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Evaluating A Company'S Resources, Capabilities, and Competitiveness
Evaluating A Company'S Resources, Capabilities, and Competitiveness
CHAPTER 4
EVALUATING A COMPANYS RESOURCES,
CAPABILITIES, AND COMPETITIVENESS
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EVALUATING A FIRMS
INTERNAL SITUATION
1. How well is the firms present strategy working?
2. What are the firms competitively important resources and
capabilities?
3. Is the firm able to take advantage of market opportunities and
overcome external threats to its external well-being?
4. Are the firms prices and costs competitive with those of key
rivals, and does it have an appealing customer value
proposition?
5. Is the firm competitively stronger or weaker than key rivals?
6. What strategic issues and problems merit front-burner
managerial attention?
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SPECIFIC INDICATORS OF
STRATEGIC SUCCESS
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TABLE 4.1
Key Financial
Ratios
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TABLE 4.1
Key Financial
Ratios
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TABLE 4.1
Key Financial
Ratios
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TABLE 4.1
Key Financial
Ratios
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Competitive Assets
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CORE CONCEPTS
A resource is a competitive asset that is owned
or controlled by a firm
A capability or competence is the capacity of a
firm to perform and internal activity competently
through deployment of a firms resources.
A firms resources and capabilities represent its
competitive assets and are big determinants of
its competitiveness and ability
to succeed in the marketplace.
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A Resource
A Capability
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TABLE 4.2
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IDENTIFYING CAPABILITIES
An Organizational Capability
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CORE CONCEPT
A resource bundle is a linked and closely
integrated set of competitive assets centered
around one or more cross-functional
capabilities.
The VRIN tests for sustainable competitive
advantage ask if a resource is Valuable, Rare,
Inimitable, and Non-substitutable.
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VRIN TESTING:
RESOURCES AND CAPABILITIES
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CORE CONCEPTS
Social complexity (company culture,
interpersonal relationships among managers or
R&D teams, trust-based relations with customers
or suppliers) and causal ambiguity are two
factors that inhibit the ability of rivals to imitate a
firms most valuable resources and capabilities.
Causal ambiguity makes it very hard to figure out
how a complex resource contributes to
competitive advantage and therefore
exactly what to imitate.
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CORE CONCEPT
A dynamic capability is the ongoing capacity
of a firm to modify its existing resources and
capabilities or create new ones by:
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SWOT Analysis
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CORE CONCEPT
SWOT analysis is a simple but powerful tool
for sizing up a companys strengths and
weaknesses, its market opportunities, and
the external threats to its future well-being.
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IDENTIFYING A COMPANYS
INTERNAL STRENGTHS
A Competence
A Core Competence
A Distinctive Competence
CORE CONCEPTS
A competence is an activity that a firm has
learned to perform with proficiencya
capability, in other words.
A core competence is an activity that a firm
performs proficiently that is also central to its
strategy and competitive success.
A distinctive competence is a competitively
important activity that a firm performs
better than its rivalsit thus represents
a competitively superior internal
strength.
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Types of Weaknesses:
CORE CONCEPT
A firms strengths represent its competitive
assets.
A firms weaknesses are shortcomings that
constitute competitive liabilities.
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IDENTIFYING A COMPANYS
MARKET OPPORTUNITIES
An unsuitable\mismatched market
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Types of Threats:
Considering Threats:
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TABLE 4.3
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TABLE 4.3
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FIGURE 4.2 The Steps Involved in SWOT Analysis: Identify the Four Components of
SWOT, Draw Conclusions, Translate Implications into Strategic Actions
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CORE CONCEPT
A companys value chain identifies the primary
activities and related support activities that
create customer value.
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FIGURE 4.3
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FIGURE 4.4
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CORE CONCEPT
Benchmarking is a potent tool for improving a
companys own internal activities that is based
on learning how other companies perform them
and borrowing their best practices.
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BENCHMARKING AND
VALUE CHAIN ACTIVITIES
Benchmarking:
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Implement best practices throughout the firm, particularly for highcost activities.
Find ways to detour around activities or items where costs are high.
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IMPROVING SUPPLIER-RELATED
VALUE CHAIN ACTIVITIES
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Collaborate with forward channel allies to identify winwin opportunities to reduce costs.
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Enhancing Differentiation:
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FIGURE 4.5
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FIGURE 4.5
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Step 2
Step 3
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TABLE 4.4
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STRATEGIC IMPLICATIONS OF
COMPETITIVE STRENGTH ASSESSMENT
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