1.

An external orientation rather than an inward focus is useful in understanding

the concept of value. Describe.

Suggested answer

The externally oriented firms look outward to the environment. They have a
thorough understanding of their customers needs and wants, as well as a strong
awareness of present and potential competitors. The firms also know that as its
external environment changes, its offers, structure, and processes must also
change. It invests in new capabilities and competencies to exploit opportunities and
to create and serve customers. Further, external orientation facilitates innovative
behaviour within a firm, because it ensures a proactive mind-set within a firm,
allowing firms to search for new and/or unserved markets. So, external orientation
enables a firm to respond quickly and efficiently to changes in its external
environment.

An inward focus describes the degree to which a firm practices a resource-based

view and is used to assess the extent to which a firm is oriented towards the
development of valuable and unique resource bundles. It focuses on how firms
create and deploy firm-specific resources and is intent on leveraging existing
resources to enhance performance. The firms seek and serve customers, arrange
financing, perform operational functions, and manage the payroll. As firms grow,
they seek efficiency through specialization and differentiation in operations, sales,
product design, finance, legal, technology, and other functions each have specific
responsibilities. Ideally, they tie together to deliver customer value, but, typically,
they develop their own missions, objectives, systems and processes, and business
philosophies. In addition, management systems that can measure, motivate, and
reward managers for securing departmental objectives often encourage nonproductive differentiation that history and internal political rivalries may exacerbate.
Regardless of changes in customer needs, competitor actions, and/or the external
environment in general, the firm will continue on its current course.

So firms with inward focus may not be in a position to be as innovative as an

externally-oriented firm as it is more likely to use and build on their existing
knowledge base rather than entering unfamiliar areas.