1. Analyzing a Company’s Resources and Competitive Position

2. Outline Sizing Up a Company’s Resource Strengths and Weaknesses
Assessing a Company’s Competitive Strength
Identifying the Strategic Issues that Merit Managerial Attention

3. The Key Questions
1. How well is the company’s present strategy working?
2. What are the company’s resource strengths and weaknesses and its external opportunities and threats?
3. Are the company’s pricing strategy competitive?
4. How competitive is the company vis-à-vis its rivals?
5. What strategic issues merit managerial attention?

4. Evaluating How Well the Company’s Present Strategy Is Working
Start by identifying the company’s present strategy
What is the company’s basic competitive approach -
Low-cost leadership?
Differentiation?
Market segmentation?
What geographic area does the company compete?
What recent strategic moves has the company made
What functional strategies is the company using

5. Identifying the Components of a Single-Business Company’s Strategy

6. Approaches to Assess How Well the Present Strategy Is Working
Quantitative assessment – Is the strategy producing good results?
Is company achieving its financial and strategic objectives?
Qualitative assessment –
Is the strategy complete (in the sense of covering all the bases)?
Are the various pieces of the strategy internally consistent and mutually supportive (as opposed to being in conflict with each other)?
Is there sound rationale for the strategy?

7. Key Indicators of How Well the Strategy Is Working
Market share
Account management
Profit margins
ROI
Share price
Improving/eroding image and reputation
Technology

8. What Are the Company’s Strengths, Weaknesses, Opportunities and Threats ?
S W O T represents the first letter in
S trengths
W eaknesses
O pportunities
T hreats

9. Identifying Resource Strengths and Competitive Capabilities
A strength is something a firm does well or an attribute that enhances its competitiveness
Know-how
Physical assets
Human capital
Intangible assets
Strong strategic alliances or partnerships
Resource strengths and competitive capabilities are competitive assets!

10. Competencies vs. Core Competencies vs. Distinctive Competencies
A competence is an activity that a company performs with real proficiency—it is usually the product of organizational learning and experience
A core competence is a well-performed internal activity central to a company’s strategy, competitiveness, and profitability
A distinctive competence is a competitively valuable activity a company performs better than its rivals

11. Company Competencies and Capabilities
Stem from skills, expertise, and cross-functional collaboration
Are usually the product of deliberate efforts to develop expertise and competitive prowess
Selecting people with requisite skills and know-how
Upgrading or expanding individual abilities
Building competitively valuable intellectual capital

12. Core Competencies -- A Valuable Company Resource
A competence becomes a core competence when an activity that a company performs particularly well is central to its strategy, competitiveness, and profitability
Typically, a core competence
Results from collaboration among different parts of a company—it grows out of cross-functional know-how and expertise rather than skills/expertise that resides within a single department or operating unit
Is intellectual capital and resides in a company’s people, not as assets on the balance sheet
Gives a company a potentially valuable competitive capability and is thus a competitive asset

13. Examples of Core Competencies
Product innovation
Supply chain management
Product development
After-sales service
Total quality management

14. Determining the Competitive Value of a Company Resource
To be the basis for sustainable competitive advantage, a “resource” must possess the following: :
1. Is the resource hard for rivals to copy?
2. Does the resource have staying power – is it durable?
3. Does it actually outclass what rivals have and provide a meaningful edge in attracting and/or pleasing customers?
4. Can the resource be trumped by the different capabilities of rivals?

17. Identifying a Company’s Market Opportunities
Opportunities most relevant to a company are those offering
Good match with its financial and organizational resource capabilities
Best prospects for profitable long-term growth
Potential for competitive advantage

18. Identifying External Threats
Slow market growth
Emergence of cheaper/better technologies
Introduction of better products by rivals
Entry of lower-cost foreign competitors
Onerous regulations
Potential of a hostile takeover
Unfavorable demographic shifts
Adverse shifts in foreign exchange rates
Attractive substitute products

19. Role of SWOT Analysis in Crafting a Better Strategy
The most important part of S W O T analysis is using the 4 lists of strengths, weaknesses, opportunities, and threats
To draw conclusions about a company’s overall situation and
Acting on the conclusions to
Better match a company’s strategy to its resource strengths and market opportunities
Correct the important weaknesses
Defend against external threats

