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					Chapter 4
  Evaluating a Company’s
 Resources and Competitive
          Position
                  Objectives
•   How evaluate and identify the strengths
•   Why certain activities performed?
•   Cost structure ?
•   Strengths and key rivals
•   Industry, analysis..
    What could a manager do?
                 Questions
1) Strategy ?
2) SWOT ?
3) Prices and costs are competitive ?
4) Competitively stronger/weaker than
   key rivals ?
5) Strategic issues/problems the most importants
                     Tools
•   SWOT
•   Value chain
•   Benchmarking
•   Competitive strength assessment
            Q1.
How well is the company’s present
strategy working ?
                 What the strategy is ?
Effort to buil      Planned,          Moves to                               Collaborative
competitive         proactive moves   respond and            Scope of        partnerships and
advantage           to outcompete     react to changing      geographic      strategic
                    rivals            conditions in the      coverage        alliances with
                                      macroenvironme                         others
                                      nt and industry
                                      and competitive
                                      conditions




                                                                          Financial
                                                          Human
                                      Marketing
                                                          ressources
                           Manufacturing

                 R&D and
                 Supply chain
Business
strategy
         How well a company’s strategy
                  is working
•   Sales
•   Customers
•   Profit margins
•   Net profits
•   Financial strength and credit rating
•   Internal measures
•   Shareholders
•   Image
Profit margins and sales


 Revenues – Cost of good sold
          Revenues
 Net profits


Profits after taxes
    Revenues
Financial strength
     Current assets
    Current liabilities

Current assets – Inventory
    Current liabilities

Current assets – Liabilities
Internal performance measures
             Inventory
        Cost of goods sold/365



          Profits after taxes
      Total stockholders’ equity
      Shareholders
 Annual dividends per share
Current market price per share
             Or
     Earnings per share

  Annual dividends per share
     Earnings per share

After tax profits + Depreciation
• Performance increase
         = Do not Change



• Performance decrease
         = Need to change
          Q2.
 What are the company’s resource
 strengths and weaknesses and its
external opportunities and threats ?
Strength
       Identifying company resource strengths,
      competencies, and competitive capabilities

• A skill, an area of specialized expertise, or a competitively
  important capability
• Valuable physical assets
• Valuable human assets and intellectual capital
• Valuable organizational assets
• Valuable intangible assets
• An achievement or attribute that puts the company in a position
  of market advantage
• Competitively valuable alliances or cooperative ventures
Assessing a company’s competencies and capabilities-
        What activities does it perform well?

 • Competence
  - something an organization is good at doing
 • Core competence
  - internal activity that is central to a company’s strategy
    and competitiveness
 • Distinctive competence
  - valuable activity that a company performs better than
   its rivals
 A distinctive competence is a competitively
          potent resource strength

• It gives a company competitively valuable
  capability that is unmatched by rivals
• It has potential for being the cornerstone of the
  company’s strategy
• It can produce a competitive edge
   What is the competitive power of a
           resource strength?

• Is the resource really competitively valuable?
• Is the resource strength rare—is it something
  rivals lack?
• Is the resource strength hard to copy?
• Can the resource strength be trumped by
  substitute resource strengths and competitive
  capabilities?
    Competitively valuable resource strengths
      and competencies call for the use of a
            resource-based strategy

• Resource-based strategies
 - attempt to exploit company resources in a
 manner that offers value to customers in ways
 rivals are unable to match
 - be directed at eroding or a least neutralizing the
  competitive potency of a particular rival’s
 resource strengths
Weakness
  Identifying company resource weaknesses, missing
       capabilities, and competitive deficiencies


• Inferior or unproven skills, expertise, or
  intellectual capital in competitively important
  areas of the business
• Deficiencies in competitively important physical,
  organizational, or intangible assets
• Missing or competitively inferior capabilities in
  key areas
Opportunities
  Identifying a company’s external market
                opportunities

• A company’s opportunities can be plentiful or
  scarce, fleeting or lasting, and can range from
  wildly attractive to marginally interesting to
  unsuitable
• Big opportunities are nonetheless hard to see in
  advance.
 Identifying a company’s external market
               opportunities

• Managers have to guard against viewing every
  industry opportunity as a company opportunity
• The market opportunities most relevant to a
  company are those that match up well with the
  company’s financial and organizational
  resource capabilities
Threats
    Identifying the external threats to
               profitability

