1.
Interrelationships among
2 Levels of Interrelationships
among Value-Chain Activities
4 limitations of the SWOT Analysis
5 types of financial ratios
Balance Score Board
Customer Perspective
activities within the firm
2. Relationships among activities
within the firm and with other org.
(e.g. customers and suppliers)
1. Strengths may not lead to an advantage
2. SWOT's focus on the external environment
is too narrow
3. SWOT gives a one-shot view of a moving
target
4. SWOT overemphasizes a single dimension
of strategy
1. Short-term Solvency
2. Long-term Solvency
3. Asset Management (or turnover)
4. Profitability
5. Market Value
set of measures that provide top managers
with a fast, but comprehensive view of the
business
Method of evaluating a firm's performance
using performance measures from the
customers', internal innovation and learning,
and financial perspectives
Measures of firms performance that indicate how
well firms' internal processes, decisions and
actions are contributing to customer satisfaction.
Time
Quality
Performance and Service
Cost

Engineering Services: Primary
Value-Chain Activities
Financial Perspective
Financial Ratio Analysis
Firm's Resources and Sustainable
Competitive Advantages
Gillette Combines several
technologies to attain unparalleled
success in the wet shaving
industry. This is an example of?
1. Research and Development
2. Engineering
3. Designs and Solutions
4. Marketing and Sales
5. Service
Measures of firms' financial performance that indicate
how well strategy, implementation and execution are
contributing bottom-line improvement.
-Profitiability
-Growth
-Shareholder Value
-Increased Market Share
-Reduced Operating Expenses
-High asset turnover
a technique for measuring the performance
of a firm according to its -balance sheet
-income statement
-market valuation.
-Historical Comparison
-Comparison w/ industry norms
-comparison w/ key attributes
1. Resource must be valuable so that is exploits
opportunities and/or neutralizes threat's in the
environment
2. Must be rare among current and potential
competitors
3. Resources must be difficult for competitors to
imitate.
4. Resource must have no strategically equivalent
substitutes
Organizational Capabilities

How is value measured?
In assessing its primary activities,
an airline would examine
Innovation and learning
Perspective
Intangible Resources
Internal Business Perspective
by total revenue which is a
reflection of the price of a firm's
product commands & the quantity
it can sell
Baggage handling, because it is a
physical service
Measures of firm performance that indicate
how well firms are changing their product
and service offerings to adapt to changes in
the internal and external environments.
-Introduction of new products and services
-Greater Value for customers
-Increased operating efficiencies
assets that are much more difficult
for competitors to account for or
imitate and are typically
embedded in unique routines &
practices that have evolved &
accumulated over time
Measures of firm performance that indicate how well
firms' internal processes, decisions and actions are
contributing to customer satisfaction.
-Processes
-Cycle time
-Quality
-Employee Skills
-Productivity

Interrelationships
Key Concept used in Analyzing a
firm's competitive position
Organizational Capabilities
Primary Activities
Primary Activity: Inbound Logistics
Collaborative and strategic exchange relationships
between value-chain activities either
-within the firm
-between firms
Strategic exchange relationships involve exchange
of resources such as information, people,
technology, or money that contribute to the success
of the firm.
Creating value for buyers that
exceed the cost of production
the competencies or skills that a firm
employs to transform inputs into outputs.
i.g.
-outstanding customer service,
-excellent product development capabilities
-innovativeness of products/services
sequential activities of the value
chain that refer to the PHYSICAL
creation of a product or service,
its sale and transfer to the buyer,
and its service after sale
receiving, storing, and distributing inputs of a product
-Location of distribution facilities
-Material and inventory control systems
-Systems to reduce time to send "returns" to suppliers
-Warehouse layout and designs
i.g.
Just-in-time (JIT) Inventory systems

Primary Activity: Marketing and
Sales
Primary Activity: Operations
Primary Activity: Outbound
Logistics
Primary Activity: Service
Resource-based view of the firm
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
All activities associated with transforming inputs into
final product form.
-Efficient plant operations
-Incorporation of appropriate process technology
-Quality production control systems
-Efficient plant layout and workflow design
i.g.
Creating environmentally friendly manufacturing
Collecting, storing, and distributing the product or service to buyers
-Effective shipping processes to provide quick delivery and minimize
damages
-Efficient finished goods warehousing processes
-Shipping of goods in large lot sizes to minimize transportation costs.
-Quality material handling equipment
i.g.
Electronic Replenishing System (Campbell Soup)
Supermarket Chains use this
Actions 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
Perspective that firms' competitive
advantages are due to their endowment
of strategic resources that are valuable,
rare, costly to imitate, and costly to
substitute.
-Goes beyond SWOT
 1. Partnering with vendors
2. Purchasing goods
Retail: Primary Value-Chain
3. Managing and distributing inv.
Activities
4. Operating stores
5. Marketing and Selling

