4-1 analyzing a company’s resources and competitive position 44 chapter screen graphics created...
TRANSCRIPT
4-1
Analyzing a Analyzing a Company’s Resources Company’s Resources
and Competitive Positionand Competitive Position
Analyzing a Analyzing a Company’s Resources Company’s Resources
and Competitive Positionand Competitive Position
4444Chapter
Screen graphics created by:Jana F. Kuzmicki, Ph.D.
Troy State University-Florida and Western Region
4-2
Chapter RoadmapChapter RoadmapChapter RoadmapChapter Roadmap
Question 1: How Well Is the Company’s Present Strategy Working?
Question 2: What Are the Company’s Resource Strengths and Weaknesses and Its External Opportunities and Threats?
Question 3: Are the Company’s Prices and Costs Competitive?
Question 4: Is the Company Competitively Stronger or Weaker than Key Rivals?
Question 5: What Strategic Issues and Problems Merit Front-Burner Managerial Attention?
4-3
Fig. 4.1: Identifying the Fig. 4.1: Identifying the Components of a Single-Business Components of a Single-Business
Company’s StrategyCompany’s Strategy
Fig. 4.1: Identifying the Fig. 4.1: Identifying the Components of a Single-Business Components of a Single-Business
Company’s StrategyCompany’s Strategy
4-4
Q #1: How Well Is the Q #1: How Well Is the Company’s Present Strategy Company’s Present Strategy
Working?Working?
Q #1: How Well Is the Q #1: How Well Is the Company’s Present Strategy Company’s Present Strategy
Working?Working?
Identify competitive approach Low-cost leadership Differentiation Focus on a particular market niche
Determine competitive scope Geographic market coverage Operating stages in industry’s production/distribution chain
Examine recent strategic moves Identify functional strategies
Key Issues
4-5
Approaches to Assess How Approaches to Assess How Well the Present Strategy Is Well the Present Strategy Is
WorkingWorking
Approaches to Assess How Approaches to Assess How Well the Present Strategy Is Well the Present Strategy Is
WorkingWorking 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?
4-6
Key Indicators of How WellKey Indicators of How Wellthe Strategy Is Workingthe Strategy Is Working
Key Indicators of How WellKey Indicators of How Wellthe Strategy Is Workingthe Strategy Is Working
Trend in sales and market share Acquiring and/or retaining customers Trend in profit margins Trend in net profits, ROI, and EVA Overall financial strength and credit ranking 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.
4-7
S W O TS W O T represents the first letter in SS trengths
WW eaknesses
OO pportunities
TT hreats
For a company’s strategy to be well-conceived, it must be Matched to its resource strengths and weaknesses
Aimed at capturing its best market opportunities and erecting defenses against external threats to its well-being
S W
O T
Q #2: What Are the Company’s Q #2: What Are the Company’s Strengths, Weaknesses, Strengths, Weaknesses,
Opportunities and Threats ? Opportunities and Threats ?
4-8
Identifying Resource Identifying Resource StrengthsStrengths
and Competitive Capabilitiesand Competitive Capabilities
Identifying Resource Identifying Resource StrengthsStrengths
and Competitive Capabilitiesand Competitive Capabilities 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
Resource strengths and competitivecapabilities are competitive assets!
4-9
Competencies vs. Core Competencies vs. Core Competencies vs. Distinctive Competencies vs. Distinctive
CompetenciesCompetencies
Competencies vs. Core Competencies vs. Core Competencies vs. Distinctive Competencies vs. Distinctive
CompetenciesCompetencies 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-performedinternal activity central (not peripheral or incidental)to a company’s competitiveness and profitability
A distinctive competence is a competitively valuable activity a company performs better than its rivals
4-10
A competence becomes a core competence when the well-performed activity is central to a company’s competitiveness and profitability
Often, a core competence results from collaboration among different parts of a company
Typically, core competencies reside in a company’s people, not in assets on a balance sheet
A core competence gives a company apotentially valuable competitive capabilityand represents a definite competitive asset
Core Competencies -- ACore Competencies -- AValuable Company Valuable Company
ResourceResource
Core Competencies -- ACore Competencies -- AValuable Company Valuable Company
ResourceResource
4-11
Distinctive Competence -- ADistinctive Competence -- ACompetitively Superior Competitively Superior
ResourceResource
Distinctive Competence -- ADistinctive Competence -- ACompetitively Superior Competitively Superior
ResourceResource 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
# 1
4-12
To qualify as competitively valuable or to be the basis for sustainable competitive advantage, a “resource” must pass 4 tests:
