1 / 20

INTERNAL ANALYSIS: DISTINCTIVE COMPETENCIES, SUSTAINABLE COMPETIVE ADVANTAGES & PROFITABILITY

INTERNAL ANALYSIS: DISTINCTIVE COMPETENCIES, SUSTAINABLE COMPETIVE ADVANTAGES & PROFITABILITY. Bus 189, Feb 10-12, 2014 CHAPTER 3, HILL & JONES DR. MARK FRUIN. PORTER VS. RESOURCE BASED VIEW OF THE FIRM. EXTERNAL ANALYSIS = INDUSTRY ANALYSIS

fifi
Download Presentation

INTERNAL ANALYSIS: DISTINCTIVE COMPETENCIES, SUSTAINABLE COMPETIVE ADVANTAGES & PROFITABILITY

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. INTERNAL ANALYSIS: DISTINCTIVE COMPETENCIES, SUSTAINABLE COMPETIVE ADVANTAGES & PROFITABILITY Bus 189, Feb 10-12, 2014 CHAPTER 3, HILL & JONES DR. MARK FRUIN

  2. PORTER VS. RESOURCE BASED VIEW OF THE FIRM • EXTERNAL ANALYSIS = INDUSTRY ANALYSIS • 5 FORCES MODEL = DESCRIBES, DOES NOT ANALYZE, INDUSTRY “DYNAMICS” • SUPERIOR INDUSTRY POSITION => COMPETITIVE SUCCESS • GENERIC COMPETITIVE STRATEGIES SUCCESS BASED ON INDUSTRY STRUCTURE & POSITION • INTERNAL ANALYSIS = ORG ANALYSIS FROM RESOURCE BASED POINT (RBV) OF VIEW • FIRM AS A COLLECTION OF RESOURCES • FIRM THAT BEST COMBINES, MOBILIZES & MANAGES RESOURCES WINS • RBV = R-C-C-DC (LONG TERM ORG PROCESS & CHANGE)

  3. DISTINCTIVE COMPETENCIES • INVOLVE MANAGERIAL CHOICE & DISCRETION • NO RISK, NO REWARD • EXECUTION (CARRY THROUGH) IS ALL IMPORTANT • INVOLVE CREATING SUPERIOR ORG PROCESSES • WHICH TAKE RESOURCES, TIME & EFFORT • WHICH RARELY OCCUR RIGHT AWAY & EASILY • WHICH INVOLVE AN INFINITE NUMBER OF FEEDBACK LOOPS, MORE CHOICES AND CONTINUOUS DISCRETION • NECESSARILY INVOLVE A MAJORITY OF ORG MEMBERS • STRATEGIC INTENT • STRETCH GOALS

  4. RESOURCES • TANGIBLE • INTANGIBLE • CREATE LITTLE VALUE UNLESS THEY ARE USED, SO USE RESOURCES • USING THEM, CONVERTS THEM INTO CAPABILITIES • CAPABILITIES ARE PRODUCTS OF FIRM STRUCTURE, PROCESSES & CONTROL SYSTEMS OR SO THE BOOK SAYS; ACTUALLY, IT’S THE REVERSE • THAT IS, DEDICATED RESOURCES (CAPABILITIES) CREATE STRUCTURES, PROCESSES & SYSTEMS • CAPABILITIES RESIDE NOT IN INDIVIDUALS, BUT ARE EMBODIED IN ORGANIZATIONS

  5. WHAT MAKES RESOURCES VALUABLE? • BOOKS SAYS, “RESOURCES ARE VALUABLE WHEN THEY ARE FIRM-SPECIFIC AND DIFFICULT TO IMITATE” • CONFUSING BECAUSE RESOURCES HAVE LITTLE VALUE ON THEIR OWN • WHEN RESOURCES ARE CONVERTED TO CAPABILITIES AND USED EFFECTIVELY = VALUE IS CREATED • OLYMPIC RING MODEL OF RESOURCE VALUE = SCARCITY, DEMAND, APPROPRIABILITY, NON- SUBSTITUTABILITY AND “ADHESABILITY”/ “ENABLING-ABILITY”

  6. GOOD NEWS & BAD NEWS • THE GOOD NEWS IS THAT RESOURCES BECOME VALUABLE TO THE EXTENT THEY ARE SPECIALIZED & DEDICATED • ASSET SPECIFICITY (GOOD ECONOMIST WORD) • THE BAD NEWS IS THAT RESOURCES ARE VALUABLE TO THE EXTENT THAT THEY ARE SPECIALIZED & DEDICATED • IF WRONG CHOICES MADE, HARD TO GO BACK • PATH DEPENDENCY; ESCALATING COMMITMENT • AS SOON AS YOU DRIVE OFF THE LOT, YOUR NEW CAR IS WORTH 20% LESS

