Review of Resource-base Strategy

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Review of Resource-base Strategy

• Looks at internal resources and capabilities of a
  company, such as

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Review of Resource-base Strategy

• Sustained Competitive Advantage
• A company that possess and exploits resources
  capabilities that are
• Valuable
• Rare
• Costly to Imitate (Inimitable)

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Review of Resource-base Strategy

• Tangible Resources
• Dow Chemicals research laboratory and facilities
  
• Intels semiconductor fabrication facilities
• ATTs network of wire, cable, and satellites

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Review of Resource-base Strategy

• Intangible Resources
• Toyotas well-known and trusted brand names,
• New Seasons good reputation,
• Intels knowledgeable and creative workforce,
• Sun Microsystems unifying corporate culture,
• Subways international experience with different
  countrys regulations on franchising,
• Norm Thompson Outfitters visionary leader with
  strong motivation and communications skills,

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Review of Resource-base Strategy

• Capabilities
• Emerge over time through complex interaction
  between and among tangible and intangible
  resources.
• Become stronger and more valuable strategically
  through repetition and practice.
• Skills and knowledge of firms employees,
  including functional expertise (human capital)

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Review of Resource-base Strategy

• Capabilities
• Toyotas efficient distribution systems -
  Just-in-time (JIT) delivery, strong supplier
  relationships, and well-trained inventory
  specialists.
• L.L. Beans customer segmentation procedures and
  systems - database management systems, effective
  market research efforts and strong supplier
  relationships.
• Nikes new product development procedures
  creative workforce and innovation-driven culture,
  strong leadership, and effective market research.

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Review of Resource-base Strategy

• Do these resources and capabilities lead to
• Competitive Advantage?
• Valuable Do a firms resources help it
• deal with external threats?
• For example, do Toyotas manufacturing and
  distribution systems and brand equity help it
  deal with the external threat associated with
  industry overcapacity and competitive pricing
  pressures?
• capitalize on external opportunities?
• For example, do Nikes product development
  procedures, brand equity and subcontracted
  assembly, help it deal with the external threat
  of the entry of many niche competitors in the
  footwear industry?

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Review of Resource-base Strategy

• Do these resources and capabilities lead to
• Competitive Advantage?
• Rare Do only a few companies have these
  resources and capabilities?
• Is Toyota the only company in the industry with
  this unique combination of manufacturing and
  distribution systems and brand equity?
• Is Nike the only company with the combination of
  new product development procedures, brand equity
  and subcontracted manufacturing?

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Review of Resource-base Strategy

• Do these resources and capabilities lead to
• Competitive Advantage?
• Inimitability Will firms that do not have the
  resources and capabilities have to spend a lot of
  time and money to acquire or develop them?
• If Ford Motor Company doesnt have the same
  manufacturing and distribution systems and brand
  equity as Toyota, how much time and money will
  it need to spend to develop them?

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Review of Resource-base Strategy
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Review of Diversification and Integration
Strategies

• Limited Diversification
• Single Business
• 95 or more of corporate revenue come from a
  single business unit
• Wm. Wrigley Jr. Co. - China

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Review of Diversification and Integration
Strategies

• Limited Diversification
• Between 70-95 of corporate revenues comes from a
  single business unit.
• Hershey Foods Corporation - Korea

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Review of Diversification and Integration
Strategies

• Related Diversification
• Related-Diversified Firm Less than 70 percent of
  firm revenues comes from a single business unit,
  and different business units share numerous links
  and common attributes.
• Proctor Gamble - Taiwan

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Review of Diversification and Integration
Strategies

• Related Linked Diversification
• Less than 70 percent of firm revenues comes from
  a single business unit, and different business
  units share only a few links and common
  attributes or different links and common
  attributes.
• General Electric Research Center in Bangalore

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Review of Diversification and Integration
Strategies

• Vertical and Horizontal Integration
• of Value Chain Activities
• Vertical Integration
• Coordinating upstream activities (those closer to
  the raw materials) with downstream activities
  (those closer to the customer)
• Using Acquisitions, Strategic Alliances, and/or
  Internal Development
• Starbucks Vertical International Expansion
  through strong alliances with growers (upstream),
  processors (upstream), and retailers (downstream)

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Review of Diversification and Integration
Strategies

• Vertical and Horizontal Integration
• of Value Chain Activities
• Horizontal Integration
• Coordinating across the same or similar value
  chain activities.
• Acquisition, Strategic Alliance, and/or Internal
  Development
• Pfizers acquisition of Pharmacia in 2003 moved
  it into new human pharmaceutical products and
  additional international markets.

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Global Expansion Framework(Gupta Govindarajan,
2001)
Market Growth Rate
Control in Foreign Market
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Global Expansion Framework(Gupta Govindarajan,
2001)
Required Adaptation
Strategic Importance
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Global Expansion Framework(Gupta Govindarajan,
2001)

• Interesting
• Intuitive
• Overly simplistic
• Static
• Only a little helpful in strategic
  decision-making
• Strategy is DYNAMICthats why the next framework
  is much better

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Capability-based Global Expansion(Tallman
Fladmoe-Lindquist, 2002)

• Focuses on firms ability to
• build,
• protect, and
• exploit
• a bundle of unique capabilities.

