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Analyzing CompanysResources &

Competitive Position

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Types of Resources

Relatively easy to identify, and includephysical and financial assets used to

create value for customers

Financial resources Firms cash accounts

Firms capacity to raise equity

Firms borrowing capacity

Physical resources Modern plant and facilities

Favorable manufacturing locations State-of-the-art machinery and

equipment

TangibleResources

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Technological resources

Trade secrets Innovative production processes

Patents, copyrights, trademarks

Organizational resources

Effective strategic planningprocesses

Excellent evaluation and control

systems

Types of Resources

TangibleResources

Relatively easy to identify, andinclude physical and financial assets

used to create value for customers

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Types of Resources

Difficult for competitors (and the firm itself)to account for or imitate, typically

embedded in unique routines and

practices that have evolved over time

Human

Experience and capabilities ofemployees

Trust

Managerial skills

Firm-specific practices and

procedures

TangibleResources

Intangible

Resources

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Types of Resources

Innovation and creativity Technical and scientific skills

Innovation capacities

Reputation Effective strategic planning processes Excellent evaluation and control

systems

TangibleResources

Intangible

Resources

Difficult for competitors (and the firmitself) to account for or imitate,

typically embedded in unique

routines and practices that have

evolved over time

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Types of Resources

Competencies or skills that a firm employsto transform inputs to outputs, and

capacity to combine tangible and

intangible resources to attain desired end

Outstanding customer service

Excellent product developmentcapabilities

Innovativeness of products and services

Ability to hire, motivate, and retain

human capital

TangibleResources

Intangible

Resources

Organizational

Capabilities

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How Resources and CapabilitiesLead to Advantages

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Firm Resources and SustainableCompetitive Advantages

Is the resource or capability

Valuable

Rare

Difficult to imitate

Difficult to substitute

Implications

Neutralize threats and exploitopportunities

Not many firms possess

Physically unique

Path dependency

Causal ambiguity

Social complexity

No equivalent strategicresources or capabilities

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Objectives of SWOT Analysis

To provide a framework to reflect o the

organizational capability to avail opportunities

or to overcome threats presented by the

environment.

It presents the information about external and

internal environment to structured form

whereby key external opportunities

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Analysis of the Companys PresentStrategies

SWOT Analysis

Value Chain Analysis

Benchmarking

Ethical Conduct

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Critical Factors Considered

(1) What factors influence the durability ofcompetitive advantage?

(2)Why do successful companies often losetheir competitive advantage?

(3) How can companies avoid competitivefailure and sustain their competitiveadvantage over time?

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Pattern of SWOT Analysis

High opportunities and high strengths. Supports an aggressive strategy

High opportunities and low strengths.

Turnaround oriented strategy High threats and high strengths.

Supports Diversification strategy

High threats and low strengths.

Supports a Defensive strategy.

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Objectives of SWOT Analysis

To provide a framework to reflect the

organizational capability to avail opportunities

or to overcome threats presented by the

environment.

It presents the information about external and

internal environment to structured form

whereby key external opportunities

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SWOT Analysis

SWOT is an ellipsis for theinternal Strengths and

Weaknesses of a business andenvironmental Opportunities

and Threats facing that

business.

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Meaning:

SWOT analysis is a systematic identification offactors and the strategy that reflects the bestmatch between them.

It is based on the logic that an effectivestrategy maximizes a businesss strengths andopportunities and minimizes its weaknessesand threats.

This simple assumption if accurately appliedhas powerful implications for successfullychoosing and designing an effective study.

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Strengths

A strength is a resource, skill or other advantagerelative to the competitors and the needs of the

markets firm serves or anticipates serving.

A strength is a distinctive competence that gives firm

a comparative advantage in the marketplace.

E.g.

- financial resources

- image

- market leadership

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Weaknesses

A weakness is a limitation or deficiency inresources, skills, and capabilities that seriouslyimpedes effective performance.

Eg: Facilities, financial resources, managementcapabilities, marketing skills, and brand imagecould be sources of weaknesses.

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o Aids in narrowing the choice of alternatives

and selecting a strategy.

o Distinct competence and critical weakness are

identified in relation to key determinants of

success for market segment.

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OpportunitiesAn opportunity is a major favorable situation in thefirms environment.E.g.

- identification of a previously unlookedmarket segment

- changes in competitive or regulatory

circumstances

- technological changes

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ThreatsA threat is a major unfavorable situation in the firmsenvironment. It is a key obstacle to the firms currentand/ or desired future position.

E.g.

- entrance of a new competitor

- slow market growth

- increased bargaining power of key buyers and suppliers

Understanding the key opportunities and threats facinga firm helps manager identify realistic options fromwhich to choose an appropriate strategy.

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Strength, weakness, opportunity and threat

analysis should be undertaken in an integrated

way by combining organizational capability

profile (OCP) and Environmental Threat and Opportunity Profile

(ETOP).

