Hill 8e Basic Ch03
-
Upload
adnan-ahmad-al-nasser -
Category
Documents
-
view
227 -
download
0
Transcript of Hill 8e Basic Ch03
-
8/12/2019 Hill 8e Basic Ch03
1/23
Copyright Houghton Mifflin Company. All rights reserved. 3 | 1
Theory of Strategic Managementwith Cases, 8eHills, Jones
Chapter ThreeCompetencies and Profitability-
Analyzing Internal Resources
-
8/12/2019 Hill 8e Basic Ch03
2/23
Copyright Houghton Mifflin Company. All rights reserved. 3 | 2
In preparing for battle I havealways found that plans are
useless , bu t plann ing isindispensable.
- Dwight D.
Eisenhower
RoyaltyFree/ Stockdisc/ Getty Images
-
8/12/2019 Hill 8e Basic Ch03
3/23
Copyright Houghton Mifflin Company. All rights reserved. 3 | 3
The firms resourcesand capabilitiesDistinctive competencies
Internal Analysis
The purpose of internal analysis is to pinpoint thestrengthsand weaknessesof the organization.
It includes assessments of:
Building and sustaining a competitive advantagerequires a company to achieve superior:
Efficiency
Quality
Innovations
Responsiveness to customers
-
8/12/2019 Hill 8e Basic Ch03
4/23
Copyright Houghton Mifflin Company. All rights reserved. 3 | 4
Internal Analysis:Strengths and Weaknesses
Internal analysis, along with the external analysis ofthe companys environment, gives managers the
information to choose the strategies and businessmodel to attain a sustained competitive advantage.
StrengthsAssetsthat boost
profitability
WeaknessesLiabilities that
depress profitability
-
8/12/2019 Hill 8e Basic Ch03
5/23
Copyright Houghton Mifflin Company. All rights reserved. 3 | 5
Competitive Advantage
Competitive Advantage
A firms profitability is greater than theaverage profitability for all firms in its
industry.SustainedCompetitive Advantage
A firm maintains above average andsuperior profitability and profit growth for anumber of years.
-
8/12/2019 Hill 8e Basic Ch03
6/23
Copyright Houghton Mifflin Company. All rights reserved. 3 | 6
Strategy, Resources,Capabilities, and Competencies
Figure 3.1
-
8/12/2019 Hill 8e Basic Ch03
7/23Copyright Houghton Mifflin Company. All rights reserved. 3 | 7
Competitive Advantage,Value Creation, and Profitability
1. Valueor utilitythe customer gets fromowning the product
2. Pricethat a company charges for itsproducts
3. Costsof creating that product
Consumer surp lusis the excess utility aconsumer captures beyond the price paid
Basic Principle: the more utility that consumersget from a companys products or services, the
more pricing options the company has.
How profitable a company becomesdepends on three basic factors:
-
8/12/2019 Hill 8e Basic Ch03
8/23Copyright Houghton Mifflin Company. All rights reserved. 3 | 8
Value Creation per Unit
Figure 3.2
-
8/12/2019 Hill 8e Basic Ch03
9/23Copyright Houghton Mifflin Company. All rights reserved. 3 | 9
Value Creationand Pricing Options
There is a dynamicrelationship among ut i l i ty,pr ic ing, demand, and costs .
Figure 3.3
-
8/12/2019 Hill 8e Basic Ch03
10/23Copyright Houghton Mifflin Company. All rights reserved. 3 | 10
Comparing Toyotaand General Motors
Superior value creation requires that the gap betweenperceived utility (U)and costs of production (C)be greater than that obtained by competitors.
Figure 3.4
-
8/12/2019 Hill 8e Basic Ch03
11/23Copyright Houghton Mifflin Company. All rights reserved. 3 | 11
The Value Chain
A company is a chain of activities for transforminginputs into outputs that customers valueincluding the primary and support activities.
Figure 3.5
-
8/12/2019 Hill 8e Basic Ch03
12/23Copyright Houghton Mifflin Company. All rights reserved. 3 | 12
Building Blocksof Competitive Advantage
Figure 3.6
-
8/12/2019 Hill 8e Basic Ch03
13/23Copyright Houghton Mifflin Company. All rights reserved. 3 | 13
Efficiency
Measured by the quantity of inputs ittakes to produce a given output:
Efficiency = Outputs / Inputs
Productivity leads to greater efficiencyand lower costs:
Employee productivity
Capital productivitySuperior efficiency helps a company
attain a competitive advantagethrough a lower cost structure.
