· Review the case study and, based on the provided information,

· Review the case study and, based on the provided
information, think about a possible patient evaluation plan. As
part of your evaluation planning, consider where the evaluation
would take place, whether any other professionals or family
members should be present, appropriate assessment tools and
guidelines, and any other relevant information you may wish to
address.
· Consider whether the assessment tool you identified was
validated for use with this specific patient population and if this
poses issues. Think about additional factors that might present
issues when performing assessments such as language,
education, prosthetics, missing limbs, etc.
· Consider immunization requirements that may be needed for
this patient.
3 APA citations / references one page ( see case study below)
Case study
Mr. Perkins, age 81, reports for an annual physical examination.
He says he is doing well. His only known problem is
osteoarthritis. He also requests a flu shot. He takes no
medications other than Tylenol for arthritis pain. When he
walks into the exam room, you notice that he is using a straight
cane in his right hand. When you ask about the cane, he says he
began using the cane because the pain in his right hip had
increased significantly over the past 6 months.
Saylor URL: http://www.saylor.org/books Saylor.org
101

Chapter 4
Managing Firm Resources
L E A R N I N G O B J E C T I V E S
After reading this chapter, you should be able to understand and
articulate answers to the following
questions:
1. What is resource-based theory, and why is it important to
organizations?
2. In what ways can intellectual property serve as a value-added
resource for organizations?
3. How should executives use the value chain to maximize the
performance of their organizations?
4. What is SWOT analysis and how can it help an organization?
Southwest Airlines: Let Your LUV Flow
Southwest Airlines’ acquisition of AirTran in 2011 may lead the
firm into stormy skies.
Chapter 4 from Mastering Strategic Management was adapted
by The Saylor Foundation under
a Creative Commons Attribution-NonCommercial-ShareAlike
3.0 license without attribution as requested
by the work’s original creator or licensee. © 2014, The Saylor
Foundation.

http://www.saylor.org/site/textbooks/Mastering%20Strategic%2
0Management.pdf
http://creativecommons.org/licenses/by-nc-sa/3.0/
102
Image courtesy of Stuart
Seeger,http://en.wikipedia.org/wiki/File:Southwest_737_At_Bur
bank.jpg
In 1971, an upstart firm named Southwest Airlines opened for
business by offering flights between
Houston, San Antonio, and its headquarters at Love Field in
Dallas. From its initial fleet of three airplanes
and three destinations, Southwest has grown to operate
hundreds of airplanes in scores of cities. Despite
competing in an industry that is infamous for bankruptcies and
massive financial losses, Southwest
marked its thirty-eighth profitable year in a row in 2010.
Why has Southwest succeeded while many other airlines have
failed? Historically, the firm has differed
from its competitors in a variety of important ways. Most large
airlines use a “hub and spoke” system.
This type of system routes travelers through a large hub airport
on their way from one city to another.
Many Delta passengers, for example, end a flight in Atlanta and

then take a connecting flight to their
actual destination. The inability to travel directly between most
pairs of cities adds hours to a traveler’s
itinerary and increases the chances of luggage being lost. In
contrast, Southwest does not have a hub
airport; preferring instead to connect cities directly. This helps
make flying on Southwest attractive to
many travelers.
Southwest has also been more efficient than its rivals. While
most airlines use a variety of different
airplanes, Southwest operates only one type of jet: the Boeing
737. This means that Southwest can service
its fleet much more efficiently than can other airlines.
Southwest mechanics need only the know-how to
fix one type of airplane, for example, while their counterparts
with other firms need a working knowledge
of multiple planes. Southwest also gains efficiency by not
offering seat assignments in advance, unlike its
competitors. This makes the boarding process move more
quickly, meaning that Southwest’s jets spend
more time in the air transporting customers (and making money)
and less time at the gate relative to its
rivals’ planes.

Organizational culture is the dimension along which Southwest
perhaps has differed most from its rivals.
The airline industry as a whole suffers from a reputation for
mediocre (or worse) service and indifferent
(sometimes even surly) employees. In contrast, Southwest
enjoys strong loyalty and a sense of teamwork
among its employees.
103
One tangible indicator of this culture is Southwest’s stock
ticker symbol. Most companies choose stock
ticker symbols that evoke their names. Ford’s ticker symbol is
F, for example, and Walmart’s symbol is
WMT. When Southwest became a publicly traded company in
1977, executives chose LUV as its ticker
symbol. LUV pays a bit of homage to the firm’s humble
beginnings at Love Field. More important,
however, LUV represents the love that executives have created
among employees, between employees and
the company, and between customers and the company. This
“LUV affair” has long been and remains a
huge success. As recently as March 2011, for example,
Southwest was ranked fourth

on Fortune magazine’s World’s Most Admired Company list.
In September 2010, Southwest surprised many observers when it
announced that it was acquiring
AirTran Airways for $1.4 billion. Southwest and AirTran both
emphasized low fares, but they differed in
many ways. AirTran routed most of its passengers through a
hub-and-spoke system, and it relied on a
different plane than Southwest, the Boeing 717. The acquisition
of AirTran thus raised important
questions about Southwest’s future. [1] How would AirTran’s
hub-and-spoke system be integrated with
Southwest’s nonhub approach? Could the airlines’ respective
fleets of 737s and 717s be joined without
losing efficiency? Perhaps most important, could Southwest
maintain its legendary organizational culture
while taking over a sizable rival and integrating AirTran’s
thousands of employees? When the acquisition
was finalized on May 2, 2011, it remained unclear whether
Southwest was flying off course or whether
Southwest’s “LUV story” would continue for many years.
[1] Schlangenstein, M., & Hughes, J. 2010, September 28.
Southwest risks keep-it-simple focus to spur growth.
Retrieved from http://www.washingtonpost.com/wp-

dyn/content/article/2010/09/28/AR2010092801578.html
104
4.1 Resource-Based Theory
1. Define the four characteristics of resources that lead to
sustained competitive advantage as articulated by
the resource-based theory of the firm.
2. Understand the difference between resources and capabilities.
3. Be able to explain the difference between tangible and
intangible resources.
4. Know the elements of the marketing mix.
Four Characteristics of Strategic Resources
Southwest Airlines provides an illustration of resource-based
theory in action. Resource-
based theory contends that the possession of strategic resources
provides an organization with a golden
opportunity to develop competitive advantages over its rivals.
These competitive advantages in turn
can help the organization enjoy strong profits.[1]

A strategic resource is an asset that is valuable, rare, difficult to
imitate, and nonsubstitutable. [2] A
resource is valuable to the extent that it helps a firm create
strategies that capitalize on opportunities and
ward off threats. Southwest Airlines’ culture fits this standard
well. Most airlines struggle to be profitable,
but Southwest makes money virtually every year. One key
reason is a legendary organizational culture
that inspires employees to do their very best. This culture is
also rare in that strikes, layoffs, and poor
morale are common within the airline industry.
Competitors have a hard time duplicating resources that are
difficult to imitate. Some difficult to imitate
resources are protected by various legal means, including
trademarks, patents, and copyrights. Other
resources are hard to copy because they evolve over time and
they reflect unique aspects of the firm.
Southwest’s culture arose from its very humble beginnings. The
airline had so little money that at times it
had to temporarily “borrow” luggage carts from other airlines
and put magnets with the Southwest logo
on top of the rivals’ logo. Southwest is a “rags to riches” story
that has evolved across several decades.

