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1. Process
a. Formulate
b. Implement
c. Evaluate
2. Theories
a. IO
b. Resource-based
c. Contingency
3. Economics
a. Boundaries
b. Market and Competitive Analysis
c. Positioning and Dynamics
d. Sustaining Competitive Advantage
e. Internal Organization
4. Boundaries
a. Horizontal
i. Economies of Scale
ii. Economies of Scope Commented [EB1]: Sources:
iii. Diseconomies of Scale 1.Economies of density
iv. Learning Curve 3.Advertising
1. Firm-specific vs Task-specific 4.R&D
v. Diversification 5.Physical Properties of Production
1. Reasons
Commented [EB2]: Sources:
2. Efficiency-based Diversification 1.Labor Costs
a. Scope Economies 2.Spreading Specialized Cost
b. Internal Capital Markets 3.Bureaucracy
3. Problematic Reasons Commented [EB3]: 1.Benefit owners through increased
4. Reasons not to Diversify efficiency
2.Preferences of managers
a. Unavailability of Scope Economies
Commented [EB4]: 1.Reduce risk
b. Managers will have jobs 2.Identify undervalued firms
c. Cross-subsidize money-losing divisions
Commented [EB5]: 1.Avoid the cost of making
d. Bureaucracy
5. Skepticism Commented [EB6]: 2.Exploit scale and learning
a. Diversify to add value 3.Limit agency and influence costs
b. Invest in strongest divisions 4.Organizational design unfit
b. Vertical Commented [EB7]: 1.Asset is a source of competitive
i. Buy advantage
2.Avoid paying a profit margin to independent firms
1. Common but incorrect reason 3.Avoid paying high market prices for the input during
2. Reasons periods of peak demand or scarce supply
ii. Make 4.Tie up to a distribution channel
1. Common but incorrect reasons Commented [EB8]: 1.Coordination of production flows
2. Reasons through the vertical chain
2.Leakage of private information
5. Positioning and Dynamics 3.Transaction cost
a. Dynamics
i. Entry
1. Conditions Commented [EB9]: 1.Blockaded entry
2. Structural 2.Accommodated entry
3.Predatory entry
ii. Exit
Commented [EB10]: 1.Control of essential resources
1. Barriers 2.Economies of scale and scope
b. Positioning 3.Marketing advantage of incumbency
i. Strategic commitments Commented [EB11]: 1.Limit pricing
1. Effects 2.Predatory pricing
2. Kinds 3.Strategic bundling

3. Pricing Commented [EB12]: 1.Direct
ii. Strategic substitutes
iii. Strategic complements Commented [EB13]: 1.Tough
iv. Value Creation
Commented [EB14]: 1.Price leadership
1. Highest consumer surplus 2.Advance announcement of price changes
2. Porter’s Generic Strategies 3.Most favored customer clauses
a. Cost Leadership 4.Uniform delivered price
b. Benefit Leadership Commented [EB15]: Firm 1 & 2 expand
c. Focus Commented [EB16]: Firm 1 expands Firm 2 contracts
3. Cost Leadership Commented [EB17]: Benefit — Cost
a. Ways Commented [EB18]: 1.Benefit parity but at a lower cost
b. Logic 2.Benefit proximity
4. Benefit Leadership 3.Completely different quantitativey
a. Ways Commented [EB19]: Achieve consumer surplus parity and
b. Logic higher profit margin for the firm

5. Cost and Benefit Leadership Commented [EB20]: 1.Cost parity
2.Cost proximity
6. Sustaining Competitive Advantage 3.Higher Benefit and Cost
a. Difficulty
Commented [EB21]: Achieve higher profit margin despite
i. Threats cost disadvantage
ii. Persistence of Profits Commented [EB22]: 1.Cost Leader with Benefit Parity
b. Sustaining 2.Benefit Leader with Cost Parity
i. Resources Commented [EB23]: 1.Entry
ii. Capabilities 2.Imitation
iii. Resource-based Theory 3.Price Competition

iv. Isolating Mechanisms Commented [EB24]: 1.Patents, copyrights, trademarks
2.Brand recognition
1. Impediments to Imitation 3.Organizational culture
a. Legal Restrictions 4.Good relationships with workforce
b. Superior Access to Inputs/Customers 5.Protected access to channels of distribution
6.Monopoly power through legislation
c. Market Size and Scale Economies
d. Casual Ambiguity Commented [EB25]: Cluster of activities that your firm
performs well relative to competitor firms
e. Historical Circumstances
Commented [EB26]: Resources and capabilities have to be:
f. Social Complexity 1.Scarce
g. Organizational Change 2.Imperfectly mobile
2. Early Mover Advantage 3.Unavailable in the open market
a. Learning Curve
b. Reputation and Buyer Uncertainty
c. Buyer Switching Costs
d. Network Effects
e. Virtual Network
f. Networks and Standards
3. Early Mover Disadvantage
a. Imperfect Imitability
b. Industry Equilibrium
c. Origins of Competitive Advantage
i. Disruptive Technologies
ii. Entrepreneurship
7. Internal Organization
a. Principal-Agent Relationship Commented [EB27]: 1.Principal gets value created by
b. Performance-based Incentives agent’s action minus payment to agent
2.Conflict arises if there is no mechanism to align the
c. Selecting Performance Measures interests of the two parties
d. Incentive Mechanisms
i. Implicit Contracts Commented [EB28]: Pay-for performance based on
ii. Subjective Evaluation 1.Performance (sales, sales growth, production)
iii. Promotion Tournaments
e. Efficiency Wages Through:
f. Incentives in Teams 1.Bonuses
3.Profit Sharing
4.Stock Options
5.Future Promotion
6.Threat of Firing
Commented [EB29]: Piece-rate compensation plans work
only for less complex jobs
Commented [EB30]: Supervisor’s assessment
Commented [EB31]: 1.360-degree peer reviews
2.Management by objectives system
3.Merit system