The Internal Environment Competitive Strategy Combo

8/18/2019 The Internal Environment Competitive Strategy Combo

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The Internal Environment:

Understanding how a Firm’s Resources and Capabilities

Lead to a Competitive Advantage

Agenda

Resource-based View of Strategy

Resources and Capabilities

SWOT Analysis

Value Chain and Cost Analysis


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Compan

!issionand

"b#ectives

E$ternal

EnvironmentMacro

IndustryOperating

Internal

EnvironmentResources

Current Strategy

Costs

%trategic

"ptionsand

Choice

esired! "ossible!


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Resource&based 'iew o( %trateg

'iews the (irm as a uni)ue bundle o( heterogeneous resources and capabilities

%trateg is concerned with matching a (irm’s resources and capabilities to theopportunities that arise in the e$ternal environment *or creating opportunities+,

The -e to pro(itabilit is not doing the same as other (irms. but e$ploiting

di((erences between (irms,


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Resource&based 'iew o( %trateg

Resources are tangible. intangible and human,

E$amples include:

Financial

/hsical

Technolog

Reputation

Culture

%peciali0ed s-ills and -nowledge

Communication patterns

Emploee motivation


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1i((erent Tpes o( Resources

Tangible Assets2Resources: Coca-Cola#s $or%ula

Intangible Assets2Resources: &i'e#s (rand &a%e)*ac' Welch as +,#s for%er C,O) Reputation

"rgani0ational Capabilities: ell Co%puter#s Custo%er Serice)Wal-Mart#s purchasing and inbound logistics) .M#s innoation process


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3ow can one identi( the -e resources

upon which a strateg can be built4


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Competitive Advantage comes (rom:

%carcit o( the Resource

Relevance o( the Resource *5e %uccess Factors+


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Resources and 5%Fs

/6 7’s

8rand !anagement /rogramIndustr 5%Fs

/ "rice Co%petitieness

/ Mar'et Share

/ (rand ,0uity

/ Access to istributionChannels

/ "roductifferentiation

http://www.pg.com/product_card/brand_overview.jhtml?brand=downy&category=Laundry&brandImage=%2Fcontent%2Fimage%2Fbrand_logos%2Fdowny.jpghttp://www.pg.com/product_card/brand_overview.jhtml?brand=ivory&category=Laundry&brandImage=%2Fcontent%2Fimage%2Fbrand_logos%2Fivorysnow.gifhttp://www.pg.com/frameset_fs.jhtml?frameURL=%2Fproducts%2Fpg_products.jhtmlhttp://www.pg.com/product_card/brand_overview.jhtml?brand=era&category=Laundry&brandImage=%2Fcontent%2Fimage%2Fbrand_logos%2Fera.gifhttp://www.pg.com/product_card/brand_overview.jhtml?brand=cheer&category=Laundry&brandImage=%2Fcontent%2Fimage%2Fbrand_logos%2Fcheer.gifhttp://www.pg.com/product_card/brand_overview.jhtml?brand=gain&category=Laundry&brandImage=%2Fcontent%2Fimage%2Fbrand_logos%2Fgain.gifhttp://www.pg.com/product_card/brand_overview.jhtml?brand=tide&category=Laundry&brandImage=%2Fcontent%2Fimage%2Fbrand_logos%2Ftide.jpg


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%ustainable Advantage is based on the (ollowing:

Rare

9ot easil imitated 1physical uni0ueness) path dependency) causal a%biguity) econo%ic deterrence2

9ot easil substitutable

Trans(erabilit

$ir%-specific resources whose ownership cannot be easily transferred

1urabilit13ow 0uic'ly will this resource depreciate! 1Inest%ents in Technology2

Competitive %uperiorit1Re0uires so%e disaggregation2

Appropriabilit

1Who captures the alue that the resource creates! "hysician43ospital Relationships2


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Financial Capital5 Retained ,arnings) Capital fro% ,ntrepreneurs) e0uity holders

/hsical Capital *e$amples+: Co%puter hardware and software technology)

auto%ated warehouses) robots used in production) +eographic 6ocation

1Wal-Mart4operations in rural %ar'ets generate higher returns than %ore co%petitie

urban %ar'ets2

3uman Capital *e$amples+: training) e7perience) 8udg%ent) relationships 1u"ont

inests heaily in training their engineering staffs to be %ore assertie and open to

new technologies2

"rgani0ational Capital *e$amples+: for%al reporting structures) for%al and

infor%al planning syste%s) culture and reputation 1Merc' uses its %anage%ent

reputation to gain access to %anagerial labor %ar'ets) distribution networ's and

custo%er groups92

1urabilit4 Trans(erabilit4 Replicabilit4


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Resource&8ased 'iew and %"T Analsis

%trengths: so%ething the co%pany either possesses or is good

at

doing 1e9g9) assets) s'ills) 'nowledge) partnerships2

ea-nesses: an area of current or potential ulnerability:9 The ;uestion of Value

ation


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% ;uestions

The ;uestion o( 'alue: oes a resource enable a fir% to e7ploit andeniron%ental opportunity or neutrali>e an eniron%ental threat!

The ;uestion o( Rarit: Is a resource currently controlled by only a s%allnu%ber of co%peting fir%s!

The ;uestion o( Imitabilit: o fir%s without a resource face a costdisadantage in obtaining or deeloping it!

The ;uestion o( "rgani0ation: Are a fir%#s other policies and proceduresorgani>ed to support the e7ploitation of its aluable) rare and costly to i%itate

resources!