Other airlines could not replicate Southwest’s culture,
regardless of how hard they might try, because of
Southwest’s unusual history.
105
A resource is nonsubstitutable when competitors cannot find
alternative ways to gain the benefits that a
resource provides. A key benefit of Southwest’s culture is that
it leads employees to treat customers well,
which in turn creates loyalty to Southwest among passengers.
Executives at other airlines would love to
attract the customer loyalty that Southwest enjoys, but they
have yet to find ways to inspire the kind of
customer service that the Southwest culture encourages.
Southwest Airlines’ unique culture is reflected in the
customization of their aircraft over the years, such as the “Lone
Star
One” design.
Image courtesy of
planephotoman,http://en.wikipedia.org/wiki/File:Southwest_737
_Lonestar_One.jpg.
Ideally, a firm will have a culture that embraces the four
qualities. If so, these resources can provide

not only a competitive advantage but also a sustained
competitive advantage—one that
will endure over time and help the firm stay successful far into
the future. Resources that do not
have all four qualities can still be very useful, but they are
unlikely to provide long-term advantages.
A resource that is valuable and rare but that can be imitated, for
example, might provide an edge in the
short term, but competitors can overcome such an advantage
eventually.
Resource-based theory also stresses the merit of an old saying:
the whole is greater than the sum of its
parts. Specifically, it is also important to recognize that
strategic resources can be created by taking
several strategies and resources that each could be copied and
bundling them together in a way that
106
cannot be copied. For example, Southwest’s culture is
complemented by approaches that individually
could be copied—the airline’s emphasis on direct flights, its
reliance on one type of plane, and its unique

system for passenger boarding—to create a unique business
model whose performance is without peer in
the industry.
Resource-based theory can be confusing because the term
resources is used in many different ways within
everyday common language. It is important to distinguish
strategic resources from other resources. To
most individuals, cash is an important resource. Tangible goods
such as one’s car and home are also vital
resources. When analyzing organizations, however, common
resources such as cash and vehicles are not
considered to be strategic resources. Resources such as cash and
vehicles are valuable, of course, but an
organization’s competitors can readily acquire them. Thus an
organization cannot hope to create an
enduring competitive advantage around common resources.
On occasion, events in the environment can turn a common
resource into a strategic resource. Consider,
for example, a very generic commodity: water. Humans simply
cannot live without water, so water has
inherent value. Also, water cannot be imitated (at least not on a
large scale), and no other substance can
substitute for the life-sustaining properties of water. Despite
having three of the four properties of

strategic resources, water in the United States has remained
cheap. Yet this may be changing. Major cities
in hot climates such as Las Vegas, Los Angeles, and Atlanta are
confronted by dramatically shrinking
water supplies. As water becomes more and more rare,
landowners in Maine stand to benefit. Maine has
been described as “the Saudi Arabia of water” because its
borders contain so much drinkable water. It is
not hard to imagine a day when companies in Maine make huge
profits by sending giant trucks filled with
water south and west or even by building water pipelines to
service arid regions.
From Resources to Capabilities
The tangibility of a firm’s resources is an important
consideration within resource-based
theory. Tangible resources are resources that can be readily
seen, touched, and quantified. Physical assets
such as a firm’s property, plant, and equipment, as well as cash,
are considered to be tangible resources.
In contrast, intangible resources are quite difficult to see, to
touch, or to quantify. Intangible resources
include, for example, the knowledge and skills of employees, a
firm’s reputation, and a firm’s culture. In

107
comparing the two types of resources, intangible resources are
more likely to meet the criteria for
strategic resources (i.e., valuable, rare, difficult to imitate, and
nonsubstitutable) than are tangible
resources. Executives who wish to achieve long-term
competitive advantages should therefore place a
premium on trying to nurture and develop their firms’ intangible
resources.
Capabilities are another key concept within resource-based
theory. A good and easy-to-remember way to
distinguish resources and capabilities is this: resources refer to
what an organization owns, capabilities
refer to what the organization can do. Capabilities tend to arise
over time as a firm takes actions that build on
its strategic resources. Southwest Airlines, for example, has
developed the capability of providing excellent
customer service by building on its strong organizational
culture. Capabilities are important in part because
they are how organizations capture the potential value that
resources offer. Customers do not simply
send money to an organization because it owns strategic

resources. Instead, capabilitiesare needed to bundle,
to manage, and otherwise to exploit resources in a manner that
provides value added to customers
and creates advantages over competitors.
Some firms develop a dynamic capability. This means that a
firm has a unique capability of creating new
capabilities. Said differently, a firm that enjoys a dynamic
capability is skilled at continually updating its
array of capabilities to keep pace with changes in its
environment. General Electric, for example, buys and
sells firms to maintain its market leadership over time, while
Coca-Cola has an uncanny knack for
building new brands and products as the soft-drink market
evolves. Not surprisingly, both of these firms
rank among the top thirteen among the “World’s Most Admired
Companies” for 2011.
Strategy at the Movies
That Thing You Do!
How can the members of an organization reach success “doing
that thing they do”? According to resource-
based theory, one possible road to riches is creating—on
purpose or by accident—a unique combination of
resources. In the 1996 movie That Thing You Do!, unwittingly

assembling a unique bundle of resources
leads a 1960s band called The Wonders to rise from small -town
obscurity to the top of the music charts.
One resource is lead singer Jimmy Mattingly, who possesses
immense musical talent. Another is guitarist
108
Lenny Haise, whose fun attitude reigns in the enigmatic
Mattingly. Although not a formal band member,
Mattingly’s girlfriend Faye provides emotional support to the
group and even suggests the group’s name.
When the band’s usual drummer has to miss a gig due to injury,
the door is opened for charismatic
drummer Guy Patterson, whose energy proves to be the final
piece of the puzzle for The Wonders.
Despite Mattingly’s objections, Guy spontaneously adds an up-
tempo beat to a sleepy ballad called “That
Thing You Do!” during a local talent contest. When the talent
show audience goes crazy in response, it
marks the beginning of a meteoric rise for both the song and the
band. Before long, The Wonders perform
on television and “That Thing You Do!” is a top-ten hit record.
The band’s magic vanishes as quickly as it

