Transcript Chapter 3 Firm Capabilities: Assessing Strengths and Weakness

Chapter 3
Firm Capabilities:
Assessing Strengths
and Weakness
Major Issues
• Value Chain
• Strengths and Weaknesses
• Capability Drivers
Value chain
• A tool that describes all activities that make up
economic performance and capabilities of the firm; is
used to analyze and examine activities that create
value for a firm
•
•
•
•
•
Two areas: primary activities and support activities
Primary activities: those that relate directly to the actual creation,
manufacture, distribution, and sale of the firm’s product
Support activities:those activities that assist the primary activities
Upstream and downstream – either toward (downstream) or away from
(upstream) from the customer
Exhibit 3-1, p. 70
Utility of VC Concept
• Do your firms ever use this term?
– In what context?
– How?
– How do you think it helps?
• With VC you can analyze the effectiveness with which you
perform certain activities; can look at the cost structure; identify
what you might want to outsource or perform in house.
• Allows you to understand more about your firm as a business
system – those parts of the value chain your firm actually
performs
• Good example of VC is for auto industry, ex. 3-3, p. 78
Strengths and Weaknesses
• Strengths – activities a firm performs more efficiently
or more effectively than its rivals
• Weaknesses – activities a firm performs less
efficiently or effectively than its rivals
• What are some of the things your firms consider to be
its S/W? Be honest? By what measures does it
KNOW it is better?
• Here the key is to tell the truth.
Bottom Line Time
• What are the strengths your firm possesses?
• What are the weaknesses your firm possesses?
Capability Drivers
• “enduring competitive strength derives from a
few fundamental ‘capability drivers’ “
• Broad routes to achieving competitive strength
• CDs transcend industries
• Four CD routes:
• First mover, economies of scale, experience effects,
interrelationships between business units
Capability Drivers
• First mover – advantages of being first – patents, licenses,
location, channel access, supply access, reputation – they make
it difficult for others to get in or overcome
• Scale effects – specialization, fixed cost spreading, purchasing
discounts
• Experience effects – from doing it more, longer, etc.
• Interrelationships between business units – resource transfer,
activity sharing
• Remember – all these characteristics or factors allow you to
build strengths and CA
• Which do you have?