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Environmental analysis and building blocks
StrategicManagement
Submitted by:
Nilam Jadhav
R.No: 121019
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External Analysis
Identify strategic opportunities and threatsin the operatingenvironment.
Macroenvironment National
Immediate (Industry)
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Internal Analysis
Identify strengths
Quality and quantity of resources available
Distinctive competencies
Identify weaknesses
Inadequate resources
Managerial and
organizational deficiencies
The purpose of internal analysis is to pinpoint the strengthsand weaknesses of the organization.
Strengths lead to superior performance.
Weaknesses lead to inferior performance.
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Internal Analysis:
A Three-Step Process
1. Understand the process by which companies create value forcustomersand profit for themselves.
Resources
Capabilities
Distinctive competencies
2. Understand the importance of superiorityin creating value andgenerating high profitability.
Efficiency
Quality
3. Analyze the sources of the companys competitive advantage.
Strengthsthat are driving profitability
Weaknessesopportunities for improvement
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Business-Level Strategies
Cost leadership
Attaining, then using the lowest total cost basis as a
competitive advantage.
Differentiation Using product features or services to distinguish the
firms offerings from its competitors.
Market niche focus
Concentrating competitively ona specific market segment.
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Competitive Advantage :
Competitive Advantage A firms profitability is greater than the average profitability
for all firms in its industry.
SustainedCompetitive Advantage A firm maintains above average and superior profitability andprofit growthfor a number of years.
The Primary Objective of Strategyis to achieve aSustained Competitive Advantage
which in turn results inSuperior Profit and Profit Growth.
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Strategy, Resources, Capabilities,
and Competencies :
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Building Blocks of Competitive
AdvantageThe Generic
Distinctive CompetenciesAllow a company to:
Differentiate product offering
Offer more utility to customer
Lower the cost structure
regardless of the industry,its products, or its services
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1.Efficiency Measured by the quantity of inputs it takes to
produce a given output:
Efficiency = Outputs / Inputs
Productivity leads to greater efficiency and lowercosts:
Employee productivity
Capital productivity
Superior efficiency helps a company attain acompetitive advantage through a lower cost
structure.
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3.Innovation
Innovation is the act of creating new products or new processes
Product innovation
Creates products that customers perceive as more valuable
and
Increases the companys pricing options
Process innovation
Creates value by lowering production costs
Successful innovation can be a major source ofcompetitive advantageby giving a company
something unique, something its competitors lack.
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4.Responsiveness to Customers
Superior quality and innovation are integral to superior
responsiveness to customers.
Customizing goods and services to the unique demands of
individual customers or customer groups.
Superior responsiveness to customers differentiates acompanys products and services and leads to brand
loyalty and premium pricing.
Identifying and satisfying customers needs better thanthe competitors
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Analyzing Competitive
Advantage and Profitability
Competitive Advantage When a companies profitability is greater than the average of all other
companies in the same industry that compete for the same customers
Benchmarking Comparing company performance against that of competitors and the
companys historic performance
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Competitive Advantage :
The Value Creation Cycle
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Competitive Advantage:
The Value Creation Cycle
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Thank you!!!