appeared, however. After their bass player joins the Marines,
Lenny elopes on a whim, and Jimmy’s diva
attitude runs amok, the band is finished and Guy is left to
“wonder” what might have been. That Thing
You Do! illustrates that while bundling resources in a unique
way can create immense success, preserving
and managing these resources over time can be very difficult.
Liv Tyler plays Faye Dolan, the love interest of drummer Guy
Patterson, in That Thing You Do!
109
Image courtesy of Daniel
Dormann,http://en.wikipedia.org/wiki/File:LivTylerJune08.jpg.
Is Resource-Based Theory Old News?
Resource-based theory has evolved in recent years to provide a
way to understand how strategic resources
and capabilities allow firms to enjoy excellent performance. But
more than one wry observer has
wondered aloud, “Is resource-based theory just old wine in a
new bottle?” This is a question worth
considering because the role of resources in shaping success and
failure has been discussed for many

centuries.
Aesop was a Greek storyteller who lived approximately 2,500
years ago. Aesop is known in particular for
having created a series of fables—stories that appear on the
surface to be simply children’s tales but that
offer deep lessons for everyone. One of Aesop’s fables focuses
on an ass (donkey) and some grasshoppers.
When the ass tries to duplicate the sweet singing of the
grasshoppers by copying their diet, he soon dies of
starvation. Attempting to replicate the grasshoppers’ unique
singing capability proved to be a fatal
mistake. The fable illustrates a central point of resource-based
theory: it is an array of resources and
capabilities that fuels enduring success, not any one resource
alone.
In a far more recent example, sociologist Philip Selznick
developed the concept
of distinctive competence through a series of books in the 1940s
and 1950s.[3] A distinctive competence is
a set of activities that an organization performs especially well.
Southwest Airlines, for example, appears
to have a distinctive competency in operations, as evidenced by
how quickly it moves its flights in and out

of airports. Further, Selznick suggested that possessing a
distinctive competency creates a competitive
advantage for a firm. Certainly, there is plenty of overlap
between the concept of distinctive competency,
on the one hand, and capabilities, on the other.
111
So is resource-based theory in fact old wine in a new bottle?
Not really. Resource-based theory builds on
past ideas about resources, but it represents a big improvement
on past ideas in at least two ways. First,
resource-based theory offers a complete framework for
analyzing organizations, not just snippets of
valuable wisdom like Aesop and Selznick provided. Second, the
ideas offered by resource-based theory
have been developed and refined through scores of research
studies involving thousands of organizations.
In other words, there is solid evidence backing it up.
The Marketing Mix
Leveraging resources and capabilities to create desirable
products and services is important, but
customers must still be convinced to purchase these goods and

services. The marketing mix—also known
as the four Ps of marketing—provides important insights into
how to make this happen. A master of the
marketing mix was circus impresario P. T. Barnum, who is
famous in part for his claim that “there’s a
sucker born every minute.” The real purpose of the marketing
mix is not to trick customers but rather to
provide a strong alignment among the four Ps (product, price,
place, and promotion) to offer customers a
coherent and persuasive message.
A firm’s product is what it sells to customers. Southwest
Airlines sells, of course, airplane flights. The
airline tries to set its flights apart from those of airlines by
making flying fun. This can include, for
example, flight attendants offering preflight instructions as a
rap. The price of a good or service should
provide a good match with the value offered. Throughout its
history, Southwest has usually charged lower
airfares than its rivals. Place can refer to a physical purchase
point as well as a distribution channel.
Southwest has generally operated in cities that are not served by
many airlines and in secondary airports
in major cities. This has allowed the firm to get favorable lease
rates at airports and has helped it create

customer loyalty among passengers who are thankful to have
access to good air travel.
112
Finally, promotion consists of the communications used to
market a product, including advertising, public
relations, and other forms of direct and indirect selling.
Southwest is known for its clever advertising. In a
recent television advertising campaign, for example, Southwest
lampooned the baggage fees charged by
most other airlines while highlighting its more customer-
friendly approach to checked luggage. Given the
consistent theme of providing a good value plus an element of
fun to passengers that is developed across
the elements of the marketing mix, it is no surprise that
Southwest has been so successful within a very
challenging industry.
113
Few executives in history have had the marketing savvy of P. T.
Barnum.

Image courtesy of The Strobridge Litho. Co., Cincinnati & New
York,
http://en.wikipedia.org/wiki/File:Barnum_%26_Bailey_clowns_
and_geese2.jpg.
K E Y T A K E A W A Y
Resource-based theory suggests that resources that are valuable,
rare, difficult to imitate, and
nonsubstitutable best position a firm for long-term success.
These strategic resources can provide the
foundation to develop firm capabilities that can lead to superior
performance over time. Capabilities are
needed to bundle, to manage, and otherwise to exploit resources
in a manner that provides value added
to customers and creates advantages over competitors.
E X E R C I S E S
1. Does your favorite restaurant have the four qualities of
resources that lead to success as articulated by
resource-based theory?
2. If you were hired by your college or university to market
your athletic department, what element of the
marketing mix would you focus on first and why?
3. What other classic stories or fables could be applied to

discuss the importance of firm resources and
superior performance?
[1] Barney, J. B. 1991. Firm resources and sustained
competitive advantage. Journal of Management, 17, 99–120;
Wernerfelt, B. 1984. A resource-based view of the firm.
Strategic Management Journal, 5, 171–180.
[2] Barney, J. B. 1991. Firm resources and sustained
competitive advantage. Journal of Management, 17, 99–120;
Chi, T. 1994. Trading in strategic resources: Necessary
conditions, transaction cost problems, and choice of
exchange structure. Strategic Management Journal, 15(4), 271–
290.
[3] Selznick, P. 1957. Leadership in administration. New York:
Harper; Selznick, P. 1952. The organizational weapon.
New York, NY: McGraw-Hill; Selznick, P. 1949. TVA and the
grass roots. Berkeley, CA: University of California Press.
114
4.2 Intellectual Property
1. Define the four major types of intellectual property.

