 What strategies to pursue? › Strategic resources › Capabilities  Two Principal Strategies: › A. Evaluate current resources and core competencies used for competitive advantage. › B. Identify internal pressures and forces of resistance.

 Physical Assets › i.e. facilities  Financial Strength › i.e. cash flow  Human Resources › i.e. Strong leadership  Organizational Assets › i.e. brand equity

 1. How valuable is a resource?  2. Is this a unique resource or do other companies have similar resources?  3. Is the strategic resource easy to imitate?  4. Is the company positioned to exploit the resource? * Issue: Can a resource be leveraged for competitive advantage?

 Can materially affect company’s competitiveness.  Examples: Airline companies, Telecommunication  “Location, location, location”  Physical Assets not necessary to own. › i.e. outsourcing, leasing, etc.

 There are four types of Financial Ratios › Profitability Ratios › Liquidity Ratios › Leverage Ratios › Activity Ratios

 Gross Profit Margin  Quick Ratio  Debt-to-equity Ratio  Inventory Turnover  Sales – cost of goods sold Sales  Current Assets Current Liabilities  Total Debt Total Assets  Sales Inventory

Cost of goods SalesEarnings Before Sold Minus Interest EBIT Earnings as a % Plus Costs Divided by of Sales Operating Sales Expenses Return Inventories Multiplied by On Asset Plus Accounts ReceivableSales Plus Asset CashCurrent turnover assets Divided by Plus Total Assets Prepaid Plus ExpensesFixed assets

 The right people are a company’s greatest asset  Investing in people pays  FedEx & Motorola

› Organizational Resources:  Knowledge and Intellectual Capital Base  Reputation  Competencies  Processes  Skill Sets  Corporate Culture

 Essential for sustainable competitive advantage  Intellectual Capital  Hard to quantify

 Patents issued in the US have doubled in the last decade  Areas of patentability are expanding  IP protection is crucial in sustaining a competitive advantage  “Strategic Patenting”

 More knowledge = Ability to make better decision  Knowledge only an asset when it is managed properly  Caterpillar management plan

 Knowledge- Implicit vs. Explicit (Tacit)  Xerox repairmen  Caterpillar University

 Physical distance between customers, distributors and manufactures created the need for brands.  Provide a guarantee of reliability and quality.  Build and retain customer loyalty.

 Do not fear public flops  Face your weaknesses  Protect your culture

 Core Competencies is the key element in building long-term strategic advantage.  They are a set of skills or systems that create a uniquely high value for the customers.  Picking the right core competencies for your company is key.

 Organizational Drivers For Strategic Change: › Poor financial performance › New owners/executives › Limited growth with current strategies › Scarcity of critical resources › Internal cultural changes  Resistance to change: › Structural/ organizational rigidities › Strong support for old business beliefs and strategies › Strong culture (Un-open to change) that sticks to traditional values, behaviors, and skills › Counterproductive change momentum

 Beginning characteristics of an organization: › Ambiguous structure, entrepreneur mindset, lack of control  “Entrepreneurial- managerial” transition  Greater company growth brings potential for greater development issues

 7-S model: strategy, structure, systems, shared values, skills, staff, style  If one fails, they all fail  Caterpillar during the recession

 Assess key stakeholders inside and outside organization. › External Stakeholders – Key customers, suppliers, alliances › Internal Stakeholder – CEO, Board of directors, owners  Recognize legitimate rights of firm’s stakeholders › Stockholders, employees, customers, suppliers, general public  General claims reflect specific demands i.e. high wages, pure air, safety, etc.  These claims must be assigned priority, in accordance with emphasis the firm will give them.

 Leverage resources for competitive advantage  Knowledge must be managed  Good branding creates loyalty  Growth leads to the need for strategic change