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2 4–2 1.Learn how to assess how well a company’s strategy is working. 2.Understand why a company’s resources and capabilities are central to its strategic approach and how to evaluate their potential for giving the company a competitive edge over rivals. 3.Discover how to assess the company’s strengths and weaknesses in light of market opportunities and external threats. 4.Grasp how a company’s value chain activities can affect the company’s cost structure and customer value proposition. 5.Understand how a comprehensive evaluation of a company’s competitive situation can assist managers in making critical decisions about their next strategic moves.

3 EVALUATING A FIRM’S INTERNAL SITUATION 1.How well is the firm’s present strategy working? 2.What are the firm’s competitively important resources and capabilities? 3.Is the firm able to take advantage of market opportunities and overcome external threats to its external well-being? 4.Are the firm’s prices and costs competitive with those of key rivals, and does it have an appealing customer value proposition? 5.Is the firm competitively stronger or weaker than key rivals? 6.What strategic issues and problems merit front-burner managerial attention? 4–3

4 QUESTION 1: HOW WELL IS THE FIRM’S PRESENT STRATEGY WORKING?  Best indicators of a well-conceived, well-executed strategy: ● The firm is achieving its stated financial and strategic objectives. ● The firm is an above-average industry performer. 4–4

5 FIGURE 4.1 Identifying the Components of a Single-Business Company’s Strategy 4–5 p. 56

6 SPECIFIC INDICATORS OF STRATEGIC SUCCESS  Growth in firm’s sales and market share  Acquisition and retention of customers  Strengthening image and reputation with customers  Increasing profit margins, net profits and ROI  Growing financial strength and credit rating  Leadership in factors relevant to market\industry success  Continuing improvement in key measures of operating performance 4–6

7 Key Financial Ratios TABLE 4.1 4–7 Read Carefully Text pp. 57 to 60 - For Quiz

8 Key Financial Ratios TABLE 4.1 4–8 Read Carefully Text pp. 57 to 60 - For Quiz

9 Key Financial Ratios TABLE 4.1 4–9 Read Carefully Text pp. 57 to 60 - For Quiz

10 Key Financial Ratios TABLE 4.1 4–10 Read Carefully Text pp. 57 to 60 - For Quiz

11 QUESTION 2: WHAT ARE THE FIRM’S COMPETITIVELY IMPORTANT RESOURCES AND CAPABILITIES?  Competitive Assets ● Are the firm’s resources and capabilities. ● Are the determinants of its competitiveness and ability to succeed in the marketplace. ● Are what a firm’s strategy depends on to develop sustainable competitive advantage over its rivals. 4–11

12 IDENTIFYING THE COMPANY’S RESOURCES AND CAPABILITIES  A Resource ● Is a productive input or competitive asset that is owned or controlled by a firm (e.g., a fleet of oil tankers).  A Capability ● Is the capacity of a firm to perform some activity proficiently (e.g., superior skills in marketing). 4–12

13 Types of Company Resources TABLE 4.2 4–13

14 QUESTION 3: IS THE COMPANY ABLE TO SEIZE MARKET OPPORTUNITIES AND NULLIFY EXTERNAL THREATS?  SWOT Analysis ● Is a powerful tool for sizing up a firm’s:  Internal strengths (the basis for strategy)  Internal weaknesses (deficient capabilities)  Market opportunities (strategic objectives)  External threats (strategic defenses) 4–14

15 IDENTIFYING A COMPANY’S INTERNAL STRENGTHS  A Competence ● Is an activity that a firm has learned to perform with proficiency—a capability.  A Core Competence ● Is a proficiently performed internal activity that is central to a firm’s strategy and competitiveness.  A Distinctive Competence ● Is a competitively valuable activity that a firm performs better than its rivals. 4–15

16 IDENTIFYING A FIRM’S WEAKNESSES AND COMPETITIVE DEFICIENCIES  A Weakness (Competitive Deficiency) ● Is something a firm lacks or does poorly (in comparison to others) or a condition that puts it at a competitive disadvantage in the marketplace.  Types of Weaknesses: ● Inferior skills, expertise, or intellectual capital ● Deficiencies in physical, organizational, or intangible assets ● Missing or competitively inferior capabilities in key areas 4–16

17 IDENTIFYING A COMPANY’S MARKET OPPORTUNITIES  Characteristics of Market Opportunities: ● An absolute “must pursue” market  Represents much potential but is hidden in “fog of the future.” ● A marginally interesting market  Presents high risk and questionable profit potential. ● An unsuitable\mismatched market  Is best avoided as the firm’s strengths are not matched to market factors. 4–17