• Can stem from the emergence of
  cheaper or better technologies, rivals’
  introduction of new or improved
  products and so on.
• They may be so imposing as to make a
 company’s situation and outlook quite
 tenuous
    What to look for in
 identifying a company’s
  strengths, weaknesses,
opportunities, and threats
         Potential resource strengths and competitive
                          capabilities
•   A powerful strategy                              •   Superior intellectual capital relative to key
•   Core competencies in                                 rivals
•   A distinctive competence in                      •   Cost advantages over rivals
•   A product that is strongly differentiated from   •   Strong advertising and promotion
    those or rivals                                  •   Product innovation capabilities
•   Competencies and capabilities that are well      •   Proven capabilities in improving
    matched to industry key success factors
                                                         production processes
•   A strong financial condition; ample financial
                                                     •   Good supply chain management
    resources to grow the business
                                                         capabilities
•   Strong brand-name image/company
                                                     •   Good customer service capabilities
    reputation
                                                     •   Better product quality relative to rivals
•   An attractive customer base
                                                     •   Wide geographic coverage and/or strong
•   Economy of scale or learning/experience
                                                         global distribution capability
    curve advantages over rivals
                                                     •   Alliances/joint ventures with other firms
•   Proprietary technology/superior
                                                         that provide access to valuable technology,
    technological skills/important patents
                                                         competencies, and/or attractive geographic
                                                         markets
       Potential resource weaknesses and competitive
                        deficiencies
•   No clear strategic direction                   •   Weak dealer networks; lack of adequate
•   Resources that are not well matched to             global distribution capability
    industry key success factors                   •   Behind on product quality, R&D, and/or
•   No well-developed or proven core                   technological know-how
    competencies                                   •   In the wrong strategic group
•   A weak balance sheet, burdened with too        •   Losing market share
    much debt                                      •   Lack of management depth
•   Higher overall unit costs relative to key      •   Inferior intellectual capital relative to leading
                                                       rivals
    competitors
                                                   •   Subpar profitability
•   Weak or unproven product innovation
                                                   •   Plagued with internal operating problems or
    capabilities
                                                       obsolete facilities
•   A product/service with ho-hum attributes or
                                                   •   Behind rivals in e-commerce capabilities
    features inferior to those of rivals
                                                   •   Short on financial resources to grow the
•   Too narrow a product line relative to rivals
                                                       business and pursue promising initiatives
•   Weak brand image or reputation
                                                   •   Too much underutilized plant capacity
                    Potential market opportunities
•   Openings to win market share from       •   Online sales
    rivals                                  •   Integrating forward or backward
•   Sharply rising buyer demand for the     •   Falling trade barriers in attractive foreign
    industry’s product                          markets
•   Serving additional customer groups or   •   Acquiring rival firms or companies with
    market segments                             attractive technological expertise or
•   Expanding into new geographic markets       capabilities
•   Expanding the company’s product line    •   Entering into alliances or joint ventures to
    to meet a broader range of customer         expand the firm’s market coverage or boost
    needs                                       its competitive capability
•   Utilizing existing company skills or    •   Openings to exploit emerging new
    technological know-how to enter new         technologies
    product lines or new businesses
                        Potential external threats to a
                            company’s prospects

•   Increasing intensity of competition        •   A shift in buyer needs and tastes away from
    among industry rivals—may squeeze              the industry’s product
    profit margins                             •   Adverse demographic changes that threaten
•   Slowdowns in market growth                     to curtail demand for the industry’s product
•   Likely entry of potent new competitors     •   Vulnerability to unfavorable industry driving
                                                   forces
•   Loss of sales to substitute products
                                               •   Restrictive trade policies on the part of
•   Growing bargaining power of customers or
                                                   foreign governments
    suppliers
                                               •   Costly new regulatory requirements
What can be learned from a
    SWOT analysis?
                                     What can be gleaned
   Identify company                from the SWOT listings?
resource strengths and
competitive capabilities    Conclusions concerning the company’s
                            overall business situation:

   Identify company         • Where on the scale from “alarmingly weak”
 resource weaknesses        to “exceptionally strong” does the
    and competitive         attractiveness of the company’s situation rank?
                            • What are the attractive and unattractive
      deficiencies
                            aspects of the company’s situation?

                            Implications for improving company
Identify the company’s      strategy:
 market opportunities
                            • Use company strengths and capabilities as
                            cornerstones for strategy
                            • Pursue those market opportunities best
Identify external threats   suited to company strengths and capabilities
to the company’s future     • Correct weaknesses and deficiencies
       well-being           • Use company strengths to lessen the
                            impact of important external threats
ARE THE COMPANY’S
 PRICES AND COSTS
  COMPETITIVE ??


