Presentation on theme: "Analyzing a Company’s Resources and Competitive Position"— Presentation transcript:
1 Analyzing a Company’s Resources and Competitive Position
2 Outline Sizing Up a Company’s Resource Strengths and Weaknesses Assessing a Company’s Competitive StrengthIdentifying the Strategic Issues that Merit Managerial Attention
3 The Key Questions1. How well is the company’s present strategy working?2. What are the company’s resource strengths and weaknesses and its external opportunities and threats?3. Are the company’s pricing strategy competitive?4. How competitive is the company vis-à-vis its rivals?5. What strategic issues merit managerial attention?
4 Evaluating How Well the Company’s Present Strategy Is Working Start by identifying the company’s present strategyWhat is the company’s basic competitive approach -Low-cost leadership?Differentiation?Market segmentation?What geographic area does the company compete?What recent strategic moves has the company madeWhat functional strategies is the company using
5 Identifying the Components of a Single-Business Company’s Strategy
6 Approaches to Assess How Well the Present Strategy Is Working Quantitative assessment – Is the strategy producing good results?Is company achieving its financial and strategic objectives?Qualitative assessment –Is the strategy complete (in the sense of covering all the bases)?Are the various pieces of the strategy internally consistent and mutually supportive (as opposed to being in conflict with each other)?Is there sound rationale for the strategy?
7 Key Indicators of How Well the Strategy Is Working Market shareAccount managementProfit marginsROIShare priceImproving/eroding image and reputationTechnology
8 What Are the Company’s Strengths, Weaknesses, Opportunities and Threats ? S W O T represents the first letter inS trengthsW eaknessesO pportunitiesT hreats
9 Identifying Resource Strengths and Competitive Capabilities A strength is something a firm does well or an attribute that enhances its competitivenessKnow-howPhysical assetsHuman capitalIntangible assetsStrong strategic alliances or partnershipsResource strengths and competitive capabilities are competitive assets!
10 Competencies vs. Core Competencies vs. Distinctive Competencies A competence is an activity that a company performs with real proficiency—it is usually the product of organizational learning and experienceA core competence is a well-performed internal activity central to a company’s strategy, competitiveness, and profitabilityA distinctive competence is a competitively valuable activity a company performs better than its rivals
11 Company Competencies and Capabilities Stem from skills, expertise, and cross-functional collaborationAre usually the product of deliberate efforts to develop expertise and competitive prowessSelecting people with requisite skills and know-howUpgrading or expanding individual abilitiesBuilding competitively valuable intellectual capital
12 Core Competencies -- A Valuable Company Resource A competence becomes a core competence when an activity that a company performs particularly well is central to its strategy, competitiveness, and profitabilityTypically, a core competenceResults from collaboration among different parts of a company—it grows out of cross-functional know-how and expertise rather than skills/expertise that resides within a single department or operating unitIs intellectual capital and resides in a company’s people, not as assets on the balance sheetGives a company a potentially valuable competitive capability and is thus a competitive asset
14 Determining the Competitive Value of a Company Resource To be the basis for sustainable competitive advantage, a “resource” must possess the following: :1. Is the resource hard for rivals to copy?2. Does the resource have staying power – is it durable?3. Does it actually outclass what rivals have and provide a meaningful edge in attracting and/or pleasing customers?4. Can the resource be trumped by the different capabilities of rivals?
