Gregory G. Dess
G. T. Lumpkin
Marilyn L. Taylor
The Limitations of SWOT Analysis
•
Strengths may not lead to an advantage
•
SWOT’s focus on the external environment
is too narrow
•
SWOT gives a one-shot view of a moving
target
•
SWOT overemphasizes a single dimension
of strategy
Value-Chain Analysis
•
Sequential process of value-creating
activities
•
The amount that buyers are willing to
pay for what a firm provides them
•
Value is measured by total revenue
•
Firm is profitable to the extent the
value it receives exceeds the total costs involved in creating its product or
service
Primary Activities
Associated with receiving, storing and distributing
inputs to the product
•
Location of distribution facilities
•
Material and inventory control systems
•
Systems to reduce time to send “returns”
to suppliers
•
Warehouse layout and designs
Associated with collecting, storing, and
distributing the product or service to buyers
•
Effective shipping processes
•
Efficient finished goods warehousing
processes
•
Shipping of goods in large lot sizes
•
Quality material handling equipment
Primary Activities
Associated with purchases of products and services
by end users and the inducements used to get them to make purchases
•
Highly motivated and competent sales
force
•
Innovative approaches to promotion and
advertising
•
Selection of most appropriate
distribution channels
•
Proper identification of customer
segments and needs
•
Effective pricing strategies
Associated with providing service to enhance or
maintain the value of the product
•
Effective use of procedures to solicit
customer feedback and to act on information
•
Quick response to customer needs and
emergencies
•
Ability to furnish replacement parts
•
Effective management of parts and
equipment inventory
•
Quality of service personnel and ongoing
training
•
Warranty and guarantee policies
Support Activities
Typically supports the entire value chain and not
individual activities
•
Effective planning systems
•
Ability of top management to anticipate
and act on key environmental trends and events
•
Ability to obtain low-cost funds for
capital expenditures and working capital
•
Excellent relationships with diverse
stakeholder groups
•
Ability to coordinate and integrate
activities across the value chain
•
Highly visible to inculcate
organizational culture, reputation, and values
Support Activities
Activities involved in the recruiting, hiring,
training, development, and compensation of all types of personnel
•
Effective recruiting, development, and
retention mechanisms for employees
•
Quality relations with trade unions
•
Quality work environment to maximize
overall employee performance and minimize absenteeisn
•
Reward and incentive programs to
motivate all employees
Support Activities
Related to a wide range of activities and those
embodied in processes and equipment and the product itself
•
Effective R&D activities for process
and product initiatives
•
Positive collaborative relationships
between R&D and other departments
•
State-of-the art facilities and
equipment
•
Culture to enhance creativity and
innovation
•
Excellent professional qualifications of
personnel
•
Ability to meet critical deadlines
Support Activities
Function of purchasing inputs used in the firm’s
value chain
•
Procurement of raw material inputs
•
Development of collaborative “win-win”
relationships with suppliers
•
Effective procedures to purchase
advertising and media services
•
Analysis and selection of alternate
sources of inputs to minimize dependence on one supplier
•
Ability to make proper lease versus buy
decisions
Interrelationships among Value-Chain Activities
within and across Organizations
•
Importance of relationships among value
activities
•
Interrelationships among activities within the firm
•
Relationships among activities within the firm and with other
organizations (e.g., customers and suppliers)
Resource-Based View of the Firm
•
Two perspectives
•
The internal analysis of phenomena
within a company
•
An external analysis of the industry and
its competitive environment
•
Three key types of resources
•
Tangible resources
•
Intangible resources
•
Organizational capabilities
Types of Resources
Relatively easy to identify, and include physical
and financial assets used to create value for customers
•
Financial resources
n Firm’s
cash accounts
n Firm’s
capacity to raise equity
n Firm’s
borrowing capacity
•
Physical resources