18 IDENTIFYING THE THREATS TO A FIRM’S FUTURE PROFITABILITY  Types of Threats: ● Normal course-of-business threats ● Sudden-death (survival) threats  Considering Threats: ● Identify the threats to the firm’s future prospects. ● Evaluate what strategic actions can be taken to neutralize or lessen their impact. 4–18

19 TABLE 4.3 What to Look for in Identifying a Firm’s Strengths, Weaknesses, Opportunities, and Threats 4–19

20 TABLE 4.3 What to Look for in Identifying a Firm’s Strengths, Weaknesses, Opportunities, and Threats (cont’d) 4–20

21 THE CONCEPT OF A COMPANY VALUE CHAIN  The Value Chain ● Identifies the primary internal activities that create and deliver customer value and the requisite related support activities. ● Permits a deep look at the firm’s cost structure and ability to offer low prices. ● Reveals the emphasis that a firm places on activities that enhance differentiation and support higher prices. 4–21

22 A Representative Company Value Chain FIGURE 4.3 4–22

23 A Representative Value Chain System FIGURE 4.4 4–23

24 ILLUSTRATION CAPSULE 4.1 The Value Chain for KP MacLane, a producer of Polo Shirts 4–24

25 Inside Your iPhone. New York Times July 5, 2010 20100706-iphone-graphic.html?ref=technology iPhone Produces $360 profit for Apple Foxconn

26 Labor Cost Comparison Auto Worker ♦US autoworker with benefits $54/hr ♦South Korean worker $22/hr ♦Mexican worker $10/hr ♦Some Chinese workers $3/hr Source: Washington Post 5/11/09

27 QUESTION 5: IS THE FIRM COMPETITIVELY STRONGER OR WEAKER THAN KEY RIVALS?  Assessing the firm’s overall competitive strength: ● How does the firm rank relative to competitors on each of the important factors that determine market success? ● Does the firm have a net competitive advantage or disadvantage versus major competitors? 4–27

28 ♦ ♦Key Success Factors ● ● Are the strategy elements, product and service attributes, operational approaches, resources, and competitive capabilities that are necessary for competitive success by any and all firms in an industry. ● ● Vary from industry to industry, and over time within the same industry, as drivers of change and competitive conditions change. From Chapter 3:

29 Identification of Key Success Factors 1. 1.What product attributes and service features strongly affect buyers when choosing between the competing brands of sellers? 2. 2.What resources and competitive capabilities are required for a firm to execute a successful strategy in the marketplace? 3. 3.What shortcomings will put a firm at a significant competitive disadvantage? From Chapter 3:

30 Examples of “KEY SUCCESS FACTORS” - KSFs

31 THE COMPETITIVE STRENGTH ASSESSMENT PROCESS Step 1 Make a list of the industry’s key success factors and measures of competitive strength or weakness (6 to 10 measures usually suffice). Step 2 Assign a weight to each competitive strength measure based on its perceived importance. Step 3 Rate the firm and its rivals on each competitive strength measure and multiply by each measure by its corresponding weight. 4–31

32 A Representative Weighted Competitive Strength Assessment TABLE 4.4 4–32

33 4–33 FORD CEOs – 1993 to present Alan Mulally: September 5, 2006 to present. Executive Chairman William Clay Ford, Jr.: September 5, 2006 to present. William Clay Ford, Jr.: October 30, 2001 to September 5, 2006 Jacques Nasser: January 1, 1999 - 2001 Alex Trotman: November 1993 - December 31, 1998 Ford acquired the British sports car maker Aston Martin in 1989, later selling it on March 12, 2007, and bought Volvo Cars of Sweden in 1999, selling it to Zhejiang Geely Holding Group in 2010. In November 2008 it reduced its 33.4% controlling interest in Mazda of Japan, to a 13.4% non-controlling interest. Ford reduced their stake further to just 3%, citing the reduction of ownership would allow greater flexibility to pursue growth in emerging markets. Ford and Mazda remain strategic partners through joint ventures and exchanges of technological information. It shares an American joint venture plant in Flat Rock, Michigan called Auto Alliance with Mazda. Ford sold the United Kingdom-based Jaguar and Land Rover companies and brands to Tata Motors of India in March 2008. Not in text!


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