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Value Chain Analysis

The value chain, also known as value chainanalysis, is a concept from business

management that was first described and

popularized by Michael Porterin his 1985

best-seller, Competitive Advantage: Creatingand Sustaining Superior Performance.

A value chain is a chain of activities.
http://en.wikipedia.org/wiki/Michael_Porterhttp://en.wikipedia.org/wiki/1985http://en.wikipedia.org/wiki/1985http://en.wikipedia.org/wiki/Michael_Porter

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The value chain categorizes the generic value-addingactivities of an organization.

The "primary activities" include: inbound logistics,

operations (production), outbound logistics, marketingand sales, and services (maintenance).

The "support activities" include: administrative

infrastructure management, human resourcemanagement, R&D, and procurement.
http://en.wikipedia.org/wiki/Value_theoryhttp://en.wikipedia.org/w/index.php?title=Inbound_logistics&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Outbound_logistics&action=edit&redlink=1http://en.wikipedia.org/wiki/Procurementhttp://en.wikipedia.org/wiki/Procurementhttp://en.wikipedia.org/w/index.php?title=Outbound_logistics&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Inbound_logistics&action=edit&redlink=1http://en.wikipedia.org/wiki/Value_theory

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The concept has been extended beyond individualorganizations. It can apply to whole supply chains anddistribution networks.

Porter terms this larger interconnected system of valuechains the "value system.

Michel Porters - A useful tool for analyzing a firmsstrengths and weaknesses and understanding how theymight translate into competitive advantage ordisadvantage.
http://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Distribution_%28business%29http://en.wikipedia.org/wiki/Distribution_%28business%29http://en.wikipedia.org/wiki/Supply_chain

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The Value Chain

The value chain is a business system concept,which was originally developed by McKinsey andCompany and further developed and clarified byPorter.

This concept captures the idea that a firm is aseries of functions (e.g. R&D, manufacturing,marketing, distribution etc.) and that each of

these can be analyzed to determine ones ownand the competitors strengths and weaknesses

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Main aspects of Value Chain Analysis

Value chain analysis is a powerful tool for managersto identify the key activities within the firm which

form the value chain for that organization, and have

the potential of a sustainable competitive advantage

for a company.

Therein, competitive advantage of an organization

lies in its ability to perform crucial activities along the

value chain better than its competitors.
http://www.coursework4you.co.uk/sprtbus61.htmhttp://www.coursework4you.co.uk/sprtbus61.htm

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General administration

Human resource management

Technology development

Procurement

Inbound

logistics OperationsOutbound

logisticsMarketing

and sales Service

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In order to conduct the value chain analysis, the company is split into

primary and support activities

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Primary value chain activitiesPrimary ActivityDescription Inbound logistics: All those activities concerned with

receiving and storing externally sourced materials Operations: The manufacture of products and

services - the way in which resource inputs (e.g.materials) are converted to outputs (e.g. products)

Outbound logistics: All those activities associatedwith getting finished goods and services to buyers

Marketing and sales Essentially: an informationactivity - informing buyers and consumers aboutproducts and services (benefits, use, price etc.)

Service: All those activities associated withmaintaining product performance after the product hasbeen sold

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Support activities include

Secondary ActivityDescription ProcurementThis concerns how resources are

acquired for a business (e.g. sourcing and negotiatingwith materials suppliers)

Human Resource Management: Those activitiesconcerned with recruiting, developing, motivating andrewarding the workforce of a business

Technology Development: Activities concerned withmanaging information processing and thedevelopment and protection of "knowledge" in abusiness

Infrastructure Concerned with a wide range ofsupport systems and functions such as finance,planning, quality control and general seniormanagement

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Linkages within the ValueChain Although value activities are the building

blocks of competitive advantage, the value

chain is not a collection of independent

activities but a system of interdependentactivities.

Value activities are related by linkages within

the value chain.

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Linkages within the ValueChain Linkages are relationships between the way

one value activity is performed and the cost

or performance of another.

Linkages often reflect tradeoffs amongactivities to achieve the same overall result.

For example a more costly product design,

more stringent materials specifications, orgreater in-process inspection may reduce

service costs.

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Linkages within the ValueChain Linkages may also reflect the need to

coordinate activities. On-time delivery, for

example, may require coordination of

activities in operations and service. The ability to coordinate linkages often

reduces costs or enhances differentiation.

Better coordination, for example can reducethe need for inventory throughout the firm.

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Steps in Value Chain Analysis

Value chain analysis can be broken down into a threesequential steps:

Break down a market/organization into its key activitiesunder each of the major headings in the model.

Assess the potential for adding value via cost advantageor differentiation, or identify current activities where abusiness appears to be at a competitive disadvantage.

Determine strategies built around focusing on activitieswhere competitive advantage can be sustained.

Five step approach to competitor

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Identify the competitors

Identify what they want

Identify their strategy

Identify their strengths & weaknesses/relative

capabilities Predict what they will do.

Five step approach to competitoranalysis

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MERITS

Value Chain Analysis provides a generic framework

to analyze both the behavior of costs as well as the

existing and potential sources of differentiation.

