Strategic Management Class 7 – Ch. 4 & Minicase 6: Starbucks

What is the focus of internal analysis?
resources, capabilities, and core competencies
core competencies
unique strengths embedded deep within the firm that enable value creation
capabilities
organizational/managerial skills necessary to orchestrate a diverse set of resources to deploy them strategically
resources
any asset leveraged for strategy formulation or implementation
resources, capabilities, and core competencies are used to:
gain and sustain a competitive advantage
competencies enable:
differentiation of products and services to create perceived value and cost leadership to offer products/services of comparable value at lower cost
types of resources
tangible and intangible
qualities of tangible resources
-units of transaction clear
-transparent
-opportunities recognizable
-boundaries and property rights clear
qualities of intangible resources
-units of transaction unclear
-opaque
-opportunities harder to recognize
-boundary and property rights unclear
*competitive advantage more likely to be based on intangible resources
2 critical assumptions of resource-based view of the firm
resource heterogeneity and resource immobility
resource-based view of the firm
-firms are a bundle of resources that differ across firms and are not easily transferable from firm to firm
-a good resource mix is key to superior performance
-if resources exhibit the VRIO attributes, they become the building blocks for gaining and sustaining a competitive advantage (leveraged through capabilities)
VRIO attributes
-valuable
-rare
-inimitable
-organized
VRIO: valuable
resources drive value creation; allows firm to take advantage of an external opportunity and/or neutralize an external threat
VRIO: rare
they are unique or uncommon; the number of firms that possess the resource is less than the number of firms it would require to reach a state of perfect competition
VRIO: inimitable
competitors cannot easily copy; unable to make or buy it at a comparable cost
VRIO: organized
the firm is structured to capture value from the resource/capability
learning curve advantages
focus on capabilities as opposed to resources; learning/experience/cost/efficiency/productivity curves illustrate how the cost per unit of output decreases over time as the result of cumulative workforce learning and experience
firms have a better chance of sustaining a competitive advantage from resources, capabilities, or competencies when:
they have the following isolating mechanisms (barriers to imitation):
-they have a better expectation about a resources’ future value
-they’ve accumulated resource advantages that can be imitated by competitors only over long periods of time (path dependence)
-the source of competitive advantage is causally ambiguous or socially complex
dynamic capabilities
a firm’s ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources in its quest for competitive advantage; necessary to sustain a competitive advantage
dynamic capabilities: creating a sustained competitive advantage
essential to find dynamic fit between firm’s internal strengths and external opportunities
resource dynamism involves
resource stocks (current level of a firm’s valuable resources) and resource flows (investments to maintain a resource)
-the strategist must reinvest, scan the environment, recognize opportunities, and reconfigure assets continually in quest of sustained advantage
value creation
-differentiating products and services to create more value than competitors
-offer products and services of acceptable value at lower cost
value chain
describes the internal activities a firm engages in when transforming inputs into outputs; each activity add incremental value and costs
Activities
distinct and fine-grained business processes that enable firms to add incremental value by transforming input into goods and services
value chain analysis
where along the set of activities can managers add incremental value to create a profit margin and where does the firm choose to “play”-look to resources, capabilities, and competencies
value chain analysis: primary activities
supply chain management
operations
distribution
marketing & sales
after-sales service
value chain analysis: support activities
R&D
information systems
human resources
accounting and finance
firm infrastructure, processes, policies, and procedures
SWOT analysis
matches internal analysis with external analysis through vision, mission, and strategy
-exploit opportunities and mitigate threats
-leverage strengths and minimize weaknesses
matrix structure:
——–exploit O mitigate T
leverage S
minimize W