakness sets on relative performance according to the given hypotheses and Figure 2?

Integration of high strength set & low weakness set: Positive effect on performance (Hypothesis 3A, Quadrant II - Robust advantage).
Integration of low strength set & high weakness set: Negative effect on performance (Hypothesis 3B, Quadrant III - Undermining).
Low strength set & low weakness set: Neutral performance effect (Quadrant I - Offsetting - undifferentiated).
High strength set & high weakness set: Positive performance effect, though potentially precarious (Quadrant IV - Precarious advantage).

What is the concept of net-effect logic in balancing strengths and weaknesses from a strategic perspective?

This perspective suggests that a firm's \strengths and \weaknesses can neutralize each other's effects on overall performance.
- The positive impacts of strengths may be cancelled out by the negative impacts of weaknesses, resulting in no clear competitive advantage or disadvantage.

What is the implication of having a mix of strong and weak points according to net-effect logic?

The positive impacts of \strengths can be counteracted by the negative impacts of \weaknesses.
- This can lead to a situation where a firm experiences no significant \competitive advantage or disadvantage compared to competitors.

What is the strategic allocation approach in balancing strengths and weaknesses?

This approach involves allocating resources based on a firm's strategic priorities and areas that require improvement.
- It focuses on optimizing resource allocation to maximize the impact of strengths and minimize the impact of weaknesses on overall performance.

How can managers strategically allocate resources in a competitive environment to maximize the impact of key capabilities?

• By concentrating on certain strengths to enhance specific capabilities
• Acknowledging weaknesses for targeted improvements
• Aim is to leverage strengths while managing weaknesses to outperform rivals

What are the advantages of selectively investing in key capabilities in a competitive environment?

• Focused resources enhance specific capabilities aligning with strategic goals
• Targeted improvements without overhauling all aspects of operations

What is the concept of a "precarious advantage" in strategic resource allocation?

• Approach where a firm performs well but remains vulnerable due to strengths and weaknesses
• Example: Costco focusing on limited products leading to strong performance but also risks

What research insights are provided regarding the variable performance outcomes of the strategic allocation approach?

• Variable performance outcomes due to optimizing strengths and managing weaknesses
• Success possible but advantage remains unstable and susceptible to competitive changes

What is the conclusion regarding balancing strengths and weaknesses through strategic resource allocation in competitive environments?

• Effective strategy for potential edge while exposing vulnerabilities
• Success relies on managing strengths and weaknesses in line with competitive context and goals

What is the definition of environmental munificence?

Environmental munificence refers to the abundance or scarcity of critical resources available to firms operating within a given environment.
In munificent environments, resources such as investment capital, talent, and materials are plentiful.

How does environmental munificence impact strength sets?

Difficulty of differentiation: Abundance of resources makes it challenging to differentiate capabilities.
Managerial effort required to build or enhance capability strengths through strategic resource bundling.

What impact does environmental munificence have on weakness sets?

Reducing weaknesses by matching capability value to average is possible.
Less competitive pressure due to lower likelihood of aggressive counteractions from rivals when improving capabilities.

What influence does prior firm performance have on strength and weakness sets over time?

High prior performance can lead to inertia and complacency.
Low prior performance triggers strategic responses to improve strengths and reduce weaknesses.

What is the impact of prior firm performance on a firm's investment capacity and competitive advantage?

Firms with strong past performance are better positioned to invest in capability development
They can leverage financial and strategic advantages to enhance their strength set
High performance provides more resources and confidence to pursue competitive improvements

How does prior firm performance affect a firm's ability to address weaknesses and engage in strategic reinvestment?

Firms with high past performance have more resources and flexibility to address weaknesses
They can allocate resources towards improving weaker areas
Strong performance allows for strategic reinvestment in areas needing improvement, reducing weakness set over time

What roles do environmental munificence and prior firm performance play in shaping a firm’s strength and weakness sets?

Munificent environment facilitates reducing weaknesses, but doesn't necessarily enhance strengths without managerial intervention
High prior performance provides resources and strategic insights to improve both strength and weakness sets
Leads to more dynamic competitive positioning for firms

How does the "Red Queen effect" relate to the need for firms to constantly adapt and evolve?

