CHAPTER 4

HOW WELL IS THE COMPANY’S STRATEGY WORKING?

Indicators of how well a company’s strategy is working

1. Recording gains in financial strength and profitability

2. Overall financial strength
3. Competitive strength and market standing improving
4. Sales and earnings growth
5. Customer retention
6. New customers are acquired
7. Company’s stock price
8. Company’s reputation with customer
9. Evidence of improvement in internal process (defect rate, order fulfillment, delivery times)

WHAT ARE THE COMPANY’S COMPETITIVELY IMPORTANT RESOURCE & CAPABILITIES?

Capability: the capacity of a firm to competently perform some internal activity

Tangible resources:

 Physical: plants, equipment, location, facilities

 Financial: cash, securities
 Technological: patent, copyright, superior production technology
 Organizational: information & communication system, quality control system, strong network
distributor/retailer

Intangible resources:

 Human assets & intellectual capital: experienced & capable workers, talented employee,
managerial know-how
 Brand, image, reputation: trademark, product/company image, buyer loyalty, reputation for
quality
 Relationship: alliance, trust with various partners

VRIN test

1. Valuable
 a capability that passes the “competitively valuable” test and is central to a company’s
strategy and competitiveness is called core competence.
 core competence that Is performed with a very high level of proficiency: distinctive
competence
 2. Rare
3. Inimitable
 unique, must be built over time (ex: brand name, organizational culture), carry big capital
requirements, social complexity, causal ambiguity (peniru gak pnya pengetahuan yg cukup ttg
sumber daya yg mau ditiru)
4. Non substitutable

Perusahaan yang tidak memiliki sumber daya mandiri yang kuat secara kompetitif dapat tetap
mengembangkan keunggulan kompetitif melalui kumpulan sumber daya (bundle of resources).

Dynamic capability: the ability to modify, deepen, or reconfigure the company’s existing resources and
capabilities in response to its changing environment/market opportunities

ARE THE COMPANY’S COST STRUCTURE & COSTUMER VALUE PROPOSITION COMPETITIVE?

Tools in determining whether a company’s value proposition and costs are competitive:

1. Value chain analysis

Ideal tool for examining how a company delivers on its customer value proposition, a deep look
at cost structure, reveals the emphasis on activities that enhance differentiation and support
higher prices
 Primary activities: supply chain management, operations, distribution, sales &
marketing, service  penting dlm creating value
 Supporting activities: R&D, technology, system development; HRM; general
administration  facilitate and enhance primary activities

2. Benchmarking
Comparing how different companies perform various value chain activities and then making
cross company comparisons of the cost and effectiveness of these activities
Objectives: identify best practice terus berusaha menerapkan menyamai/melebihi best practice
tsb.
Cara: collecting info from published reports, trade groups, industry research firms, talking to
industry analyst, customer, suppliers, field trip, consulting organization

The value chain system for an entire industry

 Customer value proposition and cost competitiveness depend on the value chain activities of its
suppliers and forward channel allies

 accurately assessing the competitiveness of a company’s cost

structure and customer value proposition requires that company managers understand
an industry’s entire value chain system for delivering a product or service to customers,
not just the company’s own value chain

Strategic options for remedying a cost/value disadvantage

1. Improving internally value chain activities
Reduce cost:
a) Implement best practice
b) Eliminate cost-producing activities  revamping value chain
c) Relocate high cost activities ke tempat yg lebih murah
d) Outsource certain internally performed activities to vendor
e) Invest in technology yg bisa enhance productivity dan saving cost
f) Find ways to detour around the activities/items where costs are high
g) Redesign product
h) Reducing cost in the supplier/forward channel portion

Rectifying (meralat) weakness in customer value proposition:

a) Implement best practice for activities that are important for creating costumer value
(ex: product design, quality, customer service)
b) Adopt best practice for marketing, brand management, customer relationship
management
c) Reallocate resources to activities having a significant impact on value delivered to
customer

2. Improving supplier-related value chain activities

Reduce cost:
a) Pressuring for lower price
b) Switching to lower-priced substitute inputs
c) Collaborating closely with suppliers
Enhance customer value proposition:
d) Supplier relationship: selecting & retaining high-quality standards supplier, provide
quality-based incentives, integrating suppliers into design process

3. Improving value chain activities of forward channels

Reduce cost:
a) Pressure channel allies to reduce their cost & markups
b) Work closely with forward channel to identify win-win opportunities to reduce cost
c) Change to a more economical distribution strategy  integrate forward into company-
owned retail outlets
Improve customer value:
a) Cooperative advertising & promotions
b) Training programs for dealer, distributor, retailer
c) Creating operating standards
WHAT IS THE COMPANY’S COMPETITIVE STRENGTH RELATIVE TO KEY RIVALS?

Competitive strength assessment: Menunjukkan strength and weaknesses against rivals dan nunjukin
strategi apa yang harus dipake (offensive/defensive)

WHAT STRATEGIC ISSUES & PROBLEMS MUST BE ADDRESSED BY MANAGEMENT?

1. Drawing on the results of both industry and competitive analysis and the evaluations of the
company’s internal situation
2. Compile precise things that management needs to worry about
3. Kalo issuenya serius berarti strateginya not well suited dan harus bikin strategi lagi