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SMMC_G1[BS-3] Internal Analysis and Competitive Advantage ([3] Resources…
SMMC_G1[BS-3]
Internal Analysis and Competitive Advantage
[2] Sources of Competitive Advantages
The reason of outperforming competitors
Resources
specific assets which firm owns
Capabilities
which company is good at doing
maybe a combination of resources and activites
Activities
large number
the focus of analysis
firm chooses to undertake and not undertake
the execution of activity will bring effectiveness
link up and exploit
Example: Soccer team
Activities
undertake
the way of dribbling the ball and passing the ball
not undertake
not selfish with the ball
Resources
human capital base, fan base etc
Capabilities
coach, style of playing, absorb pressure in defense
Activities of the firm
challenges of analyzing
way to organize a large set of activities into meaningful subsets
way to illustrate the relationships between subsets and activities
solutions of challenges
value chain
manufacturing firms
primary value added activities
steps from inbound logistics to after-sales service
supported by support activities
related to and must be coordinated with neighboring stages of the value chain
support value added activities
research and development, human resource management, etc
value network
service industry (airlines, consulting, etc)
not arranged in any sequential value chain
maps important sets of activities and its relationships
no two networks should look alike
[4] Sustained Competitive Advantage
potential challenges
threats to rarity
replication
imitation
threats to value creation
non durability
non-relevant
key goal for strategic management
Barriers to imitation & replication
isolating mechanism
complexity
tacit knowledge
resource mobility barriers
property rights
casual ambiguity
VRI framework
whether the resource or capability is
valuable, rare and inimitable
link between a firm's resources or capabilities
durability and relevance
durability
problem
capabilities deteriorate
routines and activities lost
key employees and partners leave
Resources degrade
strengths diminish
solution
maintain your activity system
new hires
retain your people
preserve your resources
Training and managerial intervention
relevance
problem
within a dynamic business environment, the company's existing sources not useful in the future
solutioin
changing their sources of competitive advantage through so-called dynamic capabilities
[3] Resources and Capabilities
capabilities
capacity to perform a particular activity
product development capability
viral marketing capability
repeatedly perform the activity
activity will no be performed in the superlative manner
Apple
capabilities combine and link with resources
brand and reputation
talented marketing managers
uniquely designed retail store and web
viral marketing
embedding of organizational routines and processes
customer-friendly
E = easy-to-use product
Resource
tangible
financial
cash at hand
borrowing capacity
physical
building,machinery and real estate
intangible
relation
customer and client
supplier and distributor and stack-holders
human capital
raw talent and skill of employees
technology
product innovation,prototypes and design
Resources matter most ?
create economic value
Increase customer value
reduce cost in the business
access exclusively
Source of competitive advantage
activity set, resources or capabilities
values criterion
help increase EVA
rarity criterion
exclusive access to create business value
Common roots of heterogeneity
path dependence
managerial foresight
history
luck
Conceptual lens to use
activity
fine grained application
capabilities
grasp of substantive difference
blended approach → more valuable
resource
link to value creation
[0] Overview
Strategic FIT
Strategy must align the firm with its environment
Internal analysis
develop a strategy
create competitive advantage
Key topics
[2] sources of competitive advantage
[1] competitive advantage & firm effects in performance
[4] sustained competitive advantage
[3] Activities,resources, capabilities
[6] Case analysis of Starbucks
[5] Executive Expertise
[5] Executive Expertise
traditional barriers to imitation
provide sustainability
competitive advantage
key sources
sustain
common
constant change and improvement
staying ahead of competition and disruption
innovation
staying relevant to customers
expertise 1
barriers to entry are decreasing
sustainable are difficult
competitive advantage
Analytics
analytical capability
develop different deployment architecture
for reverse analytical models
price risk
the lower the rate
offer lower price
the better we can price risk
Technology
Brand
provide value to consumers
conclusion
question every decision every known answer
cannibalize ourselves
challenge every assumption
expertise 3
financial representatives
key to have strong financial advisers
get strong and capable channels
third rail of their business technology
mainframe cobol based
move
flexible / configurable systems
interact well with customers
acquire consumers
settle claims
build the way correctly
expertise 2
importance
what customers want
figured out channel relationships
understand exact dynamics
play roles well
do more than what we need
explore channel relationships
coopetition
huge competitive advantage
prevailing model
other players adopted for the same
long-run competitive advantage
come from people
correct company's culture
never satisfied with current status quo
innovate
[6] Case analysis of Starbucks
Internal analysis
value chain
sourcing beans, roasting and making coffee
resources and capabilities
sourcing
roasting
brand name
expertise
coffeehouse business
routines
processes
human capital
Competitive Advantages
imitation barriers
legal
brand name and roasting knowledge
Human resource
retain talent
complexity of company's operation
customer orientation and innovation
Group member
國企三 郭儀中 Eva
國企三 姜依伶 Elain
國企三 吳育修 Amy
國企三 葉冬婷 Teresa
國企三 王煒絢 Sharon
國企三 羅修銓 Chuan
Apple
Barriers to imitation & replication
tacit knowledge
things learned by supervision of its senior managers
resource mobility barriers
competitors try to hire away key Apple's employees or suppliers
complexity
Imitators don't get every element of its activity system
property rights
Apple has sought to enforce its smartphone patents against other companies
casual ambiguity
other firms cannot easily reproduce success
four potential challenges
replication
other firms use different product development processes but achieve similar results.
non durability
Apple's reputation and brand image lost, talented employees leave key activities fade
imitation
other firms implement Apple's product development processes and routines
non-relevant
design fashionable / sleek products may become less relevant
[1] Competitive Advantage & Firm Performance
Competitive Advantage
Firm Performance
industry effects
there are durable features of this industry
company effects (major factor)
particular attributes make differences between firms in the same industry
Definition
the company performs better than same industry average competitors
How to define better performance ?
EVA:Economic Value Added
EVA = Value - Cost
it's difficult to measure exactly how much value is being created
accounting profits
return on assets, or return on equity, or return on capital employed
backward-looking data
company's stock market value
NPV:Net Present Value
focus on future cash flows or cash profits
unable to reflect internal assets
ex:human capital, process, knowledge
these approaches to measuring performance have advantages and drawbacks
Sustained competitive advantage
heterogeneity
what are the
attributes
that make firms different in their performance
how can a company acquire or develop these attributes?
sustaining
how can these performance advantages be made durable
( activities & value chains and value networks )