n Modern
plant and facilities
n Favorable
manufacturing locations
n State-of-the-art
machinery and equipment
•
Relatively easy to identify, and include
physical and financial assets used to create value for customers
•
Technological resources
n Trade
secrets
n Innovative
production processes
n Patents,
copyrights, trademarks
•
Organizational resources
n Effective
strategic planning processes
n Excellent
evaluation and control systems
Difficult for competitors (and the firm itself) to
account for or imitate, typically embedded in unique routines and practices
that have evolved over time
•
Human
n Experience
and capabilities of employees
n Trust
n Managerial
skills
n Firm-specific
practices and procedures
Difficult for
competitors (and the firm itself) to account for or imitate, typically embedded
in unique routines and practices that have evolved over time
•
Innovation and creativity
n Technical
and scientific skills
n Innovation
capacities
•
Reputation
n Effective
strategic planning processes
n Excellent
evaluation and control systems
Competencies or skills that a firm employs to
transform inputs to outputs, and capacity to combine tangible and intangible
resources to attain desired end
•
Outstanding customer service
•
Excellent product development capabilities
•
Innovativeness of products and services
•
Ability to hire, motivate, and retain
human capital
Firm Resources and Sustainable Competitive
Advantages
Is the resource or capability…
Valuable
Rare
Difficult to imitate
Difficult to substitute
Implications
•
Neutralize threats and exploit
opportunities
•
Not many firms possess
•
Physically unique
•
Path dependency
•
Causal ambiguity
•
Social complexity
•
No equivalent strategic resources or
capabilities
Is the Resource Valuable?
Organizational resources can be a source of
competitive advantage only when they are valuable
•
Enable a firm to formulate and implement
strategies that improve its efficiency or effectiveness
Is the Resource Rare?
Organizational resources also possessed by
competitors are not sources of competitive advantage
•
Common strategies based on similar
resources give no one firm an advantage
•
Competitive advantages are gained only
from uncommon resources, resources that are rare to other competitors
Can the Resource be Imitated?
Difficulty in imitating resources is key to value
creation because it constrains competition
•
Profits generated from inimitable
resources are more likely to be sustainable
n Physical
uniqueness
n Path
dependency
n Causal
ambiguity
n Social
complexity
Are Substitutes Readily Available?
There must be no strategically equivalent valuable
resources that are themselves not rare or inimitable
•
Substitutability may take at least two
forms
n Competitor
may be able to substitute a similar resource that enables it to develop and
implement the same strategy
n Very
different firm resources can become strategic substitutes (such as e-business
as a substitute for physical retail facility)
Evaluating Firm Performance
Two approaches for evaluating firm performance
•
Financial ratio analysis
n Balance
sheet
n Income
statement
•
Balanced scorecard (stakeholder
perspective)
n Employees
n Customers
n Owners
Financial Ratio Analysis
•
Five types of financial ratios
•
Short-term solvency or liquidity
•
Long-term solvency measures
•
Asset management (or turnover)
•
Profitability
•
Market value
•
Meaningful ratio analysis must include
•
Analysis of how ratios change over time
•
How ratios are interrelated
The Balanced Scorecard
•
Provides a meaningful integration of
many issues that come into evaluating a firm’s performance
•
Four key perspectives
•
How do customers see us? (customer
perspective)
•
What must we excel at? (internal
perspective)
•
Can we continue to improve and create value?
(innovation and learning perspective)
•
How do we look to shareholders?
(financial perspective)
The Balanced Scorecard
•
Time
•
Quality
•
Performance and service
•
Cost
The Balanced Scorecard
•
Processes
•
Cycle time
•
Quality
•
Employee skills
•
productivity
•
Decisions
•
Actions
•
Coordination
•
Resources and capabilities
The Balanced Scorecard
•
Introduction of new products and
services
•
Greater value for customers
•
Increased operating efficiencies
The Balanced Scorecard
•
Profitability
•
Growth
•
Shareholder value
•
Increased market share
•
Reduced operating expenses
•
Higher asset turnover
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