ECONOMICS AND TRADE
     2005033122
    LEE SEONG JIN
     THE SIGN OF COMPANY’S
            POSITION
• THE COMPETITIVENESS IN PRICES AND
  COSTS. It should be in line with rivals

• TWO TOOLS ARE USED to determine the
  competitiveness of costs and prices
  – VALUE CHAIN ANALYSIS
  – BENCHMARKING APPROACH
  THE CONCEPT OF COMPANY’S
        VALUE CHAIN
• First step in understanding cost structure.
• It shows specific activities through which
  firms can create customer value and
  competitive advantage.


• Two broad catagories.
  – The primary activities
  – The requisite support activities
This is the value chain !!
 THE VALUE CHAIN SYSTEM FOR
     AN ENTIRE INDUSTRY
• A company's cost
  competitiveness depends not
  only on the costs of internally
  performed activities but also on
  costs in the value chains of its
  suppliers and forward channel
  allies
• Look at page 120, Figure 4.4
          ACTIVITY-BASED
         COST ACCOUNTING
• A tool for determining the costs of value
  chain activities.
• Second step for evaluating a company’s
  competitiveness
• KEY POINT is !!
• costs estimates are need at least for
  each broad category of primary and
  secondary activity.
         BENCHMARKING
• A tool for assessing whether a company’s
  value chain activities are competitive

• potent tool for learning which companies
  are best at performing , using their
  techniques(OR BEST PRACTICE) to
  improve company's own activities.
              BENCHMARKING
• FOUR STAGES
MAKING PLAN COLLECTING INFORMATION



   ANALYSIS



      UNIFICATION



          IMPLEMENTAION
          BENCHMARKING
• PROBLEM is
  – how to gain access to information about
    other companies practices and costs
    • “”The leader companies are often unlikely to
      share their competitiveness.
 Strategic options for Remedying
       a cost disadvantage
• Internal cost disadvantage
  – Implement the use of best practices.
  – Try to eliminate some cost-producing
    activities altogether by revamping the value
    chain.
  – Relocate high-cost activities to
    geographically cheap areas.
  – See if certain internally performed activities
    can be outsourced.
  – Others are in page 125.
 Strategic options for Remedying
       a cost disadvantage
• A supplier-related cost disadvantage.
  – pressure suppliers for lower prices
  – collaborate closely with suppliers
• The forward channel allies.
  – Pressure dealer-distributors and other forwar
    d channel allies.
  – Change to a more economical distribution st
    rategy.
  – Work closely with forward channel allies
      Translating Activities into
       competitive advantage
• Two Options
  – perform value chain activities more
    proficiently.
  – perform value chain activities more cheaply.
      Q4.
Is the company competitively
 stronger or weaker than key
            rivals?
        Overall competitive strength


1. How does the company rank relative to
   competitors on each of the important factors
   that determine market success?

2. Does the company have a net competitive
   advantage of disadvantage VS major
   competitors?
Quantitative competitive strength assessments


 • Indicate where a company has a competitively
   strong and weak

 • Provide insight into the company’s ability to
   defend or enhance its market position
•   To make a list of the industry’s key success factors
    and most telling measures of competitive strength or
    weakness factor

•   To rate the firm and its rivals on each factor

•   To sum the strength rating on each factor to get an overall
    measure of competitive strength for each company being
    rated

•   To use the overall strength ratings to draw conclusion
Unweighted

  Rating

  System
             Competitive

              Strength

Weighted
             Assessments
  Rating

  System
1. Unweighted Rating System
Each key success factor/competitive
strength measure is assumed to be equally
important
2. Weighted Rating System
Different measures of competitive strength
are unlikely to be equally important
  Interpreting the Competitive Strength
               Assessments


                   • Strong competitive position
High Competitive
                   • Possession of competitive
Strength Rating     advantage



                   • Weak position
Low Competitive
                   • Competitive disadvantage
Strength Rating
 Company’ Competitive Strength
           Scores
                    Point directly

                   to the kinds of
Pinpoint its
                 offensive/defensive      Reduce its
strength and
                 actions it can use to    competitive
Weaknesses
                      exploit its        vulnerabilities
against rivals
                     competitive

                      strengths
            "Worry List“…
• -draws on the results of both industry
  and competitive analysis and company
  situation analysis
• -to identify the specific issues/problems
• -centers on such concerns as "how to...,"
  "what to do about...,"and "whether to..."
           A Good Strategy
• -contains ways to deal with all the
  strategic issues and obstacles
• -is a valuable precondition for good
  strategy making

• *Managers need such understanding to
  craft a strategy that is well suited to the
  company's competitive circumstances.

				
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posted:5/9/2012
language:English
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