  7. DYNAMIC CAPABILITIES • AS BUSINESS ENVIRONMENT CHANGES, CAPABILITIES & COMPETENCIES HAVE TO CHANGE TOO, • WE DON’T WANT ANY OLD CAPABILITIES, BUT DYNAMIC CAPABILITIES • CAPABILITIES THAT CAN BE ADAPTED TO CHANGING CONDITIONS • FLEXIBILITY, ADAPTABILITY, RESILIENCY • BUT ORGANIZATIONAL INERTIA MAKES FLEXIBILITY/ ADAPTABILITY HARD TO REALIZE, ESPECIALLY IN LIGHT OF INDUSTRY LIFE CYCLE CHANGES & HARD CHARGING FAST FOLLOWERS/LATE COMERS

  8. RBV AND VALUE CREATION PROFITABILITY BASED ON THREE FACTORS: -THE VALUE CUSTOMERS PLACE ON PRODUCT/SERVICE OFFERINGS -THE PRICE COMPANIES CHANGE FOR PRODUCTS -THE COSTS OF CREATING/MAKING/ DELIVERING THOSE PRODUCTS

  9. CONSUMER SURPLUS • PRICE CHARGED IS TYPICALLY LESS THAN UTILITY VALUE TO CUSTOMERS • “EXTRA” UTILITY FROM CUSTOMER PT OF VIEW = CONSUMER SURPLUS • THE MORE UTILITY THAT CONSUMERS GET FROM FIRM OFFERINGS, THE MORE PRICING OPTIONS FIRM HAS

  10. TOYOTA EXAMPLE • TOYOTA CREATES MORE UTILITY VALUE FOR CONSUMERS • FOUND IN HIGHER QUALITY, GREATER SATISFACTION & MORE INNOVATION • TOYOTA CAN CHARGE HIGHER PRICES THAN ITS RIVALS IN SPITE OF THE FACT THAT ITS COSTS ARE LOWER!! • FROM PORTER GENERIC COMPETITIVE STRATIES POINT OF VIEW, IS THIS COST LEADERSHIP OR DIFFERENTIATION?

  11. GENERIC COMPETITIVE STRATEGIES • COST LEADERSHIP OR LOWER COST STRUCTURES GIVES FIRMS MORE PRICING OPTIONS • DIFFERENTIATION CREATES MORE UTILITY/VALUE AND ALLOWS MORE PRICING CHOICES

  12. VALUE CHAIN • HOW ONE COMPANY’S INPUTS ARE CONVERTED INTO OUTPUTS • INTERCONNECTED CHAINS/SETS OF ACTIVITIES • FROM UPSTREAM TO DOWNSTREAM • PRIMARY VERSUS SECONDARY ACTIVITIES • R&D • PRODUCTION • MARKETING & SALES • CUSTOMER SERVICE

  13. VALUE CHAIN II • SUPPORT ACTIVITIES (OFTEN SHOWN AS A SECONDARY VALUE CHAIN) • IN MANY CASES, IT’S HARD TO DISTINGUISH PRIMARY AND SECONDARY ACTIVITIES; OLD IDEA ASSOCIATED WITH MFG FIRMS • IN KNOWLEDGE BASED FIRMS, WHAT’S PRIMARY AND SECONDARY? • LOGISTICS • HUMAN RESOURCES • INFORMATION SYSTEMS • COMPANY INFRASTRUCTURE • ORG STRUCTURE • CONTROL SYSTEMS • COMPANY CULTURE

  14. VALUE CHAIN III • WHAT BOOK DOESN’T SAY • LINKAGE & FEEDBACK BETWEEN STEPS IN VALUE CHAIN JUST AS IMPORTANT AS WHAT HAPPENS WITHIN STEPS • FIRST ORDER FIT • SECOND ORDER FIT • THIRD ORDER FIT • IN COMPLEX FIRMS, COMPLEX VALUE CHAINS • IN M-FORM FIRMS, FOR EXAMPLE, LITTLE DISTINCTION BETWN PRIMARY & SUPPORT ACTIVITIES; SAME FOR SERVICE INDUSTRIES

