Management 6721: Chapter 4

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Management 6721 Chapter 4

• Analyzing a Companys Resources and Competitive
  Position

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Assessing the Companys Present Strategy

• Identify competitive approach
• Low-cost leadership
• Differentiation
• Focus on a particular market niche
• Determine competitive scope
• Geographic market coverage
• Operating stages in industrys production/distribu
  tion chain
• Examine recent strategic moves
• Identify functional strategies

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Approaches to Assess How Well the Present
Strategy Is Working

• Qualitative assessment What is the strategy?
• Completeness
• Internal consistency
• Rationale
• Relevance

• Quantitative assessment What are the results?
• Is company achieving its financial and strategic
  objectives?
• Is company an above-average industry performer?

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Key Indicators of How Well the Strategy Is
Working

• Trend in sales and market share
• Acquiring and/or retaining customers
• Trend in profit margins
• Overall financial strength
• Credit ranking (rating)
• Trend in net profits, ROI, and EVA
• Efforts at continuous improvement activities
• Trend in stock price and stockholder value
• Image and reputation with customers
• Leadership role(s) Technology, quality,
  innovation, e-commerce, etc.

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SWOT Analysis A Companys Strengths,
Weaknesses, Opportunities and Threats

• S W O T
• S trengths
• W eaknesses
• O pportunities
• T hreats
• For a companys strategy to be well-conceived, it
  must be
• Matched to its resource strengths and weaknesses
• Aimed at capturing its best market opportunities
  and minimizing the effect of external threats

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Resource Strengths and Competitive
Capabilities are Competitive Assets

• A strength is something a firm does well or an
  attribute that enhances its competitiveness
• Valuable competencies or know-how
• Valuable physical assets
• Valuable human assets
• Valuable organizational assets
• Valuable intangible assets
• Important competitive capabilities
• An attribute that places a company in a position
  of market advantage
• Alliances or cooperative ventures with partners

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Competencies vs. Core Competencies vs.
Distinctive Competencies

• A competence is the product of organizational
  learning and experience and represents real
  proficiency in performing an internal activity
• A core competence is a well-performed internal
  activity central (not peripheral or incidental)
  to a companys competitiveness and profitability
• A distinctive competence is a competitively
  valuable activity a company performs better than
  its rivals

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Distinctive Competence -- ACompetitively
Superior Resource

• A distinctive competence is a competitively
  significant activity that a company performs
  better than its competitors
• A distinctive competence
• Represents a competitively valuable capability
  rivals do not have
• Presents attractive potential for being a
  cornerstone of strategy
• Can provide a competitive edge in the marketplace
  because it represents a competitively superior
  resource strength

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Assessing a Companys Costs Competitiveness

• Assessing whether a firms costs are competitive
  with those of rivals is a crucial part of company
  analysis
• Key analytical tools
• Value chain analysis
• Benchmarking

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The Concept of a Company Value Chain

• A companys business consists of all activities
  undertaken in designing, producing, marketing,
  delivering, and supporting its product or service
  
• A companys value chain consists of a linked set
  of value-creating activities performed internally
  
• The value chain contains two types of activities
• Primary activities where most of the value for
  customers is created
• Support activities facilitate performance of
  the primary activities

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Representative Company Value Chain (Fig. 4.3)
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Benchmarking Costs of Key Value Chain Activities

• Focuses on cross-company comparisons of how
  certain activities are performed and costs
  associated with these activities
• Purchase of materials
• Payment of suppliers
• Management of inventories
• Getting new products to market
• Performance of quality control
• Filling and shipping of customer orders
• Training of employees
• Processing of payrolls

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Assessing a Companys Competitive Position

• Overall competitive (Rivalry) position involves
  answering two questions
• How does a company rank relative to competitors
  on each important factor that determines market
  success?
• Does a company have a net competitive advantage
  or disadvantage vis-à-vis major competitors
  (rivals)?

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Key Strategic Issues

• ?Challenges from
• Globalization
• Competition (Rivalry)
• Market Changes
• Pricing decisions v. productive costs/efficiency
• Buyer-Supplier Relationships
• Research Development