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hat is value4

hat is meant b value&adding activities4

1o all o( the activities o( a (irm create value4


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'alue Chain: Cost Analsis

/urchased

%uppliesInbound

Logistics

"perations

1istribution

and"utbound

Logistics

%ales

and!ar-eting

%ervice !argin

Technolog: /roduct R61. %stems 1evelopment. 1esign

3uman Resource !anagement and 1evelopment

7eneral Administration: /lanning. Finance. !I%. Legal


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/er(orm proprietar

research and gather

proprietar

in(ormation

Create uni)ue

products

andservices

8uild a

networ- o(

local o((ices

to establish

a local

presence

Use

pro(essional

bro-ers paid

b commission

to deliverpersonal service

and advice to

clients

8ac- o((ice (unctions: clear trades) trac' account balances) distribute

infor%ation and research reports) install and operate ad%inistratie

and syste%s support for bro'ers9

'alue Chain o( Full %ervice 8ro-erages


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Create eb page

and navigation

so(tware<

install servers

/rovide

clients

access to

trading

in(ormationand

account

balances via

the Internet

Technical support and customer service personnel.

automated record -eeping

'alue Chain o( 1iscount 8ro-erages


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Competitive %trategies

Agenda5

7eneric %trategies

6ow cost leadership

ifferentiation

(est Cost

$ocus

7rand %trategiesConcentration

Mar'et eelop%ent

"roduct eelop%ent


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7eneric %trategies

6ow Cost 6eadership

ifferentiation

(est Cost

$ocus


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Low Cost Leadership

The (irm attempts to be the low cost provider o( a product or service,

%ources o( Cost Advantage:

Economies o( %cale *"/ERATI"9%+

Economies o( Learning *learning curve e((ects2improved coordination2

(amiliarit with technolog. etc+ *"/ERATI"9%2R61+

/roduction Techni)ues *E((icient utili0ation o( materials2increasedprecision2automation+ *"/ERATI"9%2AI%+


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Low Cost Leadership

%ources o( Cost Advantage:

/roduct 1esign *1esigns economi0e on materials2design (or

automation+ *"/ERATI"9%2R612E97I9EERI97+

Input Costs *Location advantages2ownership o( inputs2e$ercising

bargaining power2supplier cooperation+ */R"CURE!E9T2

I9TER9ATI"9ALI=ATI"92'ERTICAL I9TE7RATI"9*C&L %TRATE7>+

Capacit Utili0ation *"/ERATI"9%+

!anagerial or "rgani0ational e((icienc *operational e((ectiveness+

*ALL FU9CTI"9AL AREA%+


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?, %elects relativel ine$pensive sites

@, 8uilds onl basic (acilities*no restaurant. no bar+

, Relies on standard architectural designs

B, Uses ine$pensive materials and

low&cost construction techni)ues

, %imple room (urnishings and

decorations

Low Cost%trateg

CompetitiveAdvantage

E$ternal EnvironmentMotel 6

%ources o( Advantage


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1i((erentiation %trateg

hen the (irm attempts to provide something uni)ue that is

valuable to buers beond simpl o((ering a low price,

Firms pursue di((erentiation based on demand or suppl:

1emand involves understanding customers and their needs and

pre(erences,

%uppl involves being aware o( the resources. capabilities. s-ills

and -nowledge that a (irm can leverage to create uniqueness9


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1rivers o( Uni)ueness2%ources o(

Advantage

/roduct (eatures and product per(ormance

Complementar service *deliver. credit. repair+

Intensit o( mar-eting activities *advertising spending. signaling+

Reputation

Technolog embedded in design and manu(acture

;ualit o( purchased inputs


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1rivers o( Uni)ueness2%ources o(

Advantage continued,,

Location *e,g,. retail stores+

1egree o( vertical integration

%-ill and e$perience o( emploees

/rocedures in(luencing the conduct o( each value&adding activit

*e,g,. rigor o( )ualit control. service procedures. (re)uenc o(

visits to a customer+

/roper segmentation


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?, /rime Location with %cenic 'iews

@, Custom Architectural 1esigns

, Fine Restaurants

B, Elegantl appointed lobbies and

bar lounges,

, %wimming pools. e$ercise (acilities

D, Upscale Room Accommodations

, !ultiple 7uest %ervices, Large ell Trained %ta((

1i((erentiation

%trateg

Competitive

Advantage

E$ternal Environment



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Co%bines adantages based on both low cost and differentiation9

The fir% is able to offer what custo%ers perceie as aluable whileat the sa%e ti%e being cost efficient9

(est Cost


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?, Lu$urious. et com(orting

atmosphere *1+@, ell&chosen et limited menu o(

services *LC+

, 3igh )ualit dining *1+

B, Restaurants are pro(it centers *LC+

, Each propert has uni)ue

GpersonalitH*1+D, Low building costs *LC+

, Low costs o( capital *LC+

8est Cost

%trateg

Competitive

Advantage

E$ternal Environment5impton 3otels



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Focus %trateg5 the fir% focuses on a

narrower seg%ent of the industry9

3ow would a (irm select anappropriate segment4

Can a (irm pursue a #ust a G(ocusHstrateg4

E$amples: /apa oe’s 7rocer. "in- "in-. Inc, *roasted pig ears+


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Concentrated 7rowth

Increasing the use o( present products in present mar-ets

:9 Increasing the rate at which present custo%ers use the

product4serice 13ospitals creating wellness progra%s2


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/roduct 1evelopment

1eveloping new products (or present mar-ets

:9 eeloping new product features

The Internal Environment Competitive Strategy Combo

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