Porter emphasized the importance of regrouping

functions into activities to produce, market, deliver

and support products, to think about relationships

between activities and to link the value chain to theunderstanding of an organization's competitive

position.

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The value chain made clear that an organization

is multifaceted and that its underlying activities

need to be analyzed to understand its overall

competitive position.

The Value Chain model was intended as a

quantitative analysis. It can also be used as a

quick scan to describe the strengths andweaknesses of an organization in qualitative

terms.

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With the Value Chain Analysis, Porter tried to overcome thelimitations of portfolio planning in multidivisional organizations.

The concept of Strategic Business Units stated that businesseswithin a conglomerate should act independently while headquarters

should be responsible only for budgetary decisions to be based on abusiness unit's position in the overall portfolio

Porter used his Value Chain Analysis to identify synergies or sharedactivities between Strategic Business Units and to provide a tool to

focus on the whole rather than on the parts.

DEMERITS

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DEMERITS

The quantitative analysis is time consuming since itoften requires recalibrating the accounting system to

allocate costs to individual activities.

. Porter provided qualitative guidance for a

quantitative exercise. His analysis began with

identifying the relevant activities that lead to

competitive differences and are significant enough

to influence the organizations overall cost base.

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The Value Chain Analysis should be

accompanied with a customer segmentationanalysis to mix the internal and external view.

A feature or product provides the firm with a

differentiating competitive advantage only if

customers are willing to pay for it. Customervalue chains need to be analyzed to

determine where value is created.

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The Value Chain is used to analyze a firm's position inrelation to its direct competitors with the assumption that

rivalry drives profitability. This excludes otherassumptions such as customer bonding in AlexanderHax's delta model.

The Value Chain Analysis was developed to analyzephysical assets in product environments. Other authorsamended the model to accommodate intangible assetsand service organizations

Li it ti f V l Ch i

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Limitations of Value ChainAnalysis

One of the limitations of the value chainmodel is that it describes an industrial

organization which essentially buys rawmaterials and transforms these into physicalproducts.

The limitations of the model include the factthat value for the final customer is the valueonly in its theoretical context and not practicalterms.

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The real value of the product is assessed

when the product reaches the final customer,

and any assessment of that value before thatmoment is only something that is true in

theory.

Despite this limitation, analysts caneffectively use the value chain model to

determine the value to the final customers in

a theoretical way.

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According to Porter, competitive advantage,

and thus higher profits will result either from:

Differentiation of products and selling them

at a premium price, OR

Producing products at a lower price than

competitors

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The two basic types of competitive advantage combined with the scope

of activities for which the firm seeks to achieve these advantages results

in three different types of strategy - cost leadership, differentiation and

focus.

BENCH MARKING

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BENCH MARKING

Benchmarking is the tool that allows a

company to determine whether the manner in

which it performs particular functions and

activities represent industry best practices

when both cost and effectiveness are taken

into account.

It is a point of reference against which

performance is measured and compared.

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In short, bench marking is:

Knowing your position or operation

Knowing the industry leaders or competitors

Incorporating the best practices

Gaining superiority.

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Bench marking helps a company to know:

How materials are purchased?

How products are assembled?

How fast the company can get new product to market?

How the quality control function is performed?

How the customer orders are filled and shipped?

How employees are trained?

How payrolls are processed?

And then making cross company comparisons of the costs of these activities.

B fit f B h ki

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Benefits of Benchmarking

It ensures best practices will be identified, which inturn assures appropriate improvement.

It provides a deeper understanding of theorganisations process.

It stimulates the company to try some thing different.

Identify new technology

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Types of Benchmarking

Internal benchmarking

External benchmarking

Functional benchmarking

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sharing of opinions betweendepartments within the sameorganisation

Internal benchmarking

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External Benchmarking

Comparison with externalorganisations to discover new ideas,methods, products and services.

The gap between internal andexternal practices displays the waywhere to change and if there is any

need to change.

l b h k

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Functional benchmarking

Comparative research to seek world-class excellence by comparing businessperformance not only against

competitors but also against the bestbusinesses operating in differentindustry

Ethical Conduct

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Ethical Conduct

Social Ethical Conduct

Economic Ethical Conduct

Managerial Ethical Conduct


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Business has always been expected to vide

employment for individuals and to meet

consumer needs.

Society also expects firms to help reserve the

environment, to sell safe products to treattheir employees equitably and to be truthful

with their customers in contributing to

education, public health, public hygiene etc.


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Social responsibility refers to the expectations that

business firms should serve both society and

financial interests of the shareholders.

A firms stance on social responsibility can be a

critical factor in making strategic decisions.

They are to be based on Ethical /Moral factors with

a welfare view of all sections of the society.


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An individuals responsibility to make business

decisions that are legal, honest, moral and fair.

Managers involving in bribe keeping aside the Cos

interest and employees interest, suppression of

facts, not transparent in their dealings etc, joining

with competitor and acts of a traitor all causesserious damage to the Organization.

All acts towards Self interest is unethical.

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