2. Be able to provide examples of each intellectual property
type.
3. Understand how intellectual property can be a valuable
resource for firms.
Defining Intellectual Property
The inability of competitors to imitate a strategic resource is a
key to leveraging the resource to achieve
long–term competitive advantages. Companies are clever, and
effective imitation is often very possible.
But resources that involve intellectual property reduce or even
eliminate this risk. As a result, developing
intellectual property is important to many organizations.
Intellectual property refers to creations of the mind, such as
inventions, artistic products, and symbols.
The four main types of intellectual property are patents,
trademarks, copyrights, and trade secrets.
If a piece of intellectual property is also valuable, rare , and
nonsubstitutable, it constitutes
a strategic resource. Even if a piece of intellectual property
does not meet all four criteria for serving as a
strategic resource, it can be bundled with other resources and
activities to create a resource.
A variety of formal and informal methods are available to

protect a firm’s intellectual property from
imitation by rivals. Some forms of intellectual property are best
protected by legal means, while defending
others depends on surrounding them in secrecy. This can be
contrasted with Southwest Airlines’ well-
known culture, which rivals are free to attempt to copy if they
wish. Southwest’s culture thus is not
intellectual property, although some of its complements such as
Southwest’s logo and unique color
schemes are.
Patents
Patents are legal decrees that protect inventions from direct
imitation for a limited period of time.
Obtaining a patent involves navigating a challenging process.
To earn a patent from the US
115
Patent and Trademark Office, an inventor must demonstrate
than an invention is new, nonobvious, and
useful. If the owner of a patent believes that a company or
person has infringed on the patent, the owner
can sue for damages. In 2011, for example, a private company

named EBSCO alleged that retailer Bass Pro
Shops sold a product that violated EBSCO’s patent on a deer -
hunting stand that helps prevent hunters
from falling out of trees. Rather than endure a costly legal fight,
the two sides agreed to settle EBSCO’s
complaint out of court.
Patenting an invention is important because patents can fuel
enormous profits. Imagine, for example, the
potential for lost profits if the Slinky had not been patented.
Shipyard engineer Richard James came up
with the idea for the Slinky by accident in 1943 while he was
trying to create springs for use in ship
instruments. When James accidentally tipped over one of his
springs, he noticed that it moved downhill in
a captivating way. James spent his free time perfecting the
Slinky and then applied for a patent in 1946.
To date, more than three hundred million Slinkys have been
sold by the company that Richard James and
his wife Betty created.
Patenting inventions such as the Slinky helps ensure that the
invention is protected from imitation.
Image courtesy of Roger
McLassus,http://upload.wikimedia.org/wikipedia/commons/f/f3/
2006-

02-04_Metal_spiral.jpg.
Trademarks
116
Trademarks are phrases, pictures, names, or symbols used to
identify a particular organization.
Trademarks are important because they help an organization
stand out and build an identity in the
marketplace. Some trademarks are so iconic that almost all
consumers recognize them, including
McDonald’s golden arches, the Nike swoosh, and Apple’s
outline of an apple.
Other trademarks help rising companies carve out a unique
niche for themselves. For example, French
shoe designer Christian Louboutin has trademarked the
signature red sole of his designer shoes. Because
these shoes sell for many hundreds of dollars via upscale
retailers such as Neiman Marcus and Saks Fifth
Avenue, competitors would love to copy their look. Thus legally
protecting the distinctive red sole from
imitation helps preserve Louboutin’s profits.

Fashionistas instantly recognize the trademark red sole of
Christian Louboutin’s high-end shoes.
Image courtesy of
Arroser,http://wikimediafoundation.org/wiki/File:Louboutin_al t
adama140.jpg.
Trademarks are important to colleges and universities. Schools
earn tremendous sums of money through
royalties on T-shirts, sweatshirts, hats, backpacks, and other
consumer goods sporting their names and
logos. On any given day, there are probably several students in
your class wearing one or more pieces of
clothing featuring your school’s insignia; your school benefits
every time items like this are sold.
Schools’ trademarks are easy to counterfeit, however, and the
sales of counterfeit goods take money away
from colleges and universities. Not surprisingly, many schools
fight to protect their trademarks. In
117
October 2009, for example, the University of Oklahoma
announced that it was teaming with law
enforcement officials to combat the sale of counterfeit goods
around its campus. [1] This initiative and

similar ones at other colleges and universities are designed to
ensure that schools receive their fair share
of the sales that their names and logos generate.
Figure 4.7 Trademarks
118
Images courtesy of unknown author,
http://en.wikipedia.org/wiki/File:Aspirine-1923.jpg (bottom
left); Wilinckx, http://en.wikipedia.org/wiki/File:Trademark-
symbool.png (top left); Hult Ketchen
International Group, LLC (top right); Helix84,
http://en.wikipedia.org/wiki/File:Burrbery_check.gif
Copyrights
Copyrights provide exclusive rights to the creators of original
artistic works such as books, movies, songs,
and screenplays. Sometimes copyrights are sold and licensed. In
the late 1960s,
Buick thought it had an agreement in place to license the
number one hit “Light My Fire” for a television

advertisement from The Doors until the band’s volatile lead
singer Jim Morrison loudly protested what he
saw as mistreating a work of art. Classic rock by The Beatles
has been used in television ads in recent
years. After the late pop star Michael Jackson bought the rights
to the band’s music catalog, he licensed
songs to Target and other companies. Some devoted music fans
consider such ads to be abominations,
perhaps proving the merit of Morrison’s protest decades ago.
He looks calm here, but the licensing of a copyrighted song for
a car commercial enraged rock legend Jim Morrison.
119
Image courtesy of Polfoto/Jan Persson,
http://upload.wikimedia.org/wikipedia/commons/1/15/The_Door
s_in_Copenhagen_1968.jpg.
Over time, piracy has become a huge issue for the owners of
copyrighted works. In China, millions of
pirated DVDs are sold each year, and music piracy is estimated
to account for at least 95 percent of music
sales. This piracy deprives movie studios, record labels, and
artists of millions of dollars in royalties. In

response to the damage piracy has caused, the US government
has pressed its Chinese counterpart and
other national governments to better enforce copyrights.
Trade Secrets
Trade secrets refer to formulas, practices, and designs that are
central to a firm’s business and that remain
unknown to competitors. Trade secrets are protected by laws on
theft, but once a secret is revealed,
it cannot be a secret any longer. This leads firms to rely mainly
on silence and privacy rather than the
legal system to protect trade secrets.
Some trade secrets have become legendary, perhaps because a
mystique arises around the unknown. One
famous example is the blend of eleven herbs and spices used in
Kentucky Fried Chicken’s original recipe
chicken. KFC protects this secret by having multiple suppliers
each produce a portion of the herb and
spice blend; no one supplier knows the full recipe. The
formulation of Coca-Cola is also shrouded in
mystery. In 2006, Pepsi was approached by shady individuals
who were offering a chance to buy a stolen
copy of Coca-Cola’s secret recipe. Pepsi wisely refused. An FBI
sting was used to bring the thieves to

justice. The soft-drink industry has other secrets too. Dr
Pepper’s recipe remains unknown outside the
company. Although Coke’s formula has been the subject of
greater speculation, Dr Pepper is actually the
original secret soft drink; it was created a year before Coca -
Cola.
120
The recipe for Dr Pepper is a secret dating back to the 1880s.
Image courtesy of anyjazz65,
http://www.flickr.com/photos/[email protected]/4262262427/siz
es/l/in/photostream.
Intellectual property can serve as a strategic resource for
organizations. While some sources of
intellectual property such as patents, trademarks, and copyrights
can receive special legal protection,
trade secrets provide competitive advantages by simply staying
hidden from competitors.
E X E R C I S E S
1. What designs for your college or university are protected by
trademarks?

