© 2013 Cengage Learning. All rights reserved. CHAPTER 4 GLOBAL2 PENG © The Studio...

© 2013 Cengage Learning. All rights reserved.

CHAPTER 4

GLOBAL2 PENG

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Opening Vignette

• Describe Saturna Capital• Where is it located?• How many employees?• Describe the opportunity sought by Nicholas Kaiser

• What are some investment restrictions for Saturna Capital?

• Explain Saturna’s remarkable success

© 2013 Cengage Learning. All rights reserved. 2


CHAPTER 4 LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. Define resources and capabilities. 2. Explain how value is created from a firm’s

resources and capabilities. 3. Articulate the difference between keeping an

activity in-house and outsourcing it. 4. Explain what a VRIO framework is. 5. Explain how to use a VRIO framework to

understand a firm’s resources and capabilities. 6. Identify three things you need to do (and one thing

you should avoid) as part of a successful career and business strategy.

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SWOT ANALYSIS

Strengths and Weaknesses – internal assessment of the organization leading to management decisions.

Opportunities and Threats – external assessment of the business environment to identify the uncontrollable events that might impact management decisions.


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What is SWOT Analysis?

The SWOT Analysis is an important strategic tool. It helps companies

make sound strategic decisions by looking at their controllable/internal

environment, look at the external/uncontrollable environment.

Internal vs. External Environments

In analyzing a company’s current strategic position, it is important to

look at what the company has control of (the internal environment), and

what it does not have control of (the external environment).

The Internal Environment

The Internal Environment of a company includes the things the company can control. These are the Strengths and

Weaknesses. When you look at the these, look not

only from the company’s point of view, but also from the point of view

of outsiders. Be realistic in your assessment.

Strengths

Your strengths should cover:What do you do well?

What advantages do you have?What resources do you have access to?What do others see as your strengths?

This is a good starting point, but not a limiting point in your analysis of

strengths.

Weaknesses

Your weaknesses should cover:What do you do badly?

What are things that need improvement?

What do you do that you should avoid?Again, this is a good starting point, but try

to look beyond these questions in analyzing weaknesses.

The External EnvironmentThe External Environment is everything that

is outside of the company’s control. These are the Opportunities and Threats.1. Legal2. Political3. Social4. Economic5. Technological6. Global7. Competitive8. environmental

Opportunities & Threats

Opportunities- What elements of the external environment could benefit

the company?

Threats- What elements of the external environment could hurt to the

company?

What Next?

Now that you have identified the company’s Strengths, Weaknesses, Opportunities, and Threats, it’s time to put them together and understand

what they mean.

Internal (Controllable) External (Uncontrollable)

StrengthsStrengths OpportunitiesOpportunities

WeaknessWeakness ThreatsThreats

LEVERAGE

LeverageLeverage

Leverage is when a strength allows you to take Leverage is when a strength allows you to take advantage of an opportunity.advantage of an opportunity.


Strengths OpportunitiesOpportunities

WeaknessWeakness Threats

ConstraintConstraint

Constraint is when a weakness prevents you Constraint is when a weakness prevents you from taking advantage of an opportunity.from taking advantage of an opportunity.

CONSTRAINT


Strengths OpportunitiesOpportunities


VulnerabilityVulnerability

Vulnerability is when a threat attacks a Vulnerability is when a threat attacks a strength.strength.

VULNERABILITY


Strengths Opportunities


ProblemProblem

Problem is when a threat attacks a weakness.Problem is when a threat attacks a weakness.

PROBLEM


StrengthsStrengths OpportunitiesOpportunities

WeaknessWeakness ThreatsThreats

LEVERAGE

PROBLEM

CONSTRAINT VULNERABILITY

SWOT AnalysisSWOT Analysis

SWOT Analysis

Once you have identified the Leverages, Constraints, Vulnerabilities, and

Problems facing the company, you can make recommendations for the

company to move forward and improve its market position.

LO1: RESOURCES AND CAPABILITIES

The tangible and intangible assets a firm uses to choose and implement its strategies.


LO2: THE CREATION OF VALUE

How do resources and capabilities come together to add value?

Value is created through a series of activities, the value chain.


QA

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LO2: THE VALUE CHAIN


Note: Dashed lines represent firm boundaries.

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LO2: THE VALUE CHAIN



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Dell’s Value Chain

Benchmarking

LO2: TWO-STAGE DECISION MODEL


LO3: IN-HOUSE OR OUTSOURCE?



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LO3: IN-HOUSE OR OUTSOURCE?

Factors to consider:

Is an activity industry specific?

Is an activity proprietary?

Commoditization

Some activities have generic attributes

Cost of operating multiple stages of value chain


LO3: LOCATION, LOCATION, LOCATION


Note: “Captive sourcing” is a new term that is conceptually identical to “foreign direct investment” (FDI), a term widely used in global business. See Chapter 6 for details.

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LO4: VRIO FRAMEWORK

alue – do firm resources and capabilities add value?

arity – how rare are the resources and capabilities?

mitability – valuable and rare resources provide competitive advantage only if they are rare.

rganizational – valuable, rare, and hard to imitate resources must be well organized.


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LO5: VRIO FRAMEWORK AND FIRM PERFORMANCE


Sources: J. Barney, Gaining and Sustaining Competitive Advantage, 2nd ed. (Upper Saddle River, NJ: Prentice Hall, 2002) 173; R. Hoskisson, M. Hitt, and R. D. Ireland, Competing for Advantage (Cincinnati: Thomson South-Western, 2004) 118.

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LO5: VALUE

Only value-adding resources provide competitive advantage.

Non-value-adding resources may lead to competitive disadvantage.



LO5: RARITY

LO5: IMITABILITY

Imitation is difficult because of causal ambiguity, which means the difficulty of identifying the actual cause of a firm’s success. Outsiders usually have a hard time understanding what a firm does inside its boundaries. Additionally, even managers of a firm often do not know exactly what contributes to their success.



LO5: ORGANIZATIONORGANIZATION

Complementary assets Social complexity

LO6: THINGS TO DO FOR SUCCESS


DEBATE: OFFSHORING

• Value for firms in access to low-cost, high quality labor. • Allows firms to focus on their core capabilities.

• Offshoring nurtures rivals. • Negative impact on developed economies. • US firms not bound by American ethical values.



McKinsey Global Institute on Outsourcing

McKinsey #1 Consulting Firm in the world

Diana Farrell, Director of FGI Outsourcing

Outsourcing in the “news”

© 2013 Cengage Learning. All rights reserved. CHAPTER 4 GLOBAL2 PENG © The Studio...

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