1. Is the resource hard to copy?
2. Does the resource have staying power – is it durable?
3. Is the resource really competitively superior?
4. Can the resource be trumped by the different capabilities of rivals?
Determining the CompetitiveDetermining the CompetitiveValue of a Company Value of a Company
ResourceResource
Determining the CompetitiveDetermining the CompetitiveValue of a Company Value of a Company
ResourceResource
4-13
4-14
4-15
Opportunities most relevant to acompany are those offering
Good match with its financial andorganizational resource capabilities
Best prospects for profitable long-term growth
Potential for competitive advantage
Identifying a Company’sIdentifying a Company’sMarket OpportunitiesMarket Opportunities
Identifying a Company’sIdentifying a Company’sMarket OpportunitiesMarket Opportunities
4-16
Identifying External Identifying External ThreatsThreats
Identifying External Identifying External ThreatsThreats
Emergence of cheaper/better technologies Introduction of better products by rivals Entry of lower-cost foreign competitors Onerous regulations Rise in interest rates Potential of a hostile takeover Unfavorable demographic shifts Adverse shifts in foreign exchange rates Political upheaval in a country
4-17
Fig. 4.2: The Three StepsFig. 4.2: The Three Stepsof SWOT Analysisof SWOT Analysis
4-18
Q #3: Are the Company’sQ #3: Are the Company’sPrices and Costs Prices and Costs
Competitive?Competitive?
Q #3: Are the Company’sQ #3: Are the Company’sPrices and Costs Prices and Costs
Competitive?Competitive? Assessing whether a firm’s costs are competitive with
those of rivals is a crucial part of company analysis
Key analytical tools
Value chain analysis
Benchmarking
4-19
The Concept of aThe Concept of aCompany Value ChainCompany Value Chain
The Concept of aThe Concept of aCompany Value ChainCompany Value Chain
A company’s business consists of all activities undertaken in designing, producing, marketing, delivering, and supporting its product or service
A company’s 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 ofthe value for customers is created
Support activities – facilitateperformance of the primary activities
4-20
Fig. 4.3: RepresentativeFig. 4.3: RepresentativeCompany Value ChainCompany Value Chain
Fig. 4.3: RepresentativeFig. 4.3: RepresentativeCompany Value ChainCompany Value Chain
4-21
Fig. 4.4: Representative Fig. 4.4: Representative Value Chain for an Entire Value Chain for an Entire
IndustryIndustry
4-22
4-23
Benchmarking Costs ofBenchmarking Costs ofKey Value Chain ActivitiesKey Value Chain Activities
Benchmarking Costs ofBenchmarking Costs ofKey Value Chain ActivitiesKey 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
4-24
Table 4.3: Options for Attacking Cost Table 4.3: Options for Attacking Cost Disadvantages Associated with Supply Chain Disadvantages Associated with Supply Chain
Activities or Forward Channel AlliesActivities or Forward Channel Allies
Table 4.3: Options for Attacking Cost Table 4.3: Options for Attacking Cost Disadvantages Associated with Supply Chain Disadvantages Associated with Supply Chain
Activities or Forward Channel AlliesActivities or Forward Channel Allies
4-25
Fig. 4.5: Translating Performance of Fig. 4.5: Translating Performance of Value Chain Activities into Competitive Value Chain Activities into Competitive
Advantage Advantage
4-26
Q. #4: Is the Company Q. #4: Is the Company Stronger or Weaker than Stronger or Weaker than
Key Rivals?Key Rivals?
Q. #4: Is the Company Q. #4: Is the Company Stronger or Weaker than Stronger or Weaker than
Key Rivals?Key Rivals? Overall competitive position involves
answering two questions
How does a company rank relativeto competitors on each importantfactor that determines market success?
Does a company have a netcompetitive advantage or disadvantagevis-à-vis major competitors?
4-27
Assessing a Company’s Assessing a Company’s Competitive Strength vs. Key Competitive Strength vs. Key
RivalsRivals
Assessing a Company’s Assessing a Company’s Competitive Strength vs. Key Competitive Strength vs. Key
RivalsRivals1. List industry key success factors and other relevant
measures of competitive strength2. Rate firm and key rivals on each factor using rating scale
of 1 to 10 (1 = very weak; 5 = average; 10 = very strong)
3. Decide whether to use a weighted or unweighted rating system (a weighted system is superior because chosen strength measures are unlikely to be equally important)
4. Sum individual ratings to get an overall measure of competitive strength for each rival
5. Based on overall strength ratings, determine overall competitive position of firm
4-28
4-29
4-30
What Strategic IssuesWhat Strategic IssuesMerit Managerial Merit Managerial
Attention?Attention?
What Strategic IssuesWhat Strategic IssuesMerit Managerial Merit Managerial
Attention?Attention? Based on results of both industry and competitive
analysis and an evaluation of a company’s competitiveness, what items should beon a company’s “worry list”?
Requires thinking strategically about Pluses and minuses in the industry
and competitive situation Company’s resource strengths and weaknesses and
attractiveness of its competitive position
A “good” strategy must address “what to do”about each and every strategic issue!
4-31
Identifying the Strategic Identifying the Strategic IssuesIssues
Identifying the Strategic Identifying the Strategic IssuesIssues
How to stave off market challenges from new foreign competitors?
How to combat price discounting of rivals? How to reduce a company’s high costs? How to sustain a company’s present growth
in light of slowing buyer demand? Whether to expand a company’s product line? Whether to acquire a rival firm? Whether to expand into foreign markets rapidly or cautiously? What to do about aging demographics of a company’s
customer base?