Models of Business and Strategic management by pptfiles

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									             Strategy Arc

                    STRATEGY



    Environment                         Firm



Search for resources and capabilities that provide the
    firm with sustainable competitive advantage
    Internal Environment Analysis


                     STRATEGY


   Environment                            Firm

Internal analysis search for resources and capabilities that
 provide the firm with sustainable competitive advantage
               Assumptions
Ø   All firms are alike and all firms are different
Ø   Firms develop unique qualities based on their
    history, experiences and strategies
Ø   Success depends on how well firms develop
    and utilize their skills, resources, and
    capabilities to create competencies –
     •   create competitive advantage (provide value,
         control costs)
     •   satisfy their stakeholders
     •   create barriers to competitors
         Internal Analysis              STRATEGY


                                Environment        Firm


Internal Analysis has two parts
1.   Evaluation of the firms strategy to
     determine how well the strategy integrates
     the firm with the external environment.
2.   Systematic analysis of the skills, resources,
     capabilities, and competencies the firm
     utilizes to support its strategy
                                           STRATEGY

         Strategy
                                 Environment        Firm

Show how firm is addressing conditions in the
external environment
ØIdentify the strategy approach
     n   Rational v. Emergent
     n   Low Cost v. Differentiated v. Integrated
     n   Broad v. Focused
ØEvaluate the effectiveness of the strategy
     n Financial

     n Balanced Scorecard

     n Stakeholder
           Strategy Models                STRATEGY


                                Environment          Firm




                                  External
n   Traditional or IO Model
n   Stakeholder Model
n   Value Chain Model
n   Resource-Based View (RBV)
                                 Internal
          IO Model
Ø   Views the firm as an economic actor
    responding to market forces
Ø   Conditions in the external environment are
    the primary determinant of success
Ø   Strategic decisions involve choosing best
    markets and products
Ø   Primary Tools:
    n   Industry Analysis (Five-Forces, Strategic Group)
    n   Financial Ratios
         Stakeholder Model

Ø   Views firm as an extended network of
    relationships and dependencies
Ø   Stakeholder support determine sustainability
Ø   Strategic decisions involve identifying and
    satisfying key stakeholders
Ø   Primary Tools
    n   Stakeholder Analysis
    n   Financial Ratios
           Value Chain Model

Ø   Views firm as a set of linked value creating
    activities that transform inputs into outputs
Ø   Market distinction (doing different things;
    doing things differently) determine success
Ø   Strategic decisions involve creating superior
    value at lowest cost
Ø   Primary Tools:
    n   External Analysis
    n   Value Chain Analysis
    n   Financial Ratios
             The Value Chain


                         General administration
                   Human resource management

                     Technology development

                           Procurement
                                                             Value
Inbound                   Outbound     Marketing
            Operations                             Service
logistics                  logistics   and sales
     Value-Chain Analysis
n   Firm is profitable to the extent the revenue it
    receives exceeds the total costs involved in
    creating its products or services
n   Value chain analysis involves
    n   identifying key activities that support the firm’s
        strategy
    n   Evaluating the effectiveness of key activities
         n   Compare the costs and value added of key activities in
             the value chain
         n   Benchmarking to compare key activities to competitors
         n   VRIN
   Value-Chain Analysis
Value chain analysis involves
nList major activities the firm engages in for
each of the value chain cells
nFrom these, identifying key activities that
support the firm’s strategy
nEvaluating the effectiveness of key activities
   n Compare the costs and value added of key
     activities in the value chain
   n Benchmarking to compare key activities to
     competitors
   n VRIN
        Resource Based View
Ø   Views firm as a unique collection of resources
    and capabilities
Ø   Core competencies of the firm determine
    success
Ø   Strategic decisions involve creating and
    sustaining competitive advantage through
    core competencies
Ø   Primary Tools:
    n   VRIN Analysis
    n   Financial Ratios
        Resource Based Model

Firm converts inputs into outputs using
 Ø Resources: the assets available to a firm to develop
   and implement value creating strategies
     n Tangible: assets the firm uses to create value

         n financial, physical, technological, organizational

     n Intangible: unique routines and practices that are
       developed over time
         n human, creative, reputation, culture

 Ø Organizational Capabilities: the procedures and
   processes the firm has developed to use its resources
   effectively to achieve desired ends; the ability to put
   resources to productive use
        Core Competencies

Firms create sustainable competitive advantage
by developing Core Competencies
 n   The specific resources and capabilities of a firm
     that allow it to differentiate its products or services
     from competitors
Core competencies are the basis for strategy
and competitive advantage
 Core competencies are most effective when
   they are based on intangible resources and
   organizational capabilities
          VRIN Analysis
To be a source of sustainable competitive advantage,
a specific resource or capability must be:
 • Valuable: Allows the firm to differentiate
    products/services and create unique value
 • Rare: Competitors do not have access to the
    resource
 • Inimitable: Competitors cannot easily copy or
   reproduce the resource
 • Nonsubsitutable: Equivalent resources that may
   allow similar strategy are not readily available
               VRIN Analysis
 • Valuable: Allows the firm to differentiate
   products/services and create unique value
   • Satisfies customers needs better than competitors
   • Generates superior profits
 • Rare: Competitors do not have access to the
   resource or an equivalent

Resources that are valuable and rare allow
    temporary competitive advantage
           VRIN Analysis
   • Inimitable: Competitors cannot easily copy
     or reproduce the resource
     • Path dependent
     • Causal ambiguity; social complexity

   • Nonsubsitutable: Equivalent resources that
     may allow similar strategy are not readily
     available
Resources that are inimitable and nonsubstitutable
    allow sustainable competitive advantage
                VRIN Analysis

  n   Identify specific resources and capabilities
  n   Construct a VRIN Table
 Competency Valuable   Rare   Inimitable   Non- Sub   Conclusion
 Superior      Yes     No     No           Yes        Comp. Parity
 Engineering
 Automated     Yes     Yes    No           No         Temp. comp. adv.
 Production
 Integrated    Yes     Yes    Yes          Yes        Sustainable comp. adv.
 Design


• Look for bundles of resources and capabilities
• Assess strategic implications for success

								
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