-
8/12/2019 Hill 8e Basic Ch03
14/23Copyright Houghton Mifflin Company. All rights reserved. 3 | 14
Quality
Superior quality = customer perceptionof greater value in a products attributesForm, features, performance, durability, reliability, style, design
Quality productsare goods and services that are: Reliable and
Differentiated by attributes that customersperceive to have higher value
A perception of quality allows a firm todifferentiate its products in the eyes of itscustomers.
-
8/12/2019 Hill 8e Basic Ch03
15/23Copyright Houghton Mifflin Company. All rights reserved. 3 | 15
A Quality Map for Automobiles
When customersevaluate the quality of aproduct, they commonlymeasure it against two
kinds of attributes:
1. Quality as Excellence
2. Quality as Reliability
Figure 3.7
-
8/12/2019 Hill 8e Basic Ch03
16/23Copyright Houghton Mifflin Company. All rights reserved. 3 | 16
Innovation
Innovationisthe act of creatingnew products or new processes
Product innovation Creates products that customers
perceive as more valuable and Increases the companys pricing options
Process innovation Creates value by lowering production costs
Successful innovation can be a majorsource of competitive advantage
by giving a company something unique.
-
8/12/2019 Hill 8e Basic Ch03
17/23Copyright Houghton Mifflin Company. All rights reserved. 3 | 17
Customer Responsiveness
Enhanced customer responsiveness:Customer response time, design,service, after-sales service and support
Superior responsiveness tocustomers differentiates a companysproducts and services and leads tobrand loyalty and premium pricing.
Identifying and satisfying customersneedsbetter than the competitors do.
-
8/12/2019 Hill 8e Basic Ch03
18/23Copyright Houghton Mifflin Company. All rights reserved. 3 | 18
Analyzing CompetitiveAdvantage and Profitability
Competitive Advantage When a companys profitability is greater than the average of all
other companies in the same industry that compete for the samecustomers
Benchmarking
Comparing company performance against that of competitors andthe companys historic performance
Measures of Profitability
ReturnOnInvestedCapital (ROIC) Net profit Net income after tax
Capital invested Equity + Debt to creditors
Net Profit= Total revenuesTotal costs
=ROIC =
-
8/12/2019 Hill 8e Basic Ch03
19/23
Copyright Houghton Mifflin Company. All rights reserved. 3 | 19
Definitions ofBasic Accounting Terms
Table 3.1
-
8/12/2019 Hill 8e Basic Ch03
20/23
Copyright Houghton Mifflin Company. All rights reserved. 3 | 20
Drivers of Profitability (ROIC)
Figure 3.9
-
8/12/2019 Hill 8e Basic Ch03
21/23
Copyright Houghton Mifflin Company. All rights reserved. 3 | 21
The Durability of CompetitiveAdvantage
1.Barriers to ImitationMaking it difficult to copy a companys distinctivecompetencies
2.Capability of Competitors Strategic comm itment Absorpt ive capaci ty
3.Industry DynamismAb i l ity of an industry to change rapidly
The durabilityof a companys competitive advantage over itscompetitors depends on:
Compet i tors are also seeking to develop dis t inct ivecompetenc ies that wi l l give them a compet i t ive edge.
-
8/12/2019 Hill 8e Basic Ch03
22/23
Copyright Houghton Mifflin Company. All rights reserved. 3 | 22
Why Companies Fail
Inertia Companies find it difficult to change their strategies andstructures
Prior Strategic Commitments Limit a companys ability to imitate and cause competitive
disadvantageThe Icarus Paradox
A company can become so specialized and inner-directedbased on past success that it loses sight of market realities
Categories of rising and falling companies:
Craftsmen Bui lders Pioneers SalespeopleWhen a company loses its competitive advantage,
its profitability falls below that of the industry.It los es the abi l i ty to attract and generate resources.
Prof i t margin s and invested capita l sh rink rapidly.
-
8/12/2019 Hill 8e Basic Ch03
23/23
C i ht H ht Miffli C All i ht d 3 | 23
Avoiding Failure:Sustaining Competitive Advantage
1.Focus on the Building Blocks of CompetitiveAdvantageDevelop dist in ct ive competenc ies and super ior performance in:
Efficiency Quality Innovation Responsiveness to Customers
2. Institute Continuous Improvement andLearning
3.Track Best Practice and Use Benchmarking4.Overcome Inertia
Luck may play a role in success,so always exploit a lucky break - but remember:
The harder I work, the luckier I seem to get.J P Morgan