Strategy Integrates

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 Success of individual firms depends on the differences – the strength of the unique set of skills,resources and organizational capabilities the firm has developed over time • align with external conditions • • • provide value for the market satisfy their stakeholders create barriers to competitors

Internal Analysis 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 resources, capabilities, and competencies the firm utilizes to support its strategy

Internal Analysis

The objective of the analysis is to 1.

Examine the firm’s    Addresses conditions in the external environment Creates value for the market and profits for the firm Deters competitors business strategy 2.

3.

Identify the firm’s core competencies Evaluate the effectiveness of the core competencies to support strategy and create sustainable competitive advantage

Internal Analysis

External Environment Activities Resources

Strategy

  Identify the strategy approach   Rational v. emergent Low cost leader v. differentiator v. integrated Evaluate the effectiveness of the strategy  Financial   Balanced Scorecard Stakeholder

Models of Business and Strategic Management

 Traditional or IO Model  Stakeholder Model  Value Chain Model  Resource-Based View (RBV)  Guerilla View

IO Model

    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:  Environment Analysis  Financial Ratios

Stakeholder Model

   Views firm as an extended network of relationships and dependencies Key stakeholders determine sustainability Primary Tools  Stakeholder Analysis

Value Chain Model

    Views firm as a set of linked value creating activities that transform inputs into outputs Customers determine success Strategic decisions involve creating superior value at lowest cost Primary Tools:   External Analysis Value Chain Analysis

The Value Chain

General administration Human resource management Technology development Procurement Inbound logistics Operations Outbound logistics Marketing and sales Service

Value-Chain Analysis Value chain analysis involves

  identifying key activities that support the firm’s strategy evaluating the effectiveness of key activities  Compare the costs and value added of key activities in the value chain   Benchmarking to compare key activities to competitors VRIN

Resource Based View

    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:  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  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 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  The resources of a firm that allow it to differentiate it products or services from competitors   Core competencies are the basis for competitive advantage 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: • V aluable: Allows the firm to differentiate products/services and create unique value • R are: Competitors do not have access to the resource • I nimitable: Competitors cannot easily copy or reproduce the resource • N onsubsitutable: Equivalent resources that may allow similar strategy are not readily available

VRIN

Analysis

  Identify key competencies Construct a VRIN Table Competency Valuable Superior Engineering Yes Automated Production Yes Integrated Design Yes Rare No Yes Yes Inimitable No No Yes Non- Sub Conclusion Yes Comp. Parity No Yes Temp. comp. adv.

Sustainable comp. adv.

• Look for combinations of capabilities • Assess strategic implications for success

Guerilla Strategy

Firm Competitor

Internal Resources Market Position Perceived Opportunity Competitive Uncertainty Internal Resources Market Position Perceived Weakness Competitive Action Response Competitive Interaction