str. management chapter 4

8/8/2019 Str. Management Chapter 4

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Chapter 4

Resource Based Approach organizationalanalysis

Motiur Rahman


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Chapter 4 2

Resource Based Approach organizational analysis

Resources: VRIO Framework

Resource : an asset, competency, process,controlled by an corporation

1. Values: Does it provide competitive

advantage?

2. Rareness: Do other competitors possess it?

3. Imitability: Is it costly for others to imitate?

4. Organization: Is the firm organized to exploit

the resources


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Chapter 4 3

Core Competencies and DistinctiveCompetencies

Core Competencies Things a corporation can do exceedingly well

Distinctive Competencies

Core competencies that are superior to those of

competitors


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Chapter 4 4

Using Resources to Gain CompetitiveAdvantage

1. Identify and classify firms resources in terms ofstrengths and weaknesses

2. Combine firms strength into core competencyand distinctive competency

3. Appraise the profit potential of these resourcesand capabilities for sustainable competitiveadvantage and the ability to harvest profitsresulting from the use these resources andcapabilities

4. Select the strategy that can best exploit thefirms resources and capabilities relative toexternal opportunities

5. Identify resource gaps in upgrading weaknesses


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Chapter 4 5

Determining The Sustainability Of An Advantage

1. Durability: The rate at which a firms underlying

resources and capabilities (core competencies)depreciate or become obsolete.

2. Imitability: The rate at which firms corecompetencies can be duplicated by others

Transparency: The speed with which other firmscan understand the relationship of resources andcapabilities supporting a successful firms strategy

Transferability: the ability of competitors to useduplicated resources and capabilities necessary to

support competitive challenge Replicability: is the ability of competitors to use

duplicated resources and to imitate the otherfirms success.


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Chapter 4 6

Types of Knowledge

1. Explicit knowledge:

Type of knowledge that can be easily articulatedand communicated

Competitive intelligence activities can easilyidentify and communicate

2. Tacit Knowledge:

Knowledge that cannot be easily communicated

It is deep rooted in employee experience andcorporate culture


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Chapter 4 7

Low(Easy to Imitate)

Level of Resource Sustainability

Slow-CycleResources

Standard-CycleResources

Fast-CycleResources

Strongly shieldedPatents, brand name

Gillette: Sensor razor

Easily duplicatedIdea driven

Sony: Walkman

Standardized massproduction

Economies of scaleComplicated processes

Chrysler: Mini-van

Continuum of Resources Sustainability

Source: Suggested by J. R. Wiliams, How Sustainable Is Your Competitive Advantage? CaliforniaManagement Review (Spring 1992), p. 33.

High

Hard to imitate


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Chapter 4 8

Typical Value Chain for a ManufacturedProduct

ProductProducer

Fabrication Distributor Retailer Raw

MaterialsPrimary

Manufacturing


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Corporate Value Chain

SupportActivities

Primary Activities

ProfitMargin

Firm Infrastructure(general management, accounting, finance, strategic planning)

Human Resource Management(recruiting, training, development)

Technology Development

(R&D, product and process improvement)

Procurement(purchasing of raw materials, machines, supplies)

InboundLogistics(raw

materialshandling andwarehousing)

Operations(machining,assembling,

testing)

OutboundLogistics(warehousing

anddistributionof finishedproduct)

Marketingand Sales(advertising,

promotion,pricing,channelrelations)

Service(installation,repair, parts)

Source: Adapted/reprinted with thepermission of the

The Free Press, an

imprint of Simon &Schuster, fromCompetitive

Advantage:Creating andSustaining SuperiorPerformance byMichael E. Porter, p.37. Copyright 1985 by Michael E.

Porter.


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Chapter 4 10

Steps in Corporate value chain analysis

1.Examine each product lines value chain in terms

of various activities involved in producing thatproduct or service.