2. What type of intellectual property provides the most
protection for firms?
3. Why would a firm protect a resource through trade secret
rather than by a formal patent?
[1] Ward, C. 2009, October 8. OU works to prevent trademark
infringement. The Oklahoma Daily. Retrieved
from http://www.oudaily.com/news/2009/oct/08/ou-works-
prevent-trademark-infringement
121
4.3 Value Chain
1. Define the primary activities of the value chain.
2. Know the different support activities within the value chain.
3. Be able to apply the value chain to an organization of your
choosing.
4. Understand the difference between a value chain and supply
chain.

122
Image courtesy of Carol M. Highsmith,
http://commons.wikimedia.org/wiki/File:Randy%27s_donuts1_e
dit1.jpg.
Elements of the Value Chain
When executives choose strategies, an organization’s resources
and capabilities should be examined
alongside consideration of its value chain. A value chain charts
the path by which products and services
are created and eventually sold to customers. [1] The term value
chain reflects the fact that, as each step of
123
this path is completed, the product becomes more valuable than
it was at the previous step.
Within the lumber business, for example, value is added when a
tree is transformed into usable
wooden boards; the boards created from a tree can be sold for
more money than the price of the tree.
Adapted from Porter, M. (1985). Competitive Advantage. New
York: Free Press. Exhibit is
Creative Commons licensed at
http://en.wikipedia.org/wiki/Image:ValueChain.PNG.”

Value chains include both primary and secondary activities.
Primary activities are actions that are directly
involved in creating and distributing goods and services.
Consider a simple illustrative example: doughnut
shops. Doughnut shops transform basic commodity products
such as flour, sugar, butter, and grease into
delectable treats. Value is added through this process because
consumers are willing to pay much more for
doughnuts than they would be willing to pay for the underlying
ingredients.
There are five primary activities. Inbound logistics refers to the
arrival of raw materials. Although
doughnuts are seen by most consumers as notoriously
unhealthy, the Doughnut Plant in New York City
http://en.wikipedia.org/wiki/Image:ValueChain.PNG
124
has carved out a unique niche for itself by obtaining organic
ingredients from a local farmer’s
market.Operations refers to the actual production process, while
outbound logistics tracks the movement
of a finished product to customers. One of Southwest Airlines’
unique capabilities is moving passengers

more quickly than its rivals. This advantage in operations is
based in part on Southwest’s reliance on one
type of airplane (which speeds maintenance) and its avoidance
of advance seat assignments (which
accelerates the passenger boarding process).
Attracting potential customers and convincing them to make
purchases is the domain
of marketing and sales. For example, people cannot help but
notice Randy’s Donuts in Inglewood,
California, because the building has a giant doughnut on top of
it. Finally, service refers to the extent to
which a firm provides assistance to their customers. Voodoo
Donuts in Portland, Oregon, has developed a
clever website (voodoodoughnut.com) that helps customers
understand their uniquely named products,
such as the Voodoo Doll, the Texas Challenge, the Memphis
Mafia, and the Dirty Snowball.
Secondary activities are not directly involved in the evolution
of a product but instead provide important
underlying support for primary activities. Firm infrastructure
refers to how the firm is organized and led
by executives. The effects of this organizing and leadership can
be profound. For example, Ron Joyce’s

leadership of Canadian doughnut shop chain Tim Hortons was
so successful that Canadians consume
more doughnuts per person than all other countries. In terms of
resource-based theory, Joyce’s leadership
was clearly a valuable and rare resource that helped his firm
prosper.
Also important is human resource management, which involves
the recruitment, training, and
compensation of employees. A recent research study used data
from more than twelve thousand
organizations to demonstrate that the knowledge, skills, and
abilities of a firm’s employees can act as a
strategic resource and strongly influence the firm’s
performance. [2] Certainly, the unique level of
dedication demonstrated by employees at Southwest Airlines
has contributed to that firm’s excellent
performance over several decades.
Technology refers to the use of computerization and
telecommunications to support primary activities.
Although doughnut making is not a high-tech business,
technology plays a variety of roles for doughnut
shops, such as allowing customers to use credit cards.
Procurement is the process of negotiating for and

125
purchasing raw materials. Large doughnut chains such as
Dunkin’ Donuts and Krispy Kreme can gain cost
advantages over their smaller rivals by purchasing flour, sugar,
and other ingredients in bulk. Meanwhile,
Southwest Airlines has gained an advantage over its rivals by
using futures contracts within its
procurement process to minimize the effects of rising fuel
prices.
From the Value Chain to Best Value Supply Chains
“Time is money!” warns a famous saying. This simple yet
profound statement suggests that organizations
that quickly complete their work will enjoy greater profits,
while slower-moving firms will suffer. The
belief that time is money has encouraged the modern emphasis
on supply chain management. A
supply chain is a system of people, activities, information, and
resources involved in creating a product
and moving it to the customer. A supply chain is a broader
concept than a value chain; the latter refers to
activities within one firm, while the former captures the entire
process of creating and distributing a

product, often across several firms.
Competition in the twenty-first century requires an approach
that considers the supply chain concept in
tandem with the value-creation process within a firm: best value
supply chains. These chains do not fixate
on speed or on any other single metric. Instead, relative to their
peers, best value supply chains focus on
the total value added to the customer.
Creating best value supply chains requires four components.
The first is
strategic supply chain management—the use of supply chains as
a means to create competitive advantages
and enhance firm performance. Such an approach contradicts
the popular wisdom centered on the need
to maximize speed. Instead, there is recognition that the fastest
chain may not satisfy customers’ needs.
Best value supply chains strive to excel along four measures.
Speed (or “cycle time”) is the time duration
from initiation to completion of the production and distribution
process. Quality refers to the relative
reliability of supply chain activities. Supply chains’ efforts at
managing cost involve enhancing value by
either reducing expenses or increasing customer benefits for the
same cost level. Flexibility refers to a

supply chain’s responsiveness to changes in customers’ needs.
Through balancing these four metrics, best
value supply chains attempt to provide the highest level of total
value added.
126
The value of strategic supply chain management is reflected in
how firms such as Walmart have used their
supply chains as competitive weapons to gain advantages over
peers. Walmart excels in terms of speed
and cost by locating all domestic stores within one day’s drive
of a warehouse while owning a trucking
fleet. This creates distribution speed and economies of scale
that competitors simply cannot match. When
Kmart’s executives decided in the late 1990s to compete head-
to-head with Walmart on price, Walmart’s
sophisticated logistics system enabled it to easily withstand the
price war. Unable to match its rival’s
speed and costs, Kmart soon plunged into bankruptcy.
Walmart’s supply chains also possess strong
quality and flexibility. When Hurricane Katrina devastated the
Gulf Coast in 2005, Walmart used not only

