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Internal Analysis and Competitive Advantage, Resource 1, Resource 3,…
Internal Analysis and Competitive Advantage
Activities of a firm
Three main conceptual views
Resources
specific assets
Only one firm owns
Examples
1、Well-known brand name
2、Know-how process
3、Real estate
4、Cash
Capabilities
Help the company to achieve its goal
Examples
1、Good customer service
2、Innovative product design
3、Low cost inventory management
Relevant for company's performance
Activities
a matter of choice
To undertake
Not to undertake
Results
1、Profitability of each activity
2、Combination of these activities
3、The synergy that may exploit from these activities
Challenges
Division of activities
1、Where the synergies are generated
2、Where coordination might be unnecessary and costly
Illustration of the relationship between the activities
Solutions
Value chain
Example
1、Raw materials / components →
2、Manufacturing process →
3、Product →
4、Delivery →
5、Customer →
1 more item...
Suitable for
manufacturing industry
Value network
Suitable for
service industry
Resources and capabilities
Resources
Category
Intangible resources
Relational
Example
1、Reputation
2、Relationship with customers & clients
3、Alliance
4、Relationship with suppliers & distributors & stakeholders
Human Capital
Example
1、Raw talent & skills of employees
2、How employees are trained, motivated, and organized
→
to perform in a cohesive and coordinated manner
Technology
Example
1、Product innovation
2、Prototype
3、Know-how processes
4、Organizational routines
Tangible resources
Physical
Example
1、Buildings
2、Machinery
3、Real estate
Financial
Example
1、Cach on hand
2、Borrowing capacity
Problem
Which resources matter the most to a firm?
Answer
The resources that have the greatest potential
To
create
economic value
1、Increase customer value
2、Reduce cost
3、Increase the price cost wedge
The resources that are more difficult for firms
To
own or access exclusively
1、Have something special
2、The competitors don't have
Intangible resources become more important
1、Creating economic value
2、Financial and physical resources are easy to get in the modern market-based economy
Which resources are more valuable and rare?
Capabilities
1、A capability to
perform a particular activity
2、In a
reliable & minimally
satisfactory manner
1、Perform some important activity
2、Be able to repeatedly perform that activity in a consistent way
3、A capability ≠ The activity will be performed in a superlative manner
Case introduction：Apple
Simple to use
Path dependence
Establish the iTunes Store and Apple Store
Have unique internal attributes that others don't
Creating competitive advantage
Grasp of
substantive differentiators
Important to create EVA
Key turning point
Approach internal analysis
Sustained Competitive Advantage
Four Potential Challenges
Imitation and Replication
Other firms will figure out and implement company product development processes and routines
Non-durability or Non-relevant
Threats to the firm's ability to continue to create value
Prevent Four Problems
Casual ambiguity
A companies performance advantages where it comes from
Complexity
Success depends on a very precise combination of these different elements
Tacit knowledge
cannot be easily explained and transferred to another company
Hard to learn by other firms
Property rights
Mostly over intangibles
Trademarks that covered
→ brands
→ logos
→ copyrights over software
Rise the cost
In order to make our rival mimic our competitive advantage
VRI
1、VRI is resource or capability is valuable, rare and inimitable
2、Possess a resource or capability that's both valuable and rare
Durability
1、Internal company strength can continue to diminish over time
2、Preserving your resources
3、Maintaining your activity system
4、Retaining your people and so on
5、Managerial training and intervention can strengthen the system and the ability of the company's activities
Relevance
The biggest one faced by companies today
A dynamic and constantly changing business environment
Be able to change the source of competitive advantage
1、Create economic value and must be scarce
2、Ensure the activities, resources and abilities remain durable and relevant
Case Introduction : StarBucks
Tangible resources
Inventory
1、Vacuum-packed bags
2、Rapid distribution
Intangible resources
Human Capital
Barista training
1、First-hand knowledge of store operations
2、Very low rate of barista turnover relative to other coffeehouses
Relational
Specialty coffee becomes an
affordable luxury
1、Popular culture: TV serial “Friends”
2、Fair trade coffee beans
Technology
Blending of beans from different sources
Estate
1、Rapid expansion of coffeehouses
2、Retail operations
VRI framework
Rare
Yes
Environmental-friendly product and activities
Inimitable
Yes
Tough for competitors to achieve this amount of global expansion
Valuable
Yes
Good service and product
Group Members
Fion
Jerry
Adiyasa Gao
Anna
Levi
Pete
Phoebe
Resource 1
Resource 3
Resource 2
Capability
Activities weave them together