Transcript Models of Business and Strategic management

Strategy Arc
STRATEGY
Environment
Firm
Search for resources and capabilities that provide the
firm with sustainable competitive advantage
Assumptions
 All firms are alike and all firms are different
 Firms develop unique qualities based on their
history, experiences and strategies
 Success of individual firms depends on how
well firms develop and utilize their skills,
resources, and capabilities to
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create profits (provide value, control costs)
satisfy their stakeholders
create barriers to competitors
Internal Analysis
STRATEGY
Environment
Firm
Internal Analysis has two parts
1. Evaluation of the firms strategy to
determine how well the strategy integrates
the firm with the external environment.
2. Systematic analysis of the skills, resources,
capabilities, and competencies the firm
utilizes to support its strategy
Strategy
STRATEGY
Environment
Firm
 Identify the strategy approach
 Rational v. Emergent
 Low Cost v. Differentiated v. Integrated
 Broad v. Focused
 Evaluate the effectiveness of the strategy
 Financial
 Balanced Scorecard
 Stakeholder
Models of Business
and Strategic
Management
STRATEGY
Environment
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Traditional or IO Model
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Stakeholder Model
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Value Chain Model
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Resource-Based View (RBV)
Firm
IO Model
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Views the firm as an economic actor
responding to market forces
The external environment is the primary
determinant of success
Strategic decisions involve choosing products
and markets
Primary Tools:
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Industry Analysis
Financial Ratios
Stakeholder Model
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Views firm as an extended network of
relationships and dependencies
Key stakeholders determine sustainability
Primary Tools
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Stakeholder Analysis
Financial Ratios
Value Chain Model
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Views firm as a set of linked value creating
activities that transform inputs into outputs
Market determine success
Strategic decisions involve creating superior
value at lowest cost
Primary Tools:
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External Analysis
Value Chain Analysis
Financial Ratios
The Value Chain
General administration
Human resource management
Technology development
Procurement
Inbound
logistics
Operations
Outbound
logistics
Marketing
and sales
Service
Value-Chain Analysis
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Firm is profitable to the extent the revenue it
receives exceeds the total costs involved in
creating its products or services
Value chain analysis involves
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identifying key activities that support the firm’s
strategy
Evaluating the effectiveness of key activities
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Compare the costs and value added of key activities in
the value chain
Benchmarking to compare key activities to competitors
VRIN
Resource Based View
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Views firm as a unique collection of resources
and competencies
Unique characteristics of the firm determine
success
Strategic decisions involve creating and
sustaining competitive advantage through
core competencies
Primary Tools:
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VRIN Analysis
Financial Ratios
Resource Based Model
Firm converts inputs into outputs using
 Resources: the assets available to a firm to develop
and implement value creating strategies
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Tangible: assets the firm uses to create value
 financial, physical, technological, organizational
Intangible: unique routines and practices that are
developed over time
 human, creative, reputation, culture
 Organizational Capabilities: the procedures and
processes the firm has developed to use its resources
effectively to achieve desired ends; the ability to put
resources to productive use
Core Competencies
Competitive advantage is derived from unique
resources and capabilities.
Firms distinguish themselves from competitors
by developing Core Competencies
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The resources of a firm that allow it to differentiate
its products or services from competitors
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Core competencies are the basis for strategy and
competitive advantage
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Core competencies are most effective when they are
based on intangible resources and organizational
capabilities
VRIN Analysis
To be a source of sustainable competitive
advantage, a resource must have four attributes:
• Valuable: Allows the firm to differentiate
products/services and create unique value
• Rare: Competitors do not have access to the
resource
• Inimitable: Competitors cannot easily copy or
reproduce the resource
• Nonsubsitutable: Equivalent resources that may
allow similar strategy are not readily available
VRIN Analysis
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Identify key competencies
Construct a VRIN Table
Competency Valuable
Rare
Inimitable
Non- Sub
Conclusion
Superior
Engineering
Yes
No
No
Yes
Comp. Parity
Automated
Production
Yes
Yes
No
No
Temp. comp. adv.
Integrated
Design
Yes
Yes
Yes
Yes
Sustainable comp. adv.
• Look for combinations of capabilities
• Assess strategic implications for success