its warehouses and trucks but also its satellite technology, radio
frequency identification (RFID), and
global positioning systems to quickly divert assets to affected
areas. The result was that Walmart emerged
as the first responder in many towns and provided essentials
such as drinking water faster than local and
federal governments could.
Meanwhile, failing to manage a supply chain effectively causes
serious harm. For example, in 2003
Motorola was unable to meet demand for its new camera phones
because it did not have enough lenses
available. Also, firms whose supply chains were centered in the
Port of Los Angeles collectively lost more
than $2 billion a day during a 2002 workers’ strike. In terms of
stock price, firms’ market value erodes by
an average of 10 percent following the announcement of a major
supply chain problem.
The second component is agility, the supply chain’s relative
capacity to act rapidly in response to dramatic
changes in supply and demand. [3] Agility can be achieved
using buffers. Excess capacity, inventory, and
management information systems all provide buffers that better
enable a best value supply chain to
service and to be more responsive to its customers. Rapid

improvements and decreased costs in deploying
information systems have enabled supply chains in recent years
to reduce inventory as a buffer. Much
popular thinking depicts inventory reduction as a goal in and of
itself. However, this cannot occur without
corresponding increases in buffer capacity elsewhere in the
chain, or performance will suffer. A best value
supply chain seeks to optimize the total costs of all buffers
used. The costs of deploying each buffer differs
across industries; therefore, no solution that works for one
company can be directly applied to another in
a different industry without adaptation.
127
Agility in a supply chain can also be improved and achieved by
colocating with the customer. This
arrangement creates an information flow that cannot be
duplicated through other methods. Daily face-to-
face contact for supply chain personnel enables quicker
response times to customer demands due to the
speed at which information can travel back and forth between
the parties. Again, this buffer of increased

and improved information flows comes at an expense, so
executives seeking to build a best value supply
chain will investigate the opportunity and determine whether
this action optimizes total costs.
Adaptability refers to a willingness and capacity to reshape
supply chains when necessary. Generally,
creating one supply chain for a customer is desired because this
helps minimize costs. Adaptable firms
realize that this is not always a best value solution, however.
For example, in the defense industry, the US
Army requires one class of weapon simulators to be repaired
within eight hours, while another class of
items can be repaired and returned within one month. To service
these varying requirements efficiently
and effectively, Computer Science Corporation (the firm whose
supply chains maintain the equipment)
must devise adaptable supply chains. In this case, spare parts
inventory is positioned in proximity to the
class of simulators requiring quick turnaround, while the less-
time-sensitive devices are sent to a
centralized repair facility. This supply chain configuration
allows Computer Science Corporation to satisfy
customer demands while avoiding the excess costs that would
be involved in localizing all repair activities.

In situations in which the interests of one firm in the chain and
the chain as a whole conflict, most
executives will choose an option that benefits their firm. This
creates a need for alignment among chain
members. Alignment refers to creating consistency in the
interests of all participants in a supply chain. In
many situations, this can be accomplished through carefully
writing incentives into contracts.
Collaborative forecasting with suppliers and customers can also
help build alignment. Taking the time to
sit together with participants in the supply chain to agree on
anticipated business levels permits shared
understanding and rapid information transfers between parties.
This is particularly valuable when
customer demand is uncertain, such as in the retail industry. [4]
128
The value chain provides a useful tool for managers to examine
systematically where value may be added
to their organizations. This tool is useful in that it examines key
elements in the production of a good or

service, as well as areas in which value may be added in support
of those primary activities.
E X E R C I S E S
1. If you were hired as a consultant for your university, what
specific element of the value chain would you
seek to improve first?
2. What local business in your town could be improved most
dramatically by applying the value chain?
Would improvements of primary or support activities help to
improve this firm most? Could knowledge of
strategic supply chain management add further value to this
firm?
[1] Porter, M. E. 1985. Competitive advantage: Creating and
sustaining superior performance. New York, NY: Free
Press.
[2] Crook, T. R., Todd, S. Y., Combs, J. G., Woehr, D. J., &
Ketchen, D. J. 2011. Does human capital matter? A meta-
analysis of the relationship between human capital and firm
performance. Journal of Applied Psychology, 96(3),
443–456.
[3] Lee, H. L. 2004, October. The triple-A supply chain.
Harvard Business Review, 83, 102–112.
[4] This section of the chapter is adapted from Ketchen, D. J.,

Rebarick, W., Hult, G. T., & Meyer, D. 2008. Best
value supply chains: A key competitive weapon for the 21st
century. Business Horizons, 51, 235–243.
129
4.4 Beyond Resource-Based Theory: Other Views on Firm
Performance
1. Be able to discuss other theories about firm success and
failure beyond resource-based theory.
2. Be able to apply different theories to help explain
competition in different industries.
Although resource-based theory stands as perhaps the most
popular explanation of why some
organizations prosper while others do not, several other theories
are popular. Enactment treats
executives as the masters of their domains. Enactment contends
that an organization can, at least in
part, create an environment for itself that is beneficial to the
organization. This is accomplished by
putting strategies in place that reshape competitive conditions
in a favorable way.

By the 1990s, Microsoft had been so successful at reshaping the
software industry to its benefit that
the firm was the subject of a lengthy antitrust investigation by
the federal government. More
recently, Apple has been able to reshape its environment by
introducing products such as the iPhone
and the iPad that transcend the traditional boundaries between
the cell phone, digital camera, music
player, and computer businesses. No airline has ever been able
to enact the environment, however,
perhaps because the airline industry is so fragmented.
Environmental determinism offers a completely opposite view
from enactment on why some firms
succeed and others fail. Environmental determinism views
organizations much like biological
theories view animals—organizations (and animals) are very
limited in their ability to adapt to the
conditions around them. Thus just as harsh environmental
changes are believed to have made
dinosaurs extinct, changes in the business environment can
destroy organizations regardless of how
clever and insightful executives are.
Until 1978, the federal government regulated the airline

industry by dictating what routes each
airline would fly and what prices it would charge. Once these
controls were removed, airlines were
subjected to a series of negative environmental trends, including
recession, overcapacity in the
130
industry, new entrants, fierce price competition, and fuel
shortages. Perhaps not surprisingly, dozens
of airlines have been crushed by these conditions.
An old saying notes that “imitation is the sincerest form of
flattery.” This flattery is the focus
of institutional theory. In particular, institutional theory centers
on the extent to which firms copy one
another’s strategies. Consider, for example, fast-food
hamburger restaurants. Innovations such as
dollar menus and drive-through windows tend to be introduced
by one firm and then duplicated by
the others.
Airlines also seem to follow a “monkey see, monkey do”
mentality. To build passenger loyalty,
American Airlines introduced a frequent flyer program called