Which activities can be considered corecompetency or weakness

Can any core competency be labeled asdistinctive competence

2.Examine the linkages within each productsvalue chain

Linkages are the connections between the way

one value activity is performed and the cost ofperformance of another activity

3.Examine the potential synergies among the valuechain different product lines/ businesses


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Chapter 4 11

Scanning Functional Resources

Functional resource includes: Financial

Physical

Human assets

Ability of people to formulate and implementfunctional objectives

Marketing

Operations

Human resources Information systems

Structure and culture


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Chapter 4 12

Basic Structures of Corporations:Simple and Functional

I. Simple Structure

II. Functional Structure

Owner-Manager

Workers

Top Management

Manufacturing Sales Finance Personnel


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Chapter 4 13

Basic Structures of Corporations: Divisional

III. Divisional Structure*

Manufacturing Finance Manufacturing Finance

Top Management

Product Division A Product Division B

Sales Personnel Sales Personnel


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Chapter 4 14

Strategic Business Unit

Independent product-market unit with:

1.Unique mission

2.Identifiable competitors

3.External market focus

4. Control of its business functions


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Chapter 4 15

Analyzing Corporate structure

1. How is the corporation structured at present:a) Is the decision making authority centralized ordecentralized

b) is it organized on the basis of functions,

projects, geography, or some combination of these

2. Is the current structure consistent with currentcorporate objectives, strategies, policies, as wellas with firms international operations

3. Summary : whether strength or weakness


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Chapter 4 16

Attributes of Corporate Culture

Corporate culture is the collection of beliefs,expectations, values learned and shared by acorporations members and transmitted from onegeneration of employees to another

Intensity: is the degree to which members of aaccept the norms, values, or other culture contentassociated with the unit

Integration: Is the extent to which units throughout an organization share a common culture.Breadth of culture


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Chapter 4 17

Functions of Corporate Culture

1. Conveys sense of identity

2. Generates employee commitment

3. Adds to organizational stability

4. Serves as a frame of reference


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Chapter 4 18

Analyzing Corporate Culture

1. Is there well defined or emerging culture composed

of shared beliefs, expectations and values

2. Is the culture consistent with current objectives,strategies, policies and programs

3. What is the cultures position on important issuesfacing the corporation ( that is, on productivity,quality of performance, adaptability to changingconditions, and internationalization

4. What is your overall assessment whether culture isan strength or weakness


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Chapter 4 19

Strategic Marketing Issues

Market position and segmentation(who are our customers)

Marketing mix

Product life cycle


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Chapter 4 20

Marketing Mix Variables

Product Place Promotion Price

Quality Channels Advertising List price

Features Coverage Personal selling Discounts

Options Locations Sales promotion Allowances

Style Inventory Publicity Payment

periods

Brand name Transport Credit terms

Packaging

Sizes

Services

Warranties

Returns

Source: Philip Kotler, Marketing Management: Analysis, Planning, and Control, 4th ed. (Englewood Cliffs,N.J.: Prentice-Hall, 1980), p. 89. Copyright 1980. Reprinted by permission of Prentice-Hall, Inc.

h d if l


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Chapter 4 21

The Product Life Cycle

Introduction Growth* Maturity Decline

Time

Sa

les

*The right end of theGrowth stage is oftencalled Competitive

Turbulence because of

price and distributioncompetition that shakesout the weakercompetitors. For furtherinformation, see C. R.Wasson, DynamicCompetitive Strategy andProduct Life Cycles, 3rd ed.(Austin, Tex.: Austin Press,

1978).


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Chapter 4 22

Analyzing Marketing Function

1. What are the corporations current marketing objectives,strategies and programs.

2. Are they consistent with the corporations mission,objectives, strategies, policies and with environment

3. How well the corporation performing in terms of analysis of

market position and marketing mix in both domestic andinternational markets

4. What percentage of sales comes from foreign operations?What are the current products in product life cycle

5. What trends emerge from this analysis

6. Does marketing provide with competitive advantage7. What is your overall assessment of strengths and

weaknesses of marketing function


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Chapter 4 23

R&D Mix

Basic R&D : Focus: theoretical problem areas

Indicator of capability: number of patents and researchpublications

Product R&D

Focus: Products and /or packaging improvements

Indicator of capability: number of successful newproducts introduced and profits coming from productsintroduced within 5 years

Process (Engineering) R&D Focus: Engineering concentrating on quality control,

development of design specifications and productionequipment

Indicator of capability: Consistent reductions in unitmanufacturing costs, number of product defects


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Chapter 4 24

Analyzing R&D Function

1. What are the corporations R&D objectives,strategies, policies and programs

2. Are they consistent with the corporations mission,

objectives, strategies

3. Is the mix of basic, applied and engineeringresearch appropriate given the corporate mission

and strategies.