17 Identifying a Company’s Market Opportunities Opportunities most relevant to a company are those offeringGood match with its financial and organizational resource capabilitiesBest prospects for profitable long-term growthPotential for competitive advantage
18 Identifying External Threats Slow market growthEmergence of cheaper/better technologiesIntroduction of better products by rivalsEntry of lower-cost foreign competitorsOnerous regulationsPotential of a hostile takeoverUnfavorable demographic shiftsAdverse shifts in foreign exchange ratesAttractive substitute products
19 Role of SWOT Analysis in Crafting a Better Strategy The most important part of S W O T analysis is using the 4 lists of strengths, weaknesses, opportunities, and threatsTo draw conclusions about a company’s overall situation andActing on the conclusions toBetter match a company’s strategy to its resource strengths and market opportunitiesCorrect the important weaknessesDefend against external threats
21 Concept of a Company Value Chain A company’s business consists of all activities undertaken in designing, producing, marketing, delivering, and supporting its product or serviceThis linked set of activities that are performed internally create value for the customer (the “value” of all the activities is reflected in the price that buyers pay for the product or service—hence the term value chain)A company’s value chain consists of two types of activitiesPrimary activities – where most of the value for customers is createdSupport activities – facilitate performance of the primary activities
23 The Value Chain System for an Entire Industry Accurately determining a company’s cost competitiveness involves comparing costs all along the industry’s entire value chainSuppliers’ value chains are relevant becauseCosts, performance features, and quality of inputs provided by suppliers influence a firm’s own costs and product performanceForward channel allies’ value chains are relevant becauseCosts and margins are part of price paid by ultimate end-userActivities performed affect end-user satisfaction
24 A Representative Value Chain for an Entire Industry
25 Example of Industry Value Chain Home Appliance IndustryParts and components manufactureAssemblyWholesale distributionRetail sales
26 Example of Industry Value Chain Soft Drink IndustryProcessing of basic ingredientsSyrup manufactureBottling and can fillingWholesale distributionAdvertisingRetailing
27 Developing Data to Measure a Company’s Cost Competitiveness After identifying key value chain activities, the next step involves breaking down departmental cost accounting data into costs of performing specific activitiesAppropriate degree of disaggregation depends onEconomics of activitiesValue of comparing narrowly defined versus broadly defined activitiesGuideline – Develop separate cost estimates for activitiesHaving different economicsRepresenting a significant or growing proportion of costs
28 Activity-Based Costing: Key Tool in Analyzing Costs Determining whether a company’s costs are in line with those of rivals requiresMeasuring how a company’s costs compare with those of rivals activity-by-activityRequires having accounting data to measure cost of each value chain activityActivity-based costing entailsDefining expense categories according to specific activities performed andAssigning costs to the activity responsible for creating the cost
29 Benchmarking: A Tool for Comparing Costs of Key Value Chain Activities Benchmarking involves gathering the data needed to make cross-company comparisons ofhow certain activities are performedcosts associated with these activitiesBenchmarking can involve cross-company comparisons ofSupply chain activitiesMaterials purchasing and materials costsSystems for paying suppliersManagement of inventoriesGetting new products to marketQuality controlFilling and shipping of customer ordersTraining of employeesProcessing of payrolls
30 Objectives of Benchmarking Identify “best practices” in performing each activity in the value chainLearn the methods, techniques, and approaches used by other firms toLower costsAchieve better resultsUnderstand the “best practices”Take action to improve company’s cost competitiveness and methods of operation by implementing best practices
31 Good Value Chain Management Is the Key to Being Cost Competitive A company’s cost competitiveness depends on how well the company manages its value chain relative to how well its competitors manage their value chainsWhen a company discovers its costs are out-of-line, the high-cost activities can exist in any of three areas in the industry value chain1. Suppliers’ activities2. Company’s own internal activities3. Forward channel activitiesActivities,Costs, &Margins ofForwardChannel AlliesInternallyPerformedMarginsSuppliersBuyer/UserValueChains
32 Determining Whether a Company Is Competitively Stronger or Weaker than Key Rivals Evaluating the strength of a company’s overall competitive position involves answering two questionsHow does a company rank relative to its key rivals on each important factor that determines market success?Does the company have a net competitive advantage or disadvantage vis-à-vis its major competitors?
33 A Sampling of Possible Strategic Issues 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?How to stave off market challenges from new foreign competitors?What to do about aging demographics of a company’s customer base?