AAdvantage in 1981. After flying a
certain number of miles on American flights, AAdvantage
members were rewarded with a free flight.
The idea was to make passengers less likely to shop around for
the cheapest ticket. Ironically,
AAdvantage turned out to be not much of an advantage at all.
Many of American’s rivals quickly
developed their own frequent-flyer programs, and today most
airlines reward frequent passengers.
In recent years, ideas such as charging passengers to check their
luggage and eliminating free food
on flights have been copied by one airline after another.
Transaction cost economics is a theory that centers on just one
element of business activity: whether it
is cheaper for a firm to make or to buy the products that it
needs. This is an important element,
however, because choosing the more efficient option can
enhance a firm’s profits. Automakers such
as Ford and General Motors face a wide variety of make-or-buy
decisions because so many different
parts are needed to build cars and trucks. Sometimes Ford and
GM make these products, and other
times they purchase them from outside suppliers. These firms’
financial situations are improved

when these decisions are made wisely and harmed when they are
made poorly.
In contrast, airlines always buy (or rent) their airplanes. Large
planes are generally bought from
Boeing or Airbus, while modest-sized airliners are purchased
from companies such as Brazil’s
Embraer. It would be simply too costly for an airline to pursue a
backward integration strategy and
enter the airplane manufacturing business. Insights such as
these are powerful enough that the
131
creator of transaction cost economics, Professor Oliver
Williamson, was awarded a Nobel Prize in
Economic Sciences in 2009.
Each of these theories—enactment, environmental determinism,
institutional theory, and
transaction cost economics—is useful for understanding some
situations and some important
business decisions. Thus executives should keep these
perspectives in mind as they attempt to lead
their firms to greater levels of success. However, one important

advantage that resource-based
theory offers over the alternatives is that only resource-based
theory does a good job of explaining
firm performance across a wide variety of contexts. Thus
resource-based theory offers the point of
view of business that has the strongest value for most
executives.
Although resource-based theory is the dominant perspective to
predict performance in the strategic
management field, other theories exist to explain firm behavior.
In some industries, explanations
provided by these theories can be very convincing.
E X E R C I S E S
1. What theory of the firm do you think best explains
competition in the fast-food industry?
2. What is an example of an industry in which institutional
theory seems to explain the behavior of firms?
132
4.5 SWOT Analysis

1. Understand what SWOT analysis is.
2. Learn how SWOT analysis can help organizations and
individuals, and its limitations.
Five forces analysis examines the situation faced by the
competitors in an industry. Strategic groups
analysis narrows the focus by centering on subsets of these
competitors whose strategies are
similar. SWOT analysis takes an even narrower focus by
centering on an individual firm. Specifically,
SWOT analysis is a tool that considers a firm’s strengths and
weaknesses along with the
opportunities and threats that exist in the firm’s environment.
Executives using SWOT analysis compare these internal and
external factors to generate ideas about
how their firm might become more successful. In general, it is
wise to focus on ideas that allow a firm
to leverage its strengths, steer clear of or resolve its
weaknesses, capitalize on opportunities, and
protect itself against threats. For example, untapped overseas
markets have presented potentially
lucrative opportunities to Subway and other restaurant chains
such as McDonald’s and Kentucky

Fried Chicken. Meanwhile, Subway’s strengths include a well-
established brand name and a simple
business format that can easily be adapted to other cultures. In
considering the opportunities offered
by overseas markets and Subway’s strengths, it is not surprising
that entering and expanding in
different countries has been a key element of Subway’s strategy
in recent years. Indeed, Subway
currently has operations in nearly 100 nations.
SWOT analysis is helpful to executives, and it is used within
most organizations. Important cautions
need to be offered about SWOT analysis, however. First, in
laying out each of the four elements of
SWOT, internal and external factors should not be confused
with each other. It is important not to
list strengths as opportunities, for example, if executives are to
succeed at matching internal and
external concerns during the idea generation process. Second,
opportunities should not be confused
with strategic moves designed to capitalize on these
opportunities. In the case of Subway, it would be
a mistake to list “entering new countries” as an opportunity.
Instead, untapped markets are the

opportunity presented to Subway, and entering those markets is
a way for Subway to exploit the
133
opportunity. Finally, and perhaps most important, the results of
SWOT analysis should not be
overemphasized. SWOT analysis is a relatively simple tool for
understanding a firm’s situation. As a
result, SWOT is best viewed as a brainstorming technique for
generating creative ideas, not as a
rigorous method for selecting strategies. Thus the ideas
produced by SWOT analysis offer a starting
point for executives’ efforts to craft strategies for their
organization, not an ending point.
In addition to organizations, individuals can benefit from
applying SWOT analysis to their personal
situation. A college student who is approaching graduation, for
example, could lay out her main
strengths and weaknesses and the opportunities and threats
presented by the environment. Suppose,
for instance, that this person enjoys and is good at helping
others (a strength) but also has a rather
short attention span (a weakness). Meanwhile, opportunities to

work at a rehabilitation center or to
pursue an advanced degree are available. Our hypothetical
student might be wise to pursue a job at
the rehabilitation center (where her strength at helping others
would be a powerful asset) rather than
entering graduate school (where a lot of reading is required and
her short attention span could
undermine her studies).
Executives using SWOT analysis compare internal strengths and
weaknesses with external opportunities
and threats to generate ideas about how their firm might become
more successful. Ideas that allow a firm
to leverage its strengths, steer clear of or resolve its
weaknesses, capitalize on opportunities, and protect
itself against threats are particularly helpful.
E X E R C I S E S
1. What do each of the letters in SWOT represent?
2. What are your key strengths, and how might you build your
own personal strategies for success around
them?

134
4.6 Conclusion
This chapter explains key issues that executives face in
managing resources to keep their firms
competitive. Resource-based theory argues that firms will
perform better when they assemble
resources that are valuable, rare, difficult to imitate, and
nonsubstitutable. When executives can
successfully bundle organizational resources into unique
capabilities, the firm is more likely to enjoy
lasting success. Different forms of intellectual property—which
include patents, trademarks,
copyrights, and trade secrets—may also serve as strategic
resources for firms. Examining a firm’s
resources can be aided by the value chain, a tool that
systematically examines primary and secondary
activities in the creation of a good or service and by a
knowledge of supply chain management that
examines the value added of multiple firms working together.
While resource-based theory provides
a dominant view for examining the determinants of firm
success, other perspectives provide insight

for understanding specific behaviors of firms within an
industry. Finally, SWOT analysis is a simple
but powerful technique for examining the interactions between
factors internal and external to the
firm.
E X E R C I S E S
1. Divide your class into four or eight groups, depending on the
size of the class. Each group should search
for a patent tied to a successful product, as well as a patent
associated with a product that was not a
commercial hit. Were there resources tied to the successful
organization that the poor performer did not
seem to attain?
2. This chapter discussed Southwest Airlines. Based on your
reading of the chapter, how well has Southwest
done in bundling together the resources recommended by
resource-based theory? What theoretical
perspective best explains the competitive actions of most firms
in the airline industry?
3. Conduct a SWOT analysis of your college or university.
Based on your analysis, what one strategic move
should your school make first, and why?