20. The Three Steps of SWOT Analysis

21. Concept of a Company Value Chain
A company’s business consists of all activities undertaken in designing, producing, marketing, delivering, and supporting its product or service
This linked set of activities that are performed internally create value for the customer (the “value” of all the activities is reflected in the price that buyers pay for the product or service—hence the term value chain)
A company’s value chain consists of two types of activities
Primary activities – where most of the value for customers is created
Support activities – facilitate performance of the primary activities

22. A Representative Company Value Chain

23. The Value Chain System for an Entire Industry
Accurately determining a company’s cost competitiveness involves comparing costs all along the industry’s entire value chain
Suppliers’ value chains are relevant because
Costs, performance features, and quality of inputs provided by suppliers influence a firm’s own costs and product performance
Forward channel allies’ value chains are relevant because
Costs and margins are part of price paid by ultimate end-user
Activities performed affect end-user satisfaction

24. A Representative Value Chain for an Entire Industry

25. Example of Industry Value Chain
Home Appliance Industry
Parts and components manufacture
Assembly
Wholesale distribution
Retail sales

26. Example of Industry Value Chain
Soft Drink Industry
Processing of basic ingredients
Syrup manufacture
Bottling and can filling
Wholesale distribution
Advertising
Retailing

27. Developing Data to Measure a Company’s Cost Competitiveness
After identifying key value chain activities, the next step involves breaking down departmental cost accounting data into costs of performing specific activities
Appropriate degree of disaggregation depends on
Economics of activities
Value of comparing narrowly defined versus broadly defined activities
Guideline – Develop separate cost estimates for activities
Having different economics
Representing a significant or growing proportion of costs

28. Activity-Based Costing: Key Tool in Analyzing Costs
Determining whether a company’s costs are in line with those of rivals requires
Measuring how a company’s costs compare with those of rivals activity-by-activity
Requires having accounting data to measure cost of each value chain activity
Activity-based costing entails
Defining expense categories according to specific activities performed and
Assigning costs to the activity responsible for creating the cost

29. Benchmarking: A Tool for Comparing Costs of Key Value Chain Activities
Benchmarking involves gathering the data needed to make cross-company comparisons of
how certain activities are performed
costs associated with these activities
Benchmarking can involve cross-company comparisons of
Supply chain activities
Materials purchasing and materials costs
Systems for paying suppliers
Management of inventories
Getting new products to market
Quality control
Filling and shipping of customer orders
Training of employees
Processing of payrolls

30. Objectives of Benchmarking
Identify “best practices” in performing each activity in the value chain
Learn the methods, techniques, and approaches used by other firms to
Lower costs
Achieve better results
Understand the “best practices”
Take action to improve company’s cost competitiveness and methods of operation by implementing best practices

31. Good Value Chain Management Is the Key to Being Cost Competitive
A company’s cost competitiveness depends on how well the company manages its value chain relative to how well its competitors manage their value chains
When a company discovers its costs are out-of-line, the high-cost activities can exist in any of three areas in the industry value chain
1. Suppliers’ activities
2. Company’s own internal activities
3. Forward channel activities
Activities,
Costs, &
Margins of
Forward
Channel Allies
Internally
Performed
Margins
Suppliers
Buyer/User
Value
Chains

32. Determining Whether a Company Is Competitively Stronger or Weaker than Key Rivals
Evaluating the strength of a company’s overall competitive position involves answering two questions
How does a company rank relative to its key rivals on each important factor that determines market success?
Does the company have a net competitive advantage or disadvantage vis-à-vis its major competitors?

33. A Sampling of Possible Strategic Issues
How to combat price discounting of rivals?
How to reduce a company’s high costs?
How to sustain a company’s present growth in light of slowing buyer demand?
Whether to expand a company’s product line?
Whether to acquire a rival firm?
Whether to expand into foreign markets rapidly or cautiously?
How to stave off market challenges from new foreign competitors?
What to do about aging demographics of a company’s customer base?