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Capability-based Global Expansion(Tallman
Fladmoe-Lindquist, 2002)

• Two Types of resource-related capabilities
• Business-level Component Capabilities
• Bundles of resources that determine competitive
  position of the business unit in the marketplace.
• The Products and Product Lines Product
  Development Process Brand Image Manufacturing
  Efficiency Quality Control Financials- Cash on
  Hand, Cash Flow, Market Cap Creativity
  Corporate Culture Leadership Existing Alliances
  and Joint Ventures Distribution Channels
  International Experience Ability to Gain New and
  Manage New Knowledge...
• Honda Bundle for Autos Engine Technology,
  Corporate Culture, Leadership, Manufacturing
  Efficiency, International Experience

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Capability-based Global Expansion(Tallman
Fladmoe-Lindquist, 2002)

• Two Types of resource-related capabilities
• Corporate-Level Architecture Capabilities
• Firm-wide routines that
• facilitate the bundling of the resources within
  business units,
• and
• find ways to achieve synergies across business
  units by bundling resources of different
  business units.
• IBM Corporate Level Architecture Integrating New
  Knowledge into Widely Varying Client
  Relationships through Globally Dispersed and
  Specialized RD Activities.

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Capability-based Global Expansion(Tallman
Fladmoe-Lindquist, 2002)

• Capability Leverage
• Use existing capabilities to gain advantage (and
  profits)
• Usually based on business-level component
  capabilities built in home market.
• Capability Building
• Discovering and innovating new business- and
  corporate-level capabilities

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Capability-based Global Expansion(Tallman
Fladmoe-Lindquist, 2002)

• Capability Leverage
• Coca-Cola Example
• Past little adaptation to packaging, brand,
  advertising, manufacturing, etc.
• Expansion Strategy Business-level capability
  based
• Current localizing packaging, distribution,
  advertising, manufacturing.
• Expansion Strategy Both (Localized) Business and
  (Global) Architecture-level capabilities based
• (Why didnt the authors note this???)

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Capability-based Global Expansion(Tallman
Fladmoe-Lindquist, 2002)
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Resource-based Strategy and International
Expansion

• Global Expansion
• Product(Not adaptation, but capabilities that
  create and deliver the product.)
• How and where is it developed?
• How and where is it made?
• How and to whom is it sold?

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Resource-based Strategy and International
Expansion

• Global Expansion
• Product (Not adaptation, but capabilities that
  create and deliver the product.)
• HP Printers
• Hewlett-Packard developed all of its printer
  technology in Santa Clara and a few other U.S.
  facilities.
• The manufacture of printers was being
  increasingly outsourced to Asian subcontractors,
  particularly Singapore.
• The printers were then distributed worldwide.
• Pfizer
• Primarily internal development of new drugs, with
  some alliances with small biotech firms. Largest
  global players in consumer and animal healthcare
  products.
• Most drugs made in-house, in regional facilities
  in major industrialized markets.
• The drugs sold worldwide.

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Resource-based Strategy and International
Expansion

• Global Expansion
• Market (Matching market demand with Firms
  capabilities)
• Where are the current and emerging growth markets
  for the current product portfolio?
• How do the firms current resources and
  capabilities allow it to effectively compete in
  these markets?

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Resource-based Strategy and International
Expansion

• Global Expansion
• Market Capability Leverage (Existing
  Capabilities)
• HP Printers
• Strong growth in Asia-Pacific and European
  Markets.
• Singapore operations developing superior product
  development expertise located close to key
  markets major transshipment location
• HP brand name well recognized and respected in
  Asian and European markets.
• Market Capability Building (New Capabilities)
• Pfizer Pharmaceuticals
• High pressures to have a full pipeline of new
  drugs
• Growth markets in oncology, depression, and
  specialty niches.
• High growth in industrialized and emerging
  markets.
• Largest pharmaceutical company after acquisition
  of Warner-Lambert in 2001.
• Strong stock price and balance sheet.
• Insufficient new drugs in pipeline.

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Resource-based Strategy and International
Expansion

• Global Expansion
• Mode of Entry
• How should the firm expand its operations to meet
  the growth in key markets?
• Degree of Control How much control should the
  firm have over its expanded operations?

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Resource-based Strategy and International
Expansion

• Mode Capability Leverage (Existing Capabilities)
• HP Printers
• Rather than acquire competitor or supplier or
  work through an alliance, HP designated its
  Singapore operations as the world wide center for
  printer technology development.
• Maintain 100 ownership because of uniqueness of
  corporate culture and proprietary nature of
  technology ability to development new
  technologies in printers is a primary capability
  expansion based off of this capability.
• Mode Capability Building (New Capabilities)
• Pfizer
• With consolidation in industry over past 5 years
  (Pharmacia acquired UpJohn and Monsanto Pfizer
  acquired Warner-Lambert), presence of some
  struggling competitors,
• Corporate culture more important than original
  thought,
• Need to control as well as enhance RD
  capabilities,
• Acquisition of Pharmacia provided new market
  access, additions to existing product portfolio
  (e.g., oncology, epilepsy), and much stronger
  pipeline of upcoming drugs.

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Resource-based Strategy and International
Expansion

• Global Integration
• How to integrate worldwide activities into a
  single world strategy by managing a network of
  differentiated but interrelated subsidiaries,
  affiliates, alliances, and associations.
• (Well talk more about integration in the
  Managing Mergers Acquisitions class.)

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Resource-based Strategy and International
Expansion

• Taking another look at Midea To be or not to be
  Global?
• Product
• How and where is it developed?
• How and where is it made?
• How and to whom is it sold?
• Market (Capability Leverage/Building)
• Where are the current and emerging growth markets
  for the current product portfolio?
• How do the firms current resources and
  capabilities allow it to effectively compete in
  these markets?
• Mode(Capability Leverage/Building)
• How should the firm expand its operations to meet
  the growth in key markets?
• Degree of Control How much control should the
  firm have over its expanded operations?