  15. BUILDING BLOCKS OF COMPETITIVE ADVANTAGE • = FUNCTIONAL LEVEL STRATEGIES • DON’T BE CONFUSED; SEE CHAPTER 4, NEXT CHPT • EFFICIENCY = OUTPUT/INPUT • EFFICIENCY NOT JUST IN PRODUCTION, BUT IN R&D, HR, LOGISTICS, SALES, ETC. • QUALITY AS EXCELLENCE & RELIABILITY • THERE’S A DIFFERENCE! • SOURCES OF QUALITY AS COMPETITIVE ADVANTAGE = POSTWAR JAPAN & TQM • KAIZEN OR CONTINUOUS IMPROVEMENT

  16. INNOVATION • PRODUCT INNOVATION • iPOD, INTEL PENTIUM CHIP • PROCESS INNOVATION • LEAN PRODUCTION OR TPS • WALMART’S IT-SYSTEM FOR INVENTORY CONTROL & LOGISTICS • INCREMENTAL INNOVATION • KAIZEN • KAIZEN X TIME = CONSIDERABLE, ACCUMULATED PROGRESS-->HARD TO REPLICATE COMPT. ADV. • TENDENCY TO OVERLOOK INCREMENTAL INNO IN FAVOR OF RADICAL & DISRUPTIVE INNOVATION • RADICAL INNOVATION • DISRUPTIVE (DISCONTINUOUS) INNOVATION

  17. COMPETITIVE ADVANTAGE AND PROFITABILITY • LEARN & ANALYZE DUPONT FORMULA • SLIGHTLY DIFFERENT BETWEEN APPENDIX, CHPT 1 & HOW TO DO CASE ANALYSIS CHAPTER • WHERE ROIC = NOPLAN/IC (depreciation + adjusted taxes) • ROIC (RETURN ON INVESTED CAPITAL) DECOMPOSED INTO TWO MAJOR COMPONENTS: • RETURN ON SALES • (NET PROFIT/SALES) • COGS/SALES • SG&A/SALES • R&D/SALES • CAPITAL TURNOVER • (SALES/INVESTED CAPITAL) • WORKING CAPITAL/SALES • PPE/SALES

  18. DURABILITY OF COMPETITIVE ADVANTAGE • OR SUSTAINABLE COMPETITIVE ADVANTAGE = DURABILITY or LONGEVITY • BARRIERS TO IMITATION • INDUSTRY DYNAMISM A BIG FACTOR • IMITATING/DUPLICATING RESOURCES IS HARD TO DO (RESOURCE ENDOWMENTS) • BEGIN WITH DIFFERENT RESOURCES • USE THEM IN DIFFERENT WAYS • DEVELOP THEM DIFFERENTLY • IMITATING CAPABILITIES IS EVEN HARDER TO DO • STRATEGIC COMMITMENTS (PATHWAYS) HARD TO IMITATE • A SEQUENCE OF CHOICES ALMOST IMPOSSIBLE TO IMITATE • ABILITY TO IMITATE MAY DEPEND ON ABSORPTIVE CAPACITY

  19. WHY COMPANIES FAIL • INERTIA • PRIOR STRATEGIC COMMITMENTS • TOO COMMITED TO PRIOR INVESTMENTS/DECISIONS • TOO INVESTED TO PULL OUT • TOO MYOPIC • ICARUS PARADOX (DANNY MILLER) • CRAFTSMEN (TOO ENGINEERING FOCUSED) • BUILDERS (TOO ENAMORED OF BUILDING) • PIONEERS (TOO FIXED ON BEING CREATIVE) • SALESMEN (TOO FOCUSED ON SELLING)

  20. STEPS TO AVOID FAILURE • FOCUS ON THE BUILDING BLOCKS OF COMPETITIVE ADVANTAGE (FUNCTIONAL LEVEL STRATEGIES) • INSTITUTE CONTINUOUS IMPROVEMENT AND LEARNING PRACTICES • TRACK INDUSTRY BEST PRACTICES & BENCH-MARKS (There may be a contradiction here; what is it?) • NOTION OF COMPETITIVE ADVANTAGES BASED ON DISTINCTIVE COMPETENCIES • UNUSUAL RESOURCES • UNUSUAL CAPABILTIES & COMPETENCIES • ESSENTIALLY, INIMITABLE; THUS, BEST PRACTICES MAY NOT BE REPLICABLE. NONETHELESS, BENCHMARKS R GOOD • OVERCOME INERTIA • BE LUCKY (RIGHT TIME, RIGHT PLACE)

More Related