Week 3 Discussion (GRADED)
Instructions:
Please refer to the Discussion Grading Rubric before starting
the assignment. Read the Case Scenario and answer the three
questions that follow. Be careful to address each question
posed. Include APA formatted in-text citations and a reference
list. (In this class, all applicable citations should contain the
page or paragraph numbers. The only exceptions are videos or
podcasts.)
Use the lettering system indicated below to post your answers.
Your answers should be listed in sections labeled "A" through
"C."
Michael Porter --- An Icon of Competitive Strategy and
Competitive Advantage
Every business student would be well served by becoming
conversant with Porter's models. Michael E. Porter was (and
may still hold the distinction) of being the youngest professor to
receive tenure in Harvard University's history. He has been on
the Harvard Business School faculty since 1973. It would not be
easy to find an academic article, book, or textbook dealing with
competitive strategy and competitive advantage written in the
past 50 years that does not mention the impact of Porter's
theories.
In Competitive Strategy (1980), as you learned in week 2,
Porter identifies five industry forces that managers must
consider in developing market strategies. The five forces
Porter's model identifies are: (1) the threat of new entrants into
the market, (2) the bargaining power of customers in the
industry, (3) the bargaining power of suppliers in the industry,
(4) the threat of substitute products or services entering the
market, and (5) the price competition or other forms of rivalry
among existing firms in the market. The application of the five
forces model recurs throughout the course.

Porter pursues the theme of global competition in his 1985
book, Competitive Advantage, where he notes that companies
must select a strategy of cost leadership (e.g., Costco), which is
contingent upon a large market share, or a strategy of
differentiation (e.g., Nordstrom), which pursues a smaller
market share but has an exclusivity advantage. It is this part of
Porter's work we will focus on this week. Porter's books rank
among the best-selling business books.
Porter, E. M. (1980). Competitive strategy: Techniques for
analyzing industries and competitors. Free Press.
Porter, E. M. (1985). Competitive advantage: Creating and
sustaining superior performance. Free Press.
Case Scenario: Smithfield Custom Furniture:
Smithfield Custom Furniture has done extremely well since its
founding in 1903. Smithfield has focused on selling reasonably
priced furniture since its inception. Now 2001, the company has
been headed by the founder's granddaughter, Joan Smithfield
(CEO). She has run the company for the past twenty years.
Today, the company has 247 retail stores. 220 stores are spread
throughout the 50 states, and 27 stores are located in England,
France, and Germany. Each country has 9 stores. The company
employs 13,000 people.
For the past 20 years, Joan Smithfield has been aware of the
financial growth in a large workforce segment, primarily due to
more women in the workforce holding full-time and
professional occupations. She knows, too, that the reasonably
priced furniture market has become saturated with other
competitors during this time.
The company does all its manufacturing in the United States at
six facilities, which recently were modernized with the latest
equipment. Although recently modernized, Smithfield's
production plants are not producing at maximum capacity. Joan
realizes the plants could produce more and different types of
furniture.
The Board of Directors is pressuring Joan to diversify
Smithfield's product line. Everyone on the board, including

Joan, agrees diversification is needed. Everyone agrees, too, a
new line of furniture needs to be added.
However, the 12-member Board of Directors is evenly divided
on whether the new line of furniture should be 1) massed
produced, mass-marketed, and sold at the lowest price point
possible or 2) whether the new line of furniture should be a very
upscale line of furniture, custom-crafted and produced from the
most expensive and exotic woods, exclusively marketed to the
top 7.5% of world-wide income earners. The Smithfield plants
have the capacity and capability to develop and produce either
but not both lines of new furniture.
Joan Smithfield has been a longtime admirer of Michael Porter.
She met Porter a few times over the years at various seminars
and business functions.
Your Task for Your Initial Post:
In your role as a senior strategy analyst at Smithfield Custom
Furniture, CEO Joan Smithfield has requested you to provide to
her a memorandum that addresses A-C below.
A. Explain, using the link provided to Porter's
Competitive Advantage Model, how Porter's Competitive
Advantage model applies to the Smithfield's Board of Directors'
issue of deciding to produce a very exclusive furniture line or a
mass-produced, mass-marketed furniture product line. Use in-
text citations as
appropriate. https://courses.lumenlearning.com/wmopen-
principlesofmanagement/chapter/stages-and-types-of-strategy/
B. Select the best strategy for the Smithfield company to pursue
from the two strategies Porter presents in his model and explain
why that particular strategy is better than the alternative.
C. Using this week's course readings, assuming Joan Smithfield
accepts your recommendation, what is the next action she
should take to determine if your recommendation is correct? Be
specific. Use in-text citations and list references from course
readings as required.
Other Writing Guidelines for this Discussion:
· Use the grading rubric while completing the project to ensure

all requirements are met to lead to the highest possible grade.
· Third-person writing is required. The third person means no
words such as "I, me, my, we, or us" (first-person writing).
· Contractions are not often used in business writing, so do not
use them here.
· Paraphrase - do not use direct quotations. This means that you
will put the ideas of an author or article into your own words
rather than lift them directly from a source document. You may
not use more than four consecutive words from a source
document (including the case scenario) or change words in a
passage as doing so would require direct quotation marks. Use
a passage from a source document by putting it into your own
words (paraphrase) and attribute the passage to the source
document. Changing words from a passage does not exclude the
passage from having to have quotation marks. If direct quotes
are presented, they will not be included in the grading.
· Use in-text citations and provide a reference list that contains
a reference associated with each in-text citation.
· Only course materials (from this course's content) may be
used. Sources other than this course's eBook or the course
materials listed under content will not be considered sources of
support.
· Provide the page or paragraph number in every in-text citation
presented. Refer to this link for more guidance on how to do
this: In-Text Citations - Including Page or Paragraph Numbers.
Read and View:
Mastering Strategic Management: (Scroll down to see chapter
readings)
· Chapter 4:Managing Firm Resources
· Introduction to Industry Analysis (13.43
minutes)https://www.youtube.com/watch?v=5DFd-ZNbNX4

· Review the case study and, based on the provided information,

· Review the case study and, based on the provided information,

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