1. Chapter 5 Santiago Ibarreche © S. Ibarreche 2015 1

2. Social Competitive Internal Economics Technology Demography and Culture Governance Ecology Interaction of Factors Industry Characteristics Competitors External Stakeholders Industry Structure Level of rivalry Threat of entry Suppliers Buyers Substitution Interactions Core Competencies Sustainable Competitive Advantages Resources Value Chain and Logistics Marketing and Sales Technology Infrastructure Management Leadership Figure 5-1 Elements of the Different Level of Environment © S. Ibarreche 2015 2

3.  Sanchez (2001) “Competence is the ability of an organization to sustain coordinated deployments of resources and capabilities in ways that help the organization achieve its goals”  Hamel and Prahalad (1990) 1. It makes significant contribution to perceived customer benefits of the end product or service. 2. It is difficult for competitors to imitate. 3. It provides potential access to wide variety of markets. © S. Ibarreche 2015 3

4.  Barney and Hesterly (2010)  Questions of VRIO: 1. The Question of Value: Does the resource enable a firm to exploit an environmental opportunity, and/or neutralize an environmental threat? 2. The Question of Rarity: In a resource currently controlled by a small number of competing firms? 3. The Question of Imitability: Do firms without a resource face a cost disadvantage in developing or obtaining it? 4. The Question of Organization: Are a firm’s other policies and procedures organized to support the exploitation of its valuable, rare, and costly-t- imitate resources? © S. Ibarreche 2015 4

5.  Identification of a source of Advantage  Definition of Advantage potential  Enclosing and Bundling with other resources  Analysis of trends and potential Sustainability, and  Synthesis in Strengths and Weaknesses © S. Ibarreche 2015 5

6.  Value  Sources of Value in different Cultures  Rarity  What is unique in the environment  Imitability  How easy can it be imitated (Copyright and Intellectual Property)  Organization  We add value through the organization.  Examples in different cultures © S. Ibarreche 2015 6

7.  “Donkeys prefer garbage to gold”  Where  When  How  Who  Why  What for © S. Ibarreche 2015 7

8.  The firm this is a unique bundle of resources that determines which external circumstances can be treated as opportunities and which as threats  Resources by themselves are not advantageous unless they are considered in a context of time, space, and other resources © S. Ibarreche 2015 8

9.  Trends Include:  Long Term Trend  Cycle  Seasonality  Normal Variance  Noise  Measures:  Central Tendency  Dispersion  Skewness  Kurtosis © S. Ibarreche 2015 9

10.  Resources (Tangible and Intangible) also considered Core Competencies and Dynamic Capabilities can be classified as:  Strengths when they help the organization to achieve its objectives and provide a platform to take advantage of opportunities and/or lessen or neutralize the effect of threats  Weaknesses when they affect performance negatively and may increase the effect of threats or prevent the organization to take advantage of opportunities. © S. Ibarreche 2015 10

11.  Value Chain and Logistics  Marketing and Sales  Technology  Infrastructure  Management  Leadership © S. Ibarreche 2015 11

12.  Value chain is “the set of extended business functions, systems, and processes that sense and adaptively translate outside-in actual demand of the customer into trade-offs that profitably fulfill perfect orders to meet customer demand. The value translation and shaping of actual demand through innovation, product development, supplier, supply, and external partner operations and processes is the immediate goal.” Barret (2007) © S. Ibarreche 2015 12

13.  Tangible Assets:  Facilities for reception of items; storage, exhibition, distribution, examination and definition of quality, delivery of products and services, and service units for customer attention and product maintenance and warranty  Equipment for the same functions mentioned above  Capacity  Inventories and other current assets such as account receivables to support transactions in the value chain or logistic functions that are part of the working capital  Human Resources in charge of operations  Financial assets and support for operations © S. Ibarreche 2015 13

14.  Intangible Assets Include:  Supplier selection  Quality management within the supply chain  Materials management  Value Analysis  Policies and procedures  Level of experience in management of operations  Process technology  Product scope  Quality of suppliers  Operating cycle time  Capacity utilization  Image with customers regarding logistics (on time deliveries, precision, completeness)  Vertical integration of processes  Relations with unions and other stakeholders © S. Ibarreche 2015 14

15.  Five Basic “Ps”:  Product,  Price,  Place  Promotion, an the Most Important  PEOPLE © S. Ibarreche 2015 15

16.  Tangible Resource include:  Number and size of sales offices and locations  Internet sites  Human resources  Key customers  Inventories  Brands  Development facilities © S. Ibarreche 2015 16

17.  Intangible Resources include:  Market definition and Analysis  Product Strategy  Product Development  Distribution strategy  Promotion strategy  Market organization  Competitiveness in price  Scope of product line  Brand loyalty  Productivity of sales force  Business Image © S. Ibarreche 2015 17

18.  How We Do What We Do  Tangible Resources Include:  Facilities for Research and Development  Financial resources devoted to Research and development  Patents, Trademarks, and intellectual property  Human resources in research and development and process development © S. Ibarreche 2015 18

19.  Intangible Resources Include:  Technology selection process  Investment decisions  Form for obtaining technology  Technology interrelationship  Technology service and maintenance  Organization of technologies  Quality assessment  Certifications © S. Ibarreche 2015 19

20.  Tangible Assets Include:  Cash and cash equivalents  Bank Accounts  Facilities  Computing Equipment  Software  Licenses  Communication equipment © S. Ibarreche 2015 20

21.  Intangible Resources Include:  Organizational structure  Capital budgeting  Debt management  Equity management  Cash flow management  Risk management  Tax management  Relationship with financing organizations  Relationship with stockholders  Information systems  Operational policies and procedures  Support systems  Management participation  Other participation systems © S. Ibarreche 2015 21

22.  All activities that produce the achievement of the organization’s mission in an efficient manner  “Everything is a function of everything else”  Tangible Resources Include:  People in the management team  Key employees  Facilities  Financial resources  Equipment  Software © S. Ibarreche 2015 22

23.  Intangible Assets Include:  Planning systems  Internal controls  Decision making processes  Experience  Tacit knowledge  Policies  Procedures  Definition of goals  Implementation of strategies  Labor relations  Organizational fit with mission  Evaluation  Feedback systems © S. Ibarreche 2015 23

24.  Possible reason for failure: 1. Look for Recipes: “It all depends on the color of the glass you’re looking trough” “Adapt before you adopt” 2. Implementation: timing of the decision, creation and development of resources, and selling of the purpose so that those implementing it own it 3. Lack of follow up and corrective actions © S. Ibarreche 2015 24

25.  Human Elements of the Leadership Process:  Leaders  Team members  Followers © S. Ibarreche 2015 25

26.  Intangible Elements Include:  Core values  Knowledge and dissemination of values  Shared vision  Leader personality treats  Experience  Knowledge of the process  Knowledge and understanding of the operation  Degree of interaction between leaders and team members  Training and development activities for leaders  Training and development activities for team members  Empowerment mechanisms  Evaluation of leadership effectiveness  Fit between leader and team  Evaluation and reward systems  Recognition of accomplishments  Celebratory events © S. Ibarreche 2015 26