4. What is your overall assessment of strengths andweaknesses of R&D function

T h l i l Di i i


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Chapter 4 25

Technological Discontinuity

What the S-Curves Reveal

Research Effort/Expenditure

In the corporate planning process, it is generally assumed that incremental progress in technology will occur. But past

developments in a given technology cannot be extrapolatedinto the future, because every technology has its limits. The

key to competitiveness is to determine when to shift re-sources to a technology with more potential.

MatureTechnology

NewTechnology

ProductP

erformance


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Chapter 4 26

Strategic Operations Issues

Develop and operate a system that will produce therequired number of products or services with certainquality, at a given cost, within allotted time

Manufacturing can be intermittent shop or continuous

In intermittent systems (job shop) the items aregenerally processed sequentially, but the work andsequence of the process vary.

Usually can be labor intensive, little automatedmachinery and thus a small fixed costs.


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Chapter 4 27

Strategic Operations Issues

It has fairly low break-even point , but its variable

cost line has a relatively steep slope. Because most ofthe cost associated with the product are variable , ajob shops variable cost is higher than the automatedfirms

Its advantage over other firm that it can operate atlow levels and still be profitable. In terms of strategythe firm should look for a niche for which it canproduce and sell reasonably small quantity of goods


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Chapter 4 28

Continuous systems are those laid out as lines on which

product can be continuously assembled or processed A firm using continuous system invests heavily in fixed

assets investments.

Its labor force is relatively small but highly skilled, earnssalaries rather than piece rate wages

This firm has high amount of fixed costs and relatively highbreakeven point, but variable cost line rise slowly. Thiscalled operating leverage, the impact of specific change insales volume on net operating income

The advantage of high operating leverage is that once firms

reaches break even its profits rises heavily Continuous systems reap the benefit of economies of scale

Its strategy, the firm should find high demand niche in themarket place for which it should produce and sell largequantities of goods


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Chapter 4 29

Experience Curve

Suggest that unit production cost declines by fixedpercentage ( commonly 20 30%) each time the total

accumulated production volume in units doubles The actual percentage varies by industry and is based

on many variables: the amount of time it takes a personto learn a new task, scale economies, product andprocess improvements, lower material costs.

Management commonly uses the experience curve inestimating the production cost

(1)A product never made before with present techniquesand processes

(2)Current products being produced by newly introducedtechniques or processes

Many firms use experience curve extensively, anunquestioning it could be risky and the experiencecurve may not hold true for a particular company for avariety of reasons

Flexible Manufacturing For mass


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Chapter 4 30

Flexible Manufacturing For massCustomization

The use of computer aided designs, computer

aided manufacturing, robot technology meansthat learning times are shorter and productscould be manufactured economically in smallcustomized batches called mass customization the low cost of production of individually

customized goods or services Economies of scope : common parts of the

manufacturing activities of the variousproducts are combined to gain economies ofscale, even though small number of productsare made to replace economies of scale

Flexible manufacturing: permits low volumeoutput of custom tailored products at arelatively low cost through economies of scope


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Chapter 4 31

Economies of Scale versus Scope

Economies of Scaleversus

Economies of Scope


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Chapter 4 32

Analyzing Operations/ Logistic Function

What are the corporations current manufacturing/ serviceobjectives, strategies, policies

Are they consistent with corporations mission, objectives,strategies, policies and with environment

What is the type and extent of operations capabilities of the

corporation? How much is done domestically versus internationally? Is

the amount of outsourcing appropriate to be competitive?

