IIDS Lect 2_ Part 4 (Internal perspective on strategy formulation (A…
IIDS Lect 2_ Part 4
Internal perspective on strategy formulation
Resource-based view of strategy
: Internal strategic factors Like
resources, capabilities and core competencies
strongly drive competitive advantage
see appendix slide 48/62
The company’s collective knowledge about how to coordinate diverse production skills and technologies.
( = combination of resources and capabilities) need to fulfill the following criteria:
: Must enable a firm to exploit an opportunity.
: Available for only a small number of competitors.
Very expensive to obtain for a competitor.
No substitute available.
Firm‘s organization must enable exploitation of resources and capabilities.
Value chain analysis
: Competitive advantage resides in the value chain. Strategy is manifested in how activities in the value chain are configured and linked together.
value chains and examples see appendix slide 50-
"Mini-Maxi" Minimise weaknesses by taking advantage of opportunities.
Opportunities - ST-strategies
"Maxi-Mini” Use strengths to minimize threats.
Strengths - SO-Strategies
"Maxi-Maxi” Use strengths to maximize opportunities
Threats - WT-strategies
"Mini-Mini"Minimize weaknesses and avoid threats.
See appendix slide 54-56
4. Force: The threat of substitutes
A substitute performs the same or a similar function as an industry’s product by a different means.
threat of substitutes is high, industry profitability suffers.
The threat of a substitute is high if it offers an attractive price-performance trade-off to the industry’s product.
5. Force: Rivalry among existing competitors
Rivalry among existing competitors takes many familiar forms, including price discounting, new product introductions, advertising campaigns, and service improvements.
The intensity of rivalry is greatest if:
– there are numerous competitors equal in size and power
– exit barriers are high
– rivals are highly committed to the business, especially if they have goals that go beyond economic performance in the particular industry
– firms cannot read each other’s signals well because of lack of familiarity with one another
– Price competition is most liable to occur if:
products or services of rivals are nearly identical
fixed costs are high
capacity must be expanded in large increments to be efficient (economies of scale)
Porter's five forces
Porter‘s Five Forces: Discount furniture market see appendix slide 46-47/62