Question

1. Match each dimension of the VRIO framework with the data about a capability measures that dimension.

V            A. top management has spent a lot of time build in ways to exploit this capability.

R B. the capability directly and measurably decreases operating capital

I D. other firms in the industry chose not to develop this capability because it involved low status activities.

O C. the capability is based upon building trusting social relationships that took years to develop.

2. Which of the following is the reason a firm entering a new country would want to use a joint venture with a local firm?

Firm wants a simpler and less expensive entry strategy than a non-equity alliance.

Firm believes there are potential strategic synergies between the complementary capabilities of both firms.

Firm wants to overcome liability of foreignness.

Firm wants to increase corporate diversification.

3. Why do firms with a cost leader strategy ideally operate at minimum efficient scale?

It reduces the complexity/riskiness of the firm

It creates a barrier to imitation by other firms

It means the firm has an opportunity to increase efficiencies as scale increases

Answer 1

V = Valuable , R = Rare , I = Costly to imitate , O = Organized to capture value

V= the capability directly and measurably decreases operating capital

R= other firms in the industry chose not to develop this capability because it involved low status activities

I = the capability is based upon building trusting social relationships that took years to develop

O = top management has spent a lot of time build in ways to exploit this capability

2. Answer is A - > Firm wants a simpler and less expensive entry strategy than a non-equity alliance. A local company is well-established in what they do and a JV with them could give a quick non-expensive entry into the market.

3. The minimum efficient scale is the lowest production point at which long-run total average costs are minimum. For a cost-leader keeping costs low is a competitive advantage that creates a barrier to imitation by other firms.