Business Policy Test 2 Study Guide
Business Policy Test 2 Study Guide BUS 4853
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This 4 page Study Guide was uploaded by Whitney Smith on Tuesday February 23, 2016. The Study Guide belongs to BUS 4853 at Mississippi State University taught by Hanqing Fang in Spring 2016. Since its upload, it has received 85 views. For similar materials see Business Policy in Business at Mississippi State University.
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Date Created: 02/23/16
Study Guide Exam 2 Chapter 3: Internal Analysis 1. What is the theory behind internal analysis a. Provides a comparative look at a firm's capabilities & establishes strategies that will exploit any sources of competitive advantages 2. Difference between resources and capabilities a. Resources i. Tangible and intangible assets of a firm b. Capabilities i. A subset of resources that enable a firm to take full advantage of other resources 3. Four categories of resources and capabilities a. Financial i. Firm’s capacity to raise equity b. Physical i. Tangible; modern plant and facilities c. Human i. Intangible; difficult for competitors to imitate; experience and capabilities of employees d. Organization i. May be tangible or intangible; effective strategic planning process 4. Two critical assumptions of RBV (resourcebased view) a. Resource heterogeneity: different firms may have different resources b. Resource immobility: it may be costly for firms without certain resources to acquire or develop them; some resources may not spread from firm to firm easily 5. What is the VRIO model? a. An internal analysis tool b. What do V, R, I, and O mean? i. Value 1. The resource result in an increase in revenues, a decrease in costs, or some combination of the two ii. Rarity 1. Perfect competition dynamics are likely to be observed ( no competitive advantage, no above normal profits) iii. Imitability 1. Temporary comparative advantage of valuable and rare resources can be sustained only if competitors face a cost disadvantage in imitating the resource iv. Organization 1. Condition of being nonsubstitutable is also important in achieving sustainable competitive advantage c. Remember in some textbook, O may be replaced by N (Nonsubstitutable). Hence the condition of being nonsubstitutable is also important in achieving sustainable competitive advantage 6. What are the components of “O”? a. Organizational/reporting structure b. Management control c. Compensation policy 7. Components of firm value chain a. The set of business activities in which it engages to develop, produce, and market its products or services Study Guide Exam 2 8. Economic returns of not being valuable, being valuable but not rare and being valuable and rare. Illustrations of being valuable but not rare AND being rare but not valuable using perceptual map in Capsim. a. Rare and not valuable i. Good size & performance but out of the circle b. Not rare and valuable i. In ideal spot in circle 9. Difference between temporary competitive advantage and sustainable competitive advantage, and conditions that cause the difference (being valuable, rare, imitable, substitutable and organized well) a. Being valuable, rare, imitable, substitutable, and organized well 10. Conditions that make resources hard to imitate (historical condition [first mover advantage and path dependence], causal ambiguity, social complexity and patent) a. Unique historical condition (first mover advantage & path dependence), casual ambiguity, social complexity, and patent 11. What is causal ambiguity? a. Casual links between resources and competitive advantage may not be understood; bundles of resources fog these casual links 12. Why we say patent may be a doubleedged sword? a. Offer a period of protection if the firm is able to defend its patent rights; required disclosure may actually decrease the cost of imitation and the timing 13. What are the three strategic decisions and actions of firms in response to the strategic decisions and actions of other firms? a. No response b. Change tactics c. Change strategy 14. When should a firm choose a “no action” response? When should a firm choose a “change” response? a. Other firm is serving different market or no resources or wants to reduce rivalry Study Guide Exam 2 Chapter 4: Cost Leadership 1. Remember that the essence of cost advantage is not to reduce the price, but is to reduce the cost. 2. What are six sources of cost advantage? a. Economies of Scale b. Diseconomies of Scale c. Learning curve economies d. Differential LowCost access to Productive Inputs e. Technology Independent of Scale f. Policy choices 3. Twothirds rule. Pay attention of the difference between total cost and cost per unit. You need to know how to apply this rule. a. Total cost= volume of max production ^ (2/3) 4. Four conditions that may cause diseconomies of scale a. Physical limits b. Managerial diseconomies c. Worker demotivation d. Centralized plants increase transportation costs 5. What is learning curve economy? a. A firm gets more efficient at a process with cumulative experience 6. Four conditions that may cause differential lowcost access to productive input? a. History b. Being first into a market c. Natural endowment d. Locking up a source 7. What are two types of technology independent of scale? What are their differences? a. Technology hardware: machines & robots b. Technology software: customer relations, culture, etc. 8. Conditions that make cost advantage rare and nonimitable? Conditions that make cost advantage non rare and imitable? a. Conditions that make cost advantage rare and nonimitable? i. Learning curve economies, differential low cost access to inputs b. Conditions that make cost advantage nonrare and imitable? i. Economies of scale, technological hardware, policy choices 9. The structure that a company should choose if they use cost leadership strategy a. Organization/simple strategy Study Guide Exam 2 Chapter 5: Product differentiation 1. Difference between business level and corporate level strategies a. Business i. How to position a business in the market? b. Corporate i. Which businesses to enter? 2. Three bases of product differentiation a. Product attributes b. Firmcustomer relationships c. Firm linkages 3. Four components of product features as the base of product differentiation a. Product features b. Product complexity c. Timing of introduction d. Location 4. Three components of firmcustomer relationships as the base of product differentiation a. Customization b. Consumermarketing c. Reputation 5. What is the difference between product feature and product complexity (Ans: complexity is related to multiple functions while feature is not) a. Complexity is related to multiple functions while feature is not 6. Discuss whether it’s possible that a company can pursue both differentiation and cost advantage at the same time a. Yes i. Firms can do both because some bases of differentiation also lend themselves to low cost ii. Structure, controls, & policies are not opposites b. No i. Use of structure, management control, and compensation policies are nearly opposites 7. What are the management control, organizational structure and compensation policies that may facilitate the implementation of production differentiation strategies a. Organizational: U form with cross functional teams b. Management controls: flexibility, broad guidelines, creativity encouraged Capsim Simulation 1. Emergence loan and its impact on stock price a. Stock price falls. How much depends on how severe the emergency loan was 2. Five niche markets in the simulation a. Traditional b. Low end c. High end d. Performance e. Size
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