How are economic profits different from accounting profits and why are they a good indicator of firm performance?

How are economic profits different from accounting profits and why are they a good indicator of firm performance? In competitive industries, what would you expect regarding the economic profits of most incumbent firms? From your accounting statements, how would you roughly 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). According to Porters Five Forces model, this might be because industries with low average profitability have strong competitive forces. Discuss two industry forces from Porters model that are likely to be stronger for an airline firm than for a pharmaceuticals firm providing arguments why. Also discuss an approach (one for each force) through which an airline firm could try and weaken each of these industry forces.

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 four valuable resources (either tangible or intangible) that are likely components of this competence, discussing how each is important. Referring to theoretical notions of what causes barriers to imitation, provide two reasons for why IKEAs competency might be difficult to imitate by large furniture retailers such as Ashley Furniture or generalized retailers such as Walmart and Target.

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) Hiring and training

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