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Evaluating a Chapter Title Companys Resources and Competitive Position

Screen graphics created by: Jana F. Kuzmicki, Ph.D. Troy University-Florida Region
Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

16/e PPT
McGraw-Hill/Irwin

Before executives can chart a new strategy, they must reach common understanding of the companys current position.
W. Chan Kim and Renee Mauborgne
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Chapter Roadmap
1: How Well Is the Companys Present Strategy Working? Question 2: What Are the Companys Resource Strengths and Weaknesses and Its External Opportunities and Threats? Question 3: Are the Companys Prices and Costs Competitive? Question 4: Is the Company Competitively Stronger or Weaker than Key Rivals? Question 5: What Strategic Issues and Problems Merit Front-Burner Managerial Attention?
Question
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Company Situation Analysis: The Key Questions

1. How well is the companys present strategy working? 2. What are the companys resource strengths and weaknesses and its external opportunities and threats? 3. Are the companys prices and costs competitive? 4. Is the company competitively stronger or weaker than key rivals? 5. What strategic issues merit front-burner managerial attention?
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Fig. 4.1: Identifying the Components of a Single-Business Companys Strategy

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Question 1: How Well Is the Companys Present Strategy Working? Key Considerations Must begin by understanding what the strategy is

Identify competitive approach

Low-cost leadership

Differentiation
Focus on a particular market niche

Determine competitive scope

Broad or narrow geographic market coverage?

In how many stages of industrys production/distribution chain does the company operate?

Examine recent strategic moves

Identify functional strategies

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Approaches to Assess How Well the Present Strategy Is Working

Qualitative assessment Is the strategy wellconceived?

Quantitative assessment What are the results?

Covers all the bases? Internally consistent?

Is company achieving its financial and strategic objectives? Is company an aboveaverage industry performer?

Makes sense?
Timely and in step with marketplace?

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Key Indicators of How Well the Strategy Is Working

Trend

in sales and market share

Acquiring
Trend Trend

and/or retaining customers

in profit margins in net profits, ROI, and EVA

Overall
Efforts Trend Image

financial strength and credit ranking

at continuous improvement activities in stock price and stockholder value and reputation with customers

Leadership

role(s) Technology, quality, innovation, e-commerce, etc.

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Question 2: What Are the Companys Strengths, Weaknesses, Opportunities and Threats ?
S

W O T represents the first letter in

S trengths
W eaknesses O pportunities

S O

W T

T hreats

For

a companys strategy to be well-conceived, it must be

Matched to its resource strengths and weaknesses
Aimed at capturing its best market opportunities and erecting defenses against external threats to its wellbeing
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Identifying Resource Strengths and Competitive Capabilities

A strength is something a firm does well or an attribute that enhances its competitiveness

Valuable skills, competencies, or capabilities Valuable physical assets Valuable human assets Valuable organizational assets Valuable intangible assets Important competitive capabilities An attribute placing a company in a position of market advantage Alliances or cooperative ventures with partners

Resource strengths and competitive capabilities are competitive assets!

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Competencies vs. Core Competencies vs. Distinctive Competencies

A

competence is the product of organizational learning and experience and represents real proficiency in performing an internal activity core competence is a well-performed internal activity central (not peripheral or incidental) to a companys competitiveness and profitability

distinctive competence is a competitively valuable activity a company performs better than its rivals
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Company Competencies and Capabilities

Stem

from skills, expertise, and experience usually representing an

Accumulation of learning over time and Gradual buildup of real proficiency in performing an activity

Involve

deliberate efforts to develop the ability to do something, often entailing

Selecting people with requisite knowledge and skills Upgrading or expanding individual abilities Molding work products of individuals into a cooperative effort to create organizational ability A conscious effort to create intellectual capital
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Core Competencies A Valuable Company Resource

A

competence becomes a core competence when the well-performed activity is central to a companys competitiveness and profitability a core competence is knowledge-based, residing in people, not in assets on a balance sheet core competence is typically the result of crossdepartment collaboration core competence gives a company a potentially valuable competitive capability and represents a definite competitive asset
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Often,

A A

Examples: Core Competencies

Expertise

in integrating multiple technologies to create families of new products in creating operating systems for cost efficient supply chain management

Know-how

Speeding
Better

new/next-generation products to market

after-sale service capability

Skills

in manufacturing a high quality product

to fill customer orders accurately and
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Capability

swiftly

Distinctive Competence A Competitively Superior Resource

A

distinctive competence is a competitively valuable activity that a company performs better than its competitors distinctive competence is a competitively potent resource source because it

Gives a company a competitively valuable capability unmatched by rivals

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Can underpin and add real punch to a companys strategy

Is a basis for sustainable competitive advantage

Examples: Distinctive Competencies Toyota

Low-cost, high-quality manufacturing of motor vehicles

Starbucks
Innovative coffee drinks and store ambience

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Determining the Competitive Power of a Company Resource

To

qualify as competitively valuable or to be the basis for sustainable competitive advantage, a resource must pass 4 tests:
1. Is the resource hard to copy? 2. Is the resource durable does it have staying power? 3. Is the resource really competitively superior? 4. Can the resource be trumped by the different capabilities of rivals?
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Test Your Knowledge

A distinctive competence
A. is a more important competitive asset than a core competence.
B. represents uniquely strong capability relative to rival companiesit qualifies as a competitively superior resource strength with competitive advantage potential. C. is a competitively important value chain activity that a company performs better than its rivals.

D. can underpin and add real punch to a company's strategy.

E. All of the above.
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Identifying Resource Weaknesses and Competitive Deficiencies

A

weakness is something a firm lacks, does poorly, or a condition placing it at a disadvantage weaknesses relate to

Resource

Inferior or unproven skills, expertise, or intellectual capital Lack of important physical, organizational, or intangible assets

Missing capabilities in key areas

Resource weaknesses and deficiencies are competitive liabilities!

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Identifying a Companys 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
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Identifying External Threats

Emergence

of cheaper/better technologies

Introduction
Entry

of better products by rivals

of lower-cost foreign competitors regulations of a hostile takeover

Onerous Rise

in interest rates

Potential

Unfavorable
Adverse Political

demographic shifts

shifts in foreign exchange rates upheaval in a country

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Role of SWOT Analysis in Crafting a Better Strategy

S W O T analysis involves more than just developing the 4 lists of strengths, weaknesses, opportunities, and threats The most important part of S W O T analysis is

Using the 4 lists to draw conclusions about a companys overall situation Acting on the conclusions to

Better match a companys strategy to its resource strengths and market opportunities Correct the important weaknesses Defend against external threats
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Fig. 4.2: The Three Steps of SWOT Analysis

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