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Analyzing a
Companys Resourcesand Competitive Position
4Chapter
Screen graphics created by:Jana F. Kuzmicki, Ph.D.
Troy State University-Florida and Western Region
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Chapter Roadmap
Question 1: How Well Is the Companys PresentStrategy Working?Question 2: What Are the Companys ResourceStrengths and Weaknesses and Its External Opportunitiesand Threats?Question 3: Are the Companys Prices and CostsCompetitive?
Question 4: Is the Company Competitively Stronger orWeaker than Key Rivals?Question 5: What Strategic Issues and Problems MeritFront-Burner Managerial Attention?
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Fig. 4.1: Identifying the Components ofa Single- Business Companys Strategy
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Q #1: How Well Is the CompanysPresent Strategy Working?
Identify competi tive approachLow-cost leadership
DifferentiationFocus on a particular market niche
Determine competi ti ve scopeGeographic market coverage
Operating stages in industrys production/distribution chain
Examine recent str ategic moves
Identify functional str ategies
Key Issues
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Approaches to Assess How Wellthe Present Strategy Is Working
Quali tative assessment What is the strategy?
Completeness
Internal consistencyRationale
Relevance
Quanti tative assessment What are the results?
Is company achieving itsfinancial and strategic
objectives?Is company an above-average industry
performer?
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Key Indicators of How Wellthe Strategy Is Working
Trend in sales and market shareAcquiring and/or retaining customers
Trend in profit margins
Trend in net profits, ROI, and EVAOverall financial strength and credit ranking
Efforts at continuous improvement activities
Trend in stock price and stockholder valueImage and reputation with customers
Leadership role(s) Technology, quality,innovation, e-commerce, etc.
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S W O T represents the first letter inS trengths
W eaknesses
O pportunitiesT hreats
For a companys strategy to be well-conceived, it must be
Matched to its resource strengths and weaknessesAimed at capturing its best market opportunities anderecting defenses against external threats to its well-being
S W
O T
Q #2: What Are the Companys Strengths,Weaknesses, Opportunities and Threats ?
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Identifying Resource Strengthsand Competitive Capabilities
A strength is something a firm does well or an attribute thatenhances its competitiveness
Valuable competencies or know-howValuable physical assetsValuable human assetsValuable organizational assetsValuable intangible assetsImportant competitive capabilitiesAn attribute that places a company in a position of market
advantageAlliances or cooperative ventures with partners
Resource str engths and competi tivecapabil i ties are competi tive assets!
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Competencies vs. Core Competenciesvs. Distinctive Competencies
A competence is the product of organizational learningand exper ience and represents real proficiency in
performing an internal activity
A core competence is a well-performedinternal activity central (not peripheral or incidental)to a companys competi tiveness and profi tabil i ty
A distinctive competence is a competi tively valuableactivity a company performs better than i ts r ivals
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A competence becomes a core competence when the well- performed activity is central to a companyscompetitiveness and profitability
Often, a core competence results from collaborationamong different parts of a company
Typically, core competencies reside in a companyspeople, not in assets on a balance sheet
A core competence gives a company a potentially valuable competi tive capabi l i tyand represents a definite competi ti ve asset
Core Competencies -- AValuable Company Resource
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Distinctive Competence -- ACompetitively Superior Resource
A distinctive competence is a competitively significantactivity that a company performs better than i tscompetitors
A distinctive competenceRepresents a competitively valuablecapability rivals do not have
Presents attractive potential for
being acornerstone of str ategy
Can provide a competi tive edge in the marketplace
because it represents a competitively superior resourcestrength
# 1
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To qualify as competitively valuable or to be the basis forsustainable competi tive advantage, a resource must pass 4 tests:
1. Is the resource hard to copy?
2. Does the resource have staying power is it durable?
3. Is the resource really competi tively super ior?
4. Can the resource be trumped bythe different capabilities of rivals?
Determining the CompetitiveValue of a Company Resource
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Opportunities most relevant to acompany are those offering
Good match with its financial andorganizational resource capabilities
Best prospects for profitablelong-term growth
Potential for competi tive advantage
Identifying a Companys Market Opportunities
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Identifying External Threats
Emergence of cheaper/better technologiesIntroduction of better products by rivals
Entry of lower-cost foreign competitors
Onerous regulationsRise in interest rates
Potential of a hostile takeover
Unfavorable demographic shiftsAdverse shifts in foreign exchange rates
Political upheaval in a country
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Fig. 4.2: The Three Stepsof SWOT Analysis
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Q #3: Are the Companys Prices and Costs Competitive?
Assessing whether a firms costs are competitive withthose of rivals is a crucial part of company analysis
Key analytical tools
Value chain analysis
Benchmarking
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Fi 4 3 R i
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Fig. 4.3: RepresentativeCompany Value Chain
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Fig. 4.4: Representative ValueChain for an Entire Industry
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B h ki C f
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Benchmarking Costs ofKey Value Chain Activities
Focuses on cross-company comparisons of how certainactivities are performed and costs associated with theseactivities
Purchase of materials
Payment of suppliersManagement of inventoriesGetting new products to marketPerformance of quality controlFilling and shipping of customer ordersTraining of employeesProcessing of payrolls
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Fig. 4.5: Translating Performance of ValueChain Activities into Competitive Advantage
Q #4 I th C St
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Q. #4: Is the Company Strongeror Weaker than Key Rivals?
Overall competi tive posi tion involvesanswering two questions
How does a company rank relativeto competi tors on each importantfactor that determines market success?
Does a company have a netcompeti tive advantage or disadvantage vis--vis major competitors?
A i C
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Assessing a CompanysCompetitive Strength vs. Key Rivals
1. List industry key success factors and other relevantmeasures of competitive strength2. Rate firm and key rivals on each factor using rating scale
of 1 to 10 (1 = very weak; 5 = average; 10 = very strong)
3. Decide whether to use a weighted or unweighted ratingsystem (a weighted system is superior because chosenstrength measures are unlikely to be equally important)
4. Sum individual ratings to get an overall measure ofcompetitive strength for each rival
5. Based on overall strength ratings, determine overallcompetitive position of firm
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What Strategic Issues
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What Strategic IssuesMerit Managerial Attention?
Based on results of both industry and competitiveanalysis and an evaluation of a companyscompetitiveness, what items should beon a companys worry list?
Requires thinking strategical ly aboutPluses and minuses in the industryand competitive situationCompanys resource strengths and weaknesses and
attractiveness of its competitive position
A good strategy must address what to do about each and every str ategic issue!
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Identifying the Strategic Issues
How to stave off market challenges from new foreigncompetitors?
How to combat price discounting of rivals?
How to reduce a companys high costs?
How to sustain a companys present growth in light of slowing buyer demand?
Whether to expand a companys product line?
Whether to acquire a rival firm?
Whether to expand into foreign markets rapidly or cautiously?
What to do about aging demographics of a companyscustomer base?
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