What is your overall assessment of corporations operationsin terms of strength or weaknesses


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Chapter 4 33

Analyzing Finance Function

What are the corporations current financialobjectives, strategies and policies

Are they consistent with the mission, andstrategies

How well the corporation performing in terms offinancial analysis ( Ratios, common sizestatements)

What trends emerge from this analysis

Does finance provide the company withcompetitive strategy

What is your overall assessment of corporationsstrengths and weaknesses in finance function


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Chapter 4 34

Strategic Financial Issues Ascertaining the best sources of funds, uses of

funds and control of funds A firms capital structure can influence strategic

choices

( Increased debts increase risk aversion anddecrease the willingness of management to invest

in R & D) Financial Leverage:

The mix of externally generated short-term andlong-term funds in relation to the amount andtimings of internally generated funds should be

appropriate to corporate objectives Financial leverage is helpful in describing how debt

is used to increase the earnings available tocommon shareholder


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Chapter 4 35

> when the company finances its activities by sales of

bonds or notes instead through stock, earning pershares are boosted:

- The interest paid on debt reduces taxable income , butfewer shareholders share profits than if the companyhad sold more stock to finance its activities

- The debt however raise the breakeven point abovewhat it would have been than if the firm had financedthrough internally generated funds

- High leverage may be perceived as corporate strengthin times of prosperity and ever increasing sales orweakness in times of recession and falling sales

- Research indicates that greater leverage has positiveimpact on performance for firms in a stableenvironment, but a negative impact on firms in dynamicenvironment


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Chapter 4 36

Capital Budgeting

Analyzing and ranking of possible investmentsin fixed assets in terms of additional outlaysand additional receipts that will result fromsuch investments

A good finance department will prepare such

capital budgets and rank them on someaccepted hurdle rate for the purpose ofstrategic decisions

Many firms will have more than one hurdlerate and vary as a function of the type of

projects being considered Projects with high strategic significance, such

as entering new markets or defending marketshare will often have low hurdle rates


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Chapter 4 37

Analyzing Information Systems

What are the corporations current ISobjectives, strategies, policies

Are they consistent with corporation smission objective, strategies and policies

How well the corporations IS performing interms of providing useful data base

What is your overall assessment of

corporations strengths and weaknesses ininformation systems

Internal Factor Analysis Summary (IFAS)


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Chapter 4 38

Internal Factor Analysis Summary (IFAS)

Internal Factors Weight Rating

Weighted

Score Comments

1 2 3 4 5

1.00

Strengths

Weaknesses

Total Weighted Score

Notes: 1. List strengths and weaknesses (510 each) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (NotImportant) in Column 2 based on that factors probable impact on the companys strategic position. The total weights must sum to1.00. 3. Rate each factor from 5 (Outstanding) to 1 (Poor) in Column 3 based on the companys response to that factor. 4. Multiplyeach factors weight times its rating to obtain each factors weighted score in Column 4. 5. Use Column 5 (comments) for rationaleused for each factor. 6. Add the weighted scores to obtain the total weighted score for the company in Column 4. This tells howwell the company is responding to the strategic factors in its internal environment.Source: T. L. Wheelen and J. D. Hunger, External Strategic Factors Analysis Summary (EFAS). Copyright 1991 by Wheelen and

Hunger Associates. Reprinted by permission.


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Prentice Hall,2000

Chapter 4 39

Internal Factor Analysis Summary (IFAS):

Maytag as Example

4.17Internal Factor Analysis Summary (IFAS): Maytag as Example (Table4.2)

Internal Factors Weight Rating

Weighted

Score Comments

1 2 3 4 5

1.00

Strengths

Quality Maytag culture

Experienced top management

Vertical integration Employee relations

Hoovers international orientation

Weaknesses

Process-oriented R&D

Distribution channels

Financial position

Global positioning

Manufacturing facilities

Total Weighted Score

Quality key to success

Know appliances

Dedicated factoriesGood, but deteriorating

Hoover name in cleaners

Slow on new products

Superstores replacing

small dealers

High debt load

Hoover weak outside the

United Kingdom and

Australia

Investing now

3.05

.15

.05

.10

.05

.15

.05

.05

.15

.20

.05

5

4

43

3

2

2

2

2

4

.75

.20

.40

.15

.45

.10

.10

.30

.40

.20


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Thank you

str. management chapter 4

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