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Business Management > Block 3: Internal environment analysis > Flashcards

Block 3: Internal environment analysis Flashcards

1
Q

The VRIN tests is used to test for which resources?

A

● Is the resource (or capability) competitively Valuable?
● Is the resource Rare—is it something rivals lack?
● Is the resource hard to copy (Inimitable)?
● Is the resource invulnerable to the threat of substitution from different types of resources and capabilities (Non-substitutable)?
● Is the COMPANY exploitable– is the organization structured, built and able to exploit the resources/capability?

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2
Q

What is SWOT analysis?

A
  • Is a powerful tool for sizing up a firm’s:
    ● Internal strengths (the basis for strategy)
    ● Internal weaknesses (deficient capabilities)
    ● Market opportunities (strategic objectives)
    ● External threats (strategic defences)
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3
Q

Define competence in relations to SWOT

A

Is an activity that a firm has learned to perform with proficiency—a true capability

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4
Q

Explain core competence in terms of SWOT

A

Is a proficiently performed internal activity that is central to a firm’s strategy and competitiveness

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5
Q

Explain distinctive competence in relation to SWOT

A

Is a competitively valuable activity that a firm performs better than its rivals

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6
Q

Discuss weakness (SWOT)

A
  • A weakness (competitive deficiency):
  • Is something a firm lacks or does poorly (in comparison to others) or a condition that puts it at a competitive disadvantage in the marketplace
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7
Q

State the types of weaknesses

A
  • Inferior skills, expertise, or intellectual capital
  • Deficiencies in physical, organizational, or intangible assets
  • Missing or competitively inferior capabilities in key areas
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8
Q

True or False

A firm’s strengths represent its competitive assets

A

True

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9
Q

True or False

A firm’s weaknesses are shortcomings that constitute competitive assets.

A

False

A firm’s weaknesses are shortcomings that constitute competitive liabilities.

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10
Q

Disclose the characteristics of market opportunities

A
  • An absolute “must pursue” market:
    ● Represents much potential but is hidden in “fog of the future”
  • A marginally interesting market:
    ● Presents high risk and questionable profit potential
  • An unsuitable or mismatched market:
    ● Is best avoided as the firm’s strengths are not matched to market factors
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11
Q

Disclose the type of threats to a firm’s future profitability that should be considered

A

● Identify the threats to the firm’s future prospects
● Evaluate what strategic actions can be taken to neutralize or lessen their impact

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12
Q

State the potential strengths and competitive assets

A
  • Competencies that are well matched to industry key success factors
  • Ample financial resources to grow the business
  • Strong brand-name image and/or company reputation
  • Economies of scale and/or learning and experience-curve advantage over rivals
  • Other cost advantages over rivals
  • Attractive customer base
  • Proprietary technology, superior technological skills, important patents
  • Strong bargaining power over suppliers or buyers
  • Resources and capabilities that are valuable and rare
  • Resources and capabilities that are hard to copy and for which there are no good substitutes
  • Superior product quality
  • wide geographic coverage and/or strong global distribution capability
  • Alliances and/or joint ventures that provide access to valuable technology, competencies, and/or attractive geographic markets
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13
Q

State potential weakness and competitive deficiencies

A
  • No clear strategic vision
  • No well-developed or proven core competencies
  • No distinctive competencies or competitively superior resources
  • Lack of attention to customer needs
  • A product or service with features and attributes that are inferior to those of rivals
  • Weak balance sheet, insufficient financial resources to grow the firm
  • Too much debt
  • Higher overall unit costs relative to those key competitors
  • Too narrow a product line relative to rivals
  • Weak brand image or reputation
  • Weaker dealer network than key rivals and/or lack of adequate distribution capability
  • Lack of management depth
  • Plague of internal operating problems or obsolete facilities
  • Too much underutilized plant capacity
  • Resources that are readily copied or for which there are good substitutes
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14
Q

Disclose potential market opportunities

A
  • Meeting sharply rising buyer demand for the industry’s product
  • Serving additional customer groups or market segment
  • Expanding into new geographic markets
  • Expanding the company’s product line to meet a broader range of customer needs
  • Utilizing existing company skills or technological know-how to enter new product lines or new businesses
  • Taking advantage of an adverse change in the fortunes of rival firms
  • Acquiring rivals firms or companies with attractive technological expertise or capabilities
  • Taking advantage of emerging technological developments to innovate
  • Entering into alliances or joint ventures to expand the firm’s market coverage or boost its competitive capability
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15
Q

Discuss potential external threats to a company’s future profitability

A
  • Increased intensity of competition among industry rivals - may squeeze profits margins
  • Slowdowns in market growth
  • Likely entry of potent new competitors
  • Growing bargaining power of customers or suppliers
  • A shift in buyer needs and tastes away from the industry’s product
  • Adverse demographic changes that threaten to curtail demand for the industry’s product
  • Adverse economic conditions that threaten critical suppliers or distributors
  • Changes in technology - particularly disruptive technology that can undermine the company’s distinctive competencies
  • Restrictive foreign trade policies
  • Costly new regulatory requirements
  • Tight credit conditions
  • Rising prices on energy or other key inputs
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16
Q

What is the payoff from SWOT analysis?

A

The conclusions about a company’s situation and the implications for strategy improvement that flow from the four lists.

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17
Q

Which signs show the firm’s competitive strength?

A
  • Its prices and costs are in line with rivals
  • Its customer-value proposition is competitive and cost effective
  • Its bundled capabilities are yielding a sustainable competitive advantage
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18
Q

True or False

The higher a firm’s costs are above those of close rivals, the more competitively vulnerable it becomes.

A

True

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19
Q

True or False

The greater the amount of customer value that a firm can offer profitably relative to close rivals, the less competitively vulnerable the firm becomes .

A

True

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20
Q

Explain the concept of a company value chain

A
  • Identifies the inner workings of the firm’s customer value proposition and business model
  • Permits a deep look at the firm’s cost structure and its ability to profitably offer low prices
  • Reveals the emphasis that a firm places on activities that enhance differentiation and support higher prices
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21
Q

What does the company’s value chain identify?

A

A company’s value chain identifies the primary activities and related support activities that create customer value

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22
Q

Explain value chain analysis

A

Facilitates a comparison, activity-by-activity, of how effectively and efