Session

Assessing
Company situation

Author : Philippe Ginier-Gillet

Date : May 06
Extracts from : Contemporary strategy analysis; Grant; Blackwell

Author : Philippe Ginier-Gillet 1

 Company Situation

Introduction : How strong is the company ?

Company’s ressources

Capabilities of a firm

Author : Philippe Ginier-Gillet 2

 Company Situation

Introduction : How strong is the company ?

Company’s ressources

Capabilities of a firm

Author : Philippe Ginier-Gillet 3

 Introduction : Some indicators of
how strong is the company

– Trend in sales and market share

– Acquiring and/or retaining customers
– Trend in profit margins
– Trend in net profits, ROI, and EVA
– Overall credit ranking
– Trend in stock price and stockholder value
– Image and reputation with customers
– Leadership role(s) -- technology, quality, innovation.

Author : Philippe Ginier-Gillet 4

 Company Situation

Introduction : How strong is the company ?

Company’s ressources

Capabilities of a firm

Author : Philippe Ginier-Gillet 5

 Company’s ressources - Overview

• Financial resources
• Physical resources
• Human resources
• Intangible resources :
Technology, Others
• Reputation

Author : Philippe Ginier-Gillet 6

 Company’s ressources (1/6)

Financial ressources

• Main Characteristics
– Borrowing capacity and internal funds generation determine
investment capacity and cyclical resilience

• Some indicators
– Debt/ equity ratio
– Credit rating

Author : Philippe Ginier-Gillet 7

 Company’s ressources (2/6)

Physical resources

• Main Characteristics
– Size, location, technical sophistication & flexibility of plant and
equipment
– Location & alternative uses for land and buildings
– Reserves of raw materials:
constrain the set of production possibilities and the potential
for cost and quality advantages
• Key indicators
– Resale value of fixed assets; Alternative uses
– Scale of plants

• Key issues:
– Opportunities for economizing on use ?
ex: consolidation, improved controls
– Employing assets differently ?
ex: redeployment
Author : Philippe Ginier-Gillet 8
 Company’s ressources (3/6)

Human resources

• Main Characteristics
– Training and expertise of employees = skills
– Social capabilities
(ex capabilities for communication/ collaboration)
– Adaptability of employees = flexibility of the firm
– Motivation of employees (commitment and loyalty) =
ability to maintain competitive advantages

• Some indicators
– Educational, technical and professional qualifications of
employees
– Pay rates relative to industry average
– Record of labor disputes
– Rate of employees turnover
Author : Philippe Ginier-Gillet 9
 Company’s ressources (4/6)

Intangible resources – Technology

• Main Characteristics
– Stock of technology, including
• Proprietary technology (Patents, Copyrights, Trade secrets)
• Expertise in application of know-how
– Resources for innovation
• Research facilities
• Technical and scientific employees

• Some indicators
– Number and significance of patents
– Revenue from patent licenses
– R&D staff as a percentage of total employment

Author : Philippe Ginier-Gillet 10

 Company’s ressources (5/6)

Intangible resources – Others

• Know How
• Consumer knowledge
“reach, interaction, insight, authority”
• Information
access to potential transactions, superior insight

Author : Philippe Ginier-Gillet 11

 Company’s ressources (6/6)

Reputation

• Main Characteristics
– Reputation with customers
• Brands; established relationships with customers;
association of products with quality, reliability, etc
– Reputation with the suppliers (of components, finance, labor,
etc), partners, user community, opinion makers, regulators

• Some indicators
– Brand recognition
– Price premium over competing brands
– Percentage of repeat buying

Author : Philippe Ginier-Gillet 12

 Company Situation

Introduction : How strong is the company ?

Company’s ressources

Capabilities of a firm

Author : Philippe Ginier-Gillet 13

 The capabilities of a firm - I

Does ownership of resources always imply performance ?

example:
In a hospital :

a surgeon
+ an anesthesist
+ nurses
+ surgical & imaging equipments
= brain surgery ?

Author : Philippe Ginier-Gillet 14

 The capabilities of a firm - II

(Organizational) capability :
a firm’s capacity to deploy resources for a desired end result

example:
in a hospital :
a surgeon
+ an anesthesist
+ nurses
+ surgical & imaging equipments
working together to perform brain surgery !

Author : Philippe Ginier-Gillet 15

 The capabilities of a firm - III

How does integration occur ?

Organizational routines:

Regular and predictable patterns of activity made up of a sequence of

coordinated actions by individuals

example: McDonald’s: from operating manuals to day-to-day routines

Author : Philippe Ginier-Gillet 16