Physical Uniqueness
Path Dependency
Social of Inimitably
Casual Ambiguity
Social Complexity

This means that would-be competitors may

Social of Inimitably: Casual
Ambiguity
be thwarted because it is impossible to
disentangle the causes (or possible
explanations) of either what the valuable
resource is or how it can be re-created.

This simply means that resources are unique and

Social of Inimitably: Path
Dependency
therefore scarce because of all that has happened
along the path followed in their development
and/or accumulation.
i.g.
Gerber Products Co. brand name for baby food is a
resource that is potentially inimitable

a characteristic of a firm's resources that

Social of Inimitably: Social
Complexity
is costly to imitate because the social
engineering required is beyond the
capability of competitors, including
interpersonal relations among
managers, organizational culture, and
reputation with suppliers and customers.

Support Activities
Support Activity: General
Administration
Support Activity: Human Resource
Management
Support Activity: Procurement
Support Activity: Technology
Development
Activities of the value chain that
either add value through important
relationships with both primary
activities and other 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
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 absenteeism
-Reward and incentive programs to motivate all employees
i.g.
JetBlue developed a highly innovative recruitment program for flight
attendants to attract college graduates
Function of purchasing inputs used in the firm's value chain
-Procurement of raw material inputs, supplies, consumables, assets like
equipment, buildings, inventory, etc. to optimize quality and speed to
minimize associated costs.
-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
i.g.
Microsoft improved process by providing formal reviews of its suppliers
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
i.g.
Allied Signal and Honeywell spent large amount on R&D that lead to
innovative products and services in 2 major areas (Performance Materials
and Control Systems)

Tangible Resources
Value
Value-chain analysis
What 2 perspectives does the
resource-based view (RBV) of the
firm combine?
What 4 attributes must a resource
have in order to provide a firm
with the potential for a sustainable
competitive advantage?
Organizational assets that are
relatively easy to identify; they
include the physical & financial
assets that an organization uses to
create value for its customers
the amount that buyers are willing
to pay for what a firm provides
them
A strategic analysis of an
organization that uses value-
creating activities
1. the internal analysis of
phenomena within a company
2. an external analysis of the
industry in its competitive
environment
1. Is the resource VALUABLE?
2. Is the resource RARE?
3. Can the resource be IMITATED
easily?
4. Are SUBSTITUTES readily
available?

What are 4 factors that are
necessary for a resource to be
inimitable?
What are Employee Exit Costs?
What are Employee Replacement
Costs?
What are some limitations of the
Balanced Scorecard?
What are the 4 support activities
of a firm?
1. Physical Uniqueness
2. Path Dependency
3. Casual ambiguity
4. Social complexity
tends to reduce an employee's
bargaining power; an individual
may face high personal costs
when leaving the organization thus
that individual's threat of leaving
may not be credible
If employees' skills are idiosyncratic and rare (a
source of resource-based advantages), they
should have high bargaining power based on the
high cost required by the firm to replace them
1. Lack of clear strategy
2. Limited or ineffective executive sponsorship
3. Too much emphasis on financial measures
rather than non financial measures
4. Poor data on actual performance
5. Inappropriate links of scorecard measures to
compensation
6. Inconsistent or inappropriate terminology
1. procurement
2. technology development
3. HRM
4. general administration
 1. inbound logistics
2. operations
What are the 5 primary activities
3. outbound logistics
of a firm?
4. marketing & sales
5. service

If employees are vital to forming a

What is Employee Bargaining firm's unique capability, they will
Power? earn disproportionately high
wages

this would be based on how well they

create resource-based advantages. They
are generally charged with creating
What is Manager Bargaining
value through the process of organizing,
Power? coordinating, and leveraging employees
as well as other forms of capital such as
plant, equipment and financial capital

lies in providing a customized

What is the difference b/w solution rather than the kind of
manufacturing & service? mass production that is common in
manufacturing