Lecture 3 - Chp 5.pptx abu dhabi university

management

1. Chapter 5 Organizational Analysis and Competitive Advantage Strategic Management and Business Policy 15e, Global Edition

2. Learning Objectives (1 of 2) 5-1 Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies 5-2 Understand a company business models and how they can be imitated 5-3 Use value chain to assess the activities of an industry and of an organization 5- 2

3. Learning Objectives (2 of 2) 5-4 Explain why different organizational structures are utilized in business 5-5 Assess a company’s corporate culture and how it might affect a proposed strategy 5-6 Construct an IFAS Table that summarizes internal factors 5- 3

4. A Resource-Based Approach to Organizational Analysis Organizational analysis concerned with identifying and developing an organization’s resources and competencies 5- 4

5. Core and Distinctive Competencies Resources An organization’s assets and are thus the basic building blocks of the organization. tangible: factories, products - intangible: reputation Capabilities Refer to a corporation’s ability to exploit its resources. Consist of business processes and routines that manage the interaction among resources to turn inputs into outputs marketing skill, cooperative relationships 5 -5

6. Examples of Resources and Capabilities Tangible resources and capabilities Examples Financial Ability to generate internal funds Ability to raise external capital Physical Location of plants, offices, and equipment Access to raw materials and distribution channels Technological Possession of patents, trademarks, copyrights, and trade secrets Organizational Formal planning, command, and control systems Integrated management information systems

7. Examples of Resources and Capabilities Intangible resources and capabilities Examples Human Managerial talents Organizational culture Innovation Research and development capabilities Capacities for organizational innovation and change Reputational Perceptions of product quality, durability, and reliability Reputation as a good employer Reputation as a socially responsible corporate citizen Sources: Adapted from (1) J. Barney, 19 91, Firm resources and sustained competitive advantage, Journal of Management , 17: 101; (2) R. Hall, 19 92, The strategic analysis of intangible resources, Strategic Management Journal , 13: 135–144.

8. Core and Distinctive Competencies Core competency a collection of competencies that cross divisional boundaries, is wide-spread throughout the corporation and is something the corporation does exceedingly well Distinctive competency core competencies that are superior to those of the competition 5- 8

9. VRIO Framework of Analysis Valuable: Does it provide customer value and competitive advantage? Rareness: Do no other competitors possess it at the same level? Imitability: Do the competitors have the financial ability to imitate? Organization: Is the firm organized to exploit the resource? https://www.youtube.com/watch?v=ffnOqKniYyc 5- 9

10. Applying the V R I O Framework V aluable and R are If a firm’s resources are: The firm can expect: Not V aluable Competitive Disadvantage V aluable, but Not R are Competitive Parity V aluable and R are Competitive Advantage (at least temporarily)

11. Core and Distinctive Competencies Imitability the rate at which a firm’s underlying resources, capabilities, or core competencies can be duplicated by others 5- 11

12. Imitability The Question of I mitability The temporary competitive advantage of valuable and rare resources can be sustained only if competitors face a cost disadvantage in imitating the resource. Intangible resources are usually more costly to imitate than tangible resources . (Harley-Davidson’s styles may be easily imitated, but its reputation cannot.) 5- 12

13. Imitability If there are high costs of imitation, then the firm may enjoy a period of sustained competitive advantage. A sustained competitive advantage will last only until a duplicate or substitute emerges. If a firm has a competitive advantage, others will attempt to imitate it. ( Razor scooters were a big hit and others quickly imitated them .)

14. Organization complementary assets and social complexity E.g. Think of an efficiency driven firm with an innovative R&D department Imagine Steve Jobs having his ‘Apple’ idea’s in Laos Strategy: Innovation but company punishes people making “mistakes”

15. The V R I O Framework: Is a Resource or Capability… Valuable? Rare? Costly to imitate? Exploited by organization? Competitive implications Firm performance No — — No Competitive disadvantage Below average Yes No — Yes Competitive parity Average Yes Yes No Yes Temporary competitive advantage Above average Yes Yes Yes Yes Sustained competitive advantage Persistently above average Sources: Adapted from (1) J. Barney, 2002, Gaining and Sustaining Competitive Advantage , 2 nd ed. (p.173). Upper Saddle River, NJ: Prentice Hall; (2) R. Hoskisson, M.Hitt, & R.D. Ireland, 2004, Competing for Advantage (p.118), Cincinnati: Cengage Learning.

16. So keep in mind… It is not necessarily the Patent as such that is the resource or better a capability that provides a sustained competitive advantage. But the innovativeness of the firm! Starbucks … think of the coffee, the service, the music, the location…. So, maybe the ability to create the ambience package is the capability that makes the company successful ( causal ambiguity ).

