Reference no: EM13510208

1. Why are economic profits a better indicator of firm performance than accounting profits? In competitive industries, what would you expect regarding most incumbent firms' economic profits? From your accounting statements, how would you determine whether your firm is making positive economic profits or not?

2. Some industries (e.g., airlines) are characterized by lower average profitability of firms than other industries (e.g., pharmaceuticals). Using Porter's model, discuss three industry forces in Porter's model that are likely to be stronger for an airline firm than for a pharmaceuticals firm providing relevant arguments.

3. Tata Motors currently adopts a cost-leadership strategy in the Indian automobile industry and has some of the lowest-priced car models in the world. Discuss two reasons why a purely low price strategy may be risky for the company in the long-run. Also, suggest an approach that the company could use to build more differentiation without reducing its cost-leadership position significantly, explaining how this would work.

4. The furniture manufacturer, IKEA, has a core competency in offering well-designed and easy-to-assemble furniture at economical prices. Mention five valuable resources (either tangible or intangible) that are likely components of this competence, discussing how each is important. Provide two reasons for why IKEA's competency might be difficult to imitate by large retailers such as Walmart or Target (that also sell some furniture) or other smaller furniture stores.


5. You have just been hired as the CEO of Innova Inc., a new entrant in the semiconductor industry. You want to create a competency of product development and therefore want to build a culture where grassroots employees feel encouraged and motivated to think of new product ideas. Discuss how you would use the following aspects of organizational design to build such a culture:
a) Administrative structures
b) Control systems
c) Other informal approaches