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G3_[BS-3]_Internal Analysis and Competitive Advantage (Competitive…
G3_[BS-3]_Internal Analysis and Competitive Advantage
Activities of the Firm
Sources of competitive advantage
Activities
undertake or not
how it executes
how the activities are linked up
Resources
specific assets
well-known brand name
know-how for improving production processes
real estate, cash
Capability
company's performance that it is very good at doing
innovative product design
low cost inventory management
great customer service
Analyzing activities
challenges
How to organize a large set of activities into meaningful subsets
How to illustrate the relationship between activities
solutions
value chain
primary activities
supplier logistics
intermediate production
final production
distribution logistics
marketing & sales
customer service
support activities
research & development
information systems
accounting & finance
human resources
procurement
Activities being performed in a company
manufacturing firms
value network
service industries
airlines, telephone services, financial services, healthcare, consulting
maps important sets of activities and relationships with each other
not arranged in sequential value chain, customized to a company
less generic in the sub categories of activities used and how they are connected
A & C
.
capability
result from a combination of a few resources
capabilities are the capacity of the firm to actually do something, that is to perform some important activity.
Even if having a capability, firm still need to stay alertness
To achieve competitive advantage
Key factors: history of a company, experiences, capability of development, the influence of its founders, path dependence, managerial foresight
The thing that create value in the business, for example, the set of activities, or the resource, or capability
uniqueness & heterogeneity
Results from learning, encoded in organizational routines
Need not a map to a functional area
Entails deploying, combing and linking resource
Resource
tangible resources
financial resource
cash in hand, Borrowing capacity
physical resources
buildings, machinery, and real estate.
Intangible resources
technology
Human capital
relationship
which resource is more important for company?
the one who can increase customer value and/or reduce cost in the business and thus increase the price cost wedge
which resources are more difficult for firms to own or access exclusively
Nowadays, the intangible resource is becoming more and more important
intangibles resource are much more important today for creating economic value
firms have greater access to financial and physical resources in the modern market-based economy.
Example
Reduce the cost and improve the productivity are both important for firm in industry
Ex.resource in secondary industry and technology industry.
Competitive Advantage and Firm Performance
Industry/Company Effects
the factors that drive company performance
to disentangle whether there are durable features of industries or particular attributes of companies
drive company financial performance over the long run
predict nearly 50% of profit performance
predict nearly 80% of the explained differences in firm performance
Southwest Airlines
it has averaged net margins of 5.8%
Southwest’s stock has had cumulative return of 4000% between 1990 and 2014 (the return on the S&P500 index over the same period)
Cannot compare the stock return as the major airline at that time had declared bankruptcy
Soccer
the top two soccer clubs in the world in valuation are Real Madrid and Barcelona
as a league is far behind the Premier League in overall revenues and profits
some businesses do really well even when they are in poorly performing industries
Competitive Advantage
some set of rivals of the firm operating in the same industry
to focus on the industry average competitor, and compare the firm’s performance to this average
the concept of sustained competitive advantage
Better Performance
compare accounting profits
disadvantage: backward looking
company’s stock market value
net present value of a company
(by projecting out future free cash flows)
Economic Value Added (EVA)
the difference between the value generated and costs incurred by the company for the average customer
STARBUCKS
Down-Stream
93% Gains
Delivery
Middle-Stream
6% Gains
Roasters/Tasters
Up-Stream
1% Gains
Farmer/Manor
Machine Suppliers
Workshop/Coffee Lecture
Online Shop
Check-out Free Store(Northern Europe)
Entity Coffee Shop
Analyzing Activities
primary activities
supplier logistics/distribution logistics
their own transport can support them with coffee beans and other goods
intermediate production
coffee bean roaster
final production
culture spreading orientation by coffee products and bakery
marketing & sales
high quality specialty coffee
(brand famous)
Arabica beans around world which focus on specific area
custom roasting which performed art and science
coffee sipping culture
estate orientation
customer service
Member System
Resources
tangible resources
financial resource
cash in hand, Borrowing capacity
physical resources
buildings, machinery, and real estate.
Intangible resources
Coffee Culture
Brand
Capability
Sustained Competitive Advantage
Threat of sustain competitive advantage
threat to the firm's ability to continue to create value, to continue to produce economic value added
non duranility
irrelevant
threat to rarity of firm's internal attribute
imitation
replication
The possible forms of threat
imitation
other firm figures out and implement product development processes and routines
non durability
company's resources degrade
leave of company's key employees
lost company's partner
resources lose rarity
company's capabilities deteriorate
routines and activities fade from its value network
lost of routines and activities
replication
other firm uses different product development processes but achieve similar result
irrelevant
dynamic and constantly changing business environment
core competencies become core rigidities and gets in the way of acquiring or building new relevant competencies
How to deal with threats
imitation and replication
tacit knowledge
make it hard for other companies to learn and acquire the knowledge of firm
resource mobility barriers
prevent other companies from luring away key resources
complexity
individual element can be combined in many diffirent ways, and company's success depends on precise combination of these elements
property right
the property right of creative content and technologies
causal ambiguity
make other companies unclear where exactly a company's performance advantages come from
non durability
try to continuously top up and add to the bucket to replace what is being lost
develop new and rare resources and capabilities
hire new employees can replace lost talents
plug the leaks of company's recources and capabilities
maintain the value and rarity and uniqueness of resources and capabilities
training and managerial intervention can strengthen the firm's activity systems and capabilities
irrelevant
dynamic capabilities
be capable of changing their source of competitive advantage
Executive Expertise
competitive advantage
Scale
CRM systems
Easily to rebuild data
Innovation
Continuously evolve
Channel relationships
coopetition
Financial representative
strong/capable channels
strong financial advisers
Brand
provide value to consumers.
can be long-term competitive advantage
Product perspective
always looked out at competitive field
know what our customers wanted
do more to improve product
never be satisfied
Technology and Analytics
Technology
analytical models
long-term competitive advantage
require having the right people and the right culture in place
Third rail of business technology
mainframe cobol based(precise)
configurable systems(flexible)
interact well with a customer
acquire customers
settle claims
build them correctly
G3 Group members
國企三 翁暐婷 Kristin
國企三 吳翊瑄 Amanda
國企三 蔣明慈 Esther
國企三 張瑋庭 Wei Ting
國企三 李家慧 Stephanie
國企三 吳承樺 Eric