17. 5- 17 Value chain a linked set of value-creating activities that begin with basic raw materials coming from suppliers moving on to a series of value-added activities involved in producing and marketing a product or service, and ending with distributors getting the final goods into the hands of the ultimate consumer. Value-Chain Analysis (Next Class) Figure 5-1: Typical Value Chain for a Manufactured Product

18. Industry Value Chain Analysis Value chain segments include: Upstream Downstream Center of gravity the part of the chain that is most important to the company and the point where its core competencies lie 5- 18

19. 5- 19 Figure 5-2: A Corporation’s Value Chain

20. Corporate Value Chain Analysis Primary Activities Inbound logistics Operations Outbound logistics Support Activities Procurement Technology development Human resource management Firm infrastructure 5- 20

21. Corporate Value Chain Analysis Examine each product line’s value chain in terms of the various activities involved in producing the product or service Examine the linkages within each product line’s value chain Examine the potential synergies among the value chains of different product lines or business units Example: https://www.youtube.com/watch?v=SI5lYaZaUlg 5- 21

22. Basic Organizational Structures (1 of 2) 5- 22 Simple Functional Divisional Strategic business units Conglomerate

23. 5- 23 Figure 5-3: Basic Organizational Structures (2 of 2)

24. Culture (1 of 2) Corporate culture the collection of beliefs, expectations, and values learned and shared by a corporation’s members and transmitted from one generation of employees to another 5- 24

25. Culture (2 of 2) Cultural intensity the degree to which members of a unit accept the norms, values and other cultural content associated with the unit shows the culture’s depth Cultural integration the extent of which units throughout the organization share a common culture culture’s breadth 5- 25

26. Functions of Corporate Culture Conveys a sense of identity for employees Generates employee commitment Adds to the stability of the organization as a social system Serves as a frame of reference for employees to understand organizational activities and as a guide for behavior 5- 26

27. Strategic Marketing Issues Market position refers to the selection of specific areas for marketing concentration and can be expressed regarding market, product, and geographic locations. https://www.youtube.com/watch?v=23CDFiXH-2k Marketing Strategy https://www.youtube.com/watch?v=bilOOPuAvTY Marketing mix the particular combination of key variables under a corporation’s control that can be used to affect demand and to gain competitive advantage https://www.youtube.com/watch?v=M8nC4dgKB9g Critics: https://www.youtube.com/watch?v=wX0SGMrZpOg 5- 27

28. 5- 28 Table 5-1: Marketing Mix Variables https://www.youtube.com/watch?v=53gC1hGm5wY

29. 5- 29 Product life cycle a graph showing time plotted against the sales of a product as it moves from introduction through growth and maturity to decline. Product Life Cycle (1 of 2)

30. 5- 30 Figure 5-4: Product Life Cycle (2 of 2)

31. Brand and Corporate Reputation (1 of 2) Brand a name given to a company’s product which identifies that item in the mind of the consumer Corporate brand a type of brand in which the company’s name serves as the brand 5- 31

32. Brand and Corporate Reputation (2 of 2) Corporate reputation a widely held perception of a company by the general public Consists of two attributes : Stakeholders’ perceptions of quality Corporation’s prominence in the minds of stakeholders 5- 32

33. Strategic Financial Issues Financial leverage ratio of total debt to total assets describes how debt is used to increase earnings available to common shareholders Capital budgeting analyzing and ranking of possible investments in fixed assets regarding additional outlays and receipts that will result from each investment hurdle rate 5- 33

34. Strategic Research and Development Issues R&D intensity spending on R&D as a percentage of sales revenue principal means of gaining market share in global competition Technology transfer the process of taking new technology from the laboratory to the marketplace 5- 34

35. R&D Mix Basic R&D focuses on theoretical problems Product R&D concentrates on marketing and is concerned with product or product packaging improvements Engineering R&D concerned with engineering, concentrating on quality control, and the development of design specifications and improved production equipment 5- 35

36. Increasing Use of Teams (1 of 2) Autonomous (self-managing) a group of people work together without a supervisor to plan, coordinate and evaluate their work Cross-functional work teams various disciplines are involved in a project from the beginning Concurrent engineering specialists work side-by-side and compare notes constantly to design cost-effective products with features customers want 5- 36

37. Increasing Use of Teams (2 of 2) Virtual teams groups of geographically and/or organizationally dispersed co-workers that are assembled using a combination of telecommunications and information technologies to accomplish an organizational task 5- 37

38. Five Trends Driving Virtual Teams Flatter organizational structures Turbulent environments Increased employee autonomy Higher knowledge requirements Increasing globalization 5- 38

39. Quality of Work Life and Human Diversity (1 of 2) Quality of work life includes improvements in: Introducing participative problem solving Restructuring work Introducing innovative reward systems Improving the work environment 5- 39

40. Quality of Work Life and Human Diversity (2 of 2) Human diversity the mix in the workplace of people from different races, cultures and backgrounds human resources may be a key to competitive advantage 5- 40

41. Strategic Information Systems/Technology Issues (1 of 2) Information systems/technology contributions to performance: Automation of back office processes Automation of individual tasks Enhancement of key business functions Do you think that this allow organizations to develop a competitive advantage (Why and Why not?) 5- 41

42. Strategic Information Systems/Technology Issues (2 of 2) Supply chain management the forming of networks for sourcing raw materials, manufacturing products or creating services, storing and distributing the goods, and delivering them to customers and consumers. 5- 42