Species must constantly adapt and evolve to stay relative to others in their environment
Like running in place, firms need to keep moving just to stay where they are
Requires continuous adaptation to remain competitive in the environment

What is the focus of Hypothesis 4A in the context of strength and weakness sets of firms?

Hypothesis 4A states that higher environmental munificence leads to a decrease in a firm's weakness sets over time
Firms can use firm-specific resources to alter strengths and weaknesses
Increased financial resources from prior performance can be utilized for enhancing strengths and mitigating weaknesses

How does Hypothesis 4B relate higher prior performance to the increase in firms' strength sets over time?

Hypothesis 4B suggests that higher prior performance leads to an increase in a firm's strength sets over time
Firms can leverage resources gained from prior performance to enhance strengths and differentiate from rivals
Strong prior performance is linked to the growth of a firm's strength sets

What is the focus of Hypothesis 4C in terms of prior firm performance and weakness sets?

Hypothesis 4C proposes that higher prior performance leads to a decrease in a firm's weakness sets over time
Strong prior performance enables firms to address weaknesses and engage in strategic reinvestment
This results in a reduction of the firm's weakness sets over a period

What were the independent variables examined in the study concerning strengths and weaknesses sets of firms?

Independent variables included sets of strengths and weaknesses based on six capabilities
These capabilities are cost management, product reliability, product innovation, process innovation, brand management, and manufacturing flexibility
The study analyzed the impact of these capabilities on firms' strength and weakness sets

What performance measure was used to assess a company's performance in the study conducted on small and medium-sized industrial firms in the French manufacturing sector?

The study utilized an accounting-based measure called "firm value-added" as the performance measure
This measure was used to evaluate the performance of the surveyed companies based on their value-added contributions
The assessment helped understand the financial performance of the firms in the manufacturing sector

What does the study reveal about the relationship between a firm's strength set and relative performance?

Strength set variable and its square are positive and statistically significant, indicating a positive curvilinear relationship with relative performance.
Decreasing weaknesses is beneficial when a firm has low strength, but is negative or neutral when strength is high.

What are the effects of a firm's weaknesses on relative performance according to the study's findings?

A firm's set of weaknesses has a negative linear effect on relative performance.
Firms with robust advantage show significantly less variance in performance outcomes compared to those with precarious advantage.

How does environmental munificence influence a firm's performance based on the study's results?

Munificent environments may lead to less motivation to reduce weaknesses, however, they facilitate weakness reduction.
A Red Queen effect exists for strengths but not for weaknesses when resources are highly accessible.

What implications do firms' prior performance have on their subsequent performance, as suggested by the study's outcomes?

Prior performance has a positive and statistically significant impact on subsequent firm performance per Model 6.
Prior performance has a negative and statistically significant impact on subsequent firm performance per Model 7.

What are the managerial implications to achieve temporary competitive advantages?

Enhance strengths and address weaknesses
Improve performance and feasibility compared to outperforming stronger competitors
Maintain and invest in strengths to prevent weaknesses
Continuous development and investment are essential
Ongoing investments and effective management are critical for long-term success

What does the article propose regarding dynamic capabilities and competitive advantage?

Dynamic capabilities can confer a competitive advantage
Effectiveness depends on the level of external environmental dynamism
A nonlinear, inverse U-shaped moderation model is proposed

How does the moderation model described in the article affect the relationship between dynamic capabilities and competitive advantage?

Strongest at intermediate levels of environmental dynamism
Relationship comparatively weaker in low and high dynamism environments

What dynamic capabilities are tested in the article to determine their impact on competitive advantage?

Alliance management capability
New product development capability

What empirical contribution does the article make in terms of testing the relationship between dynamic capabilities and competitive advantage?

Empirically tests the nonlinear interaction effect
Addresses the lack of empirical research on the impacts of dynamic capabilities on organizational outcomes

The question on the page originate from the summary of the following study material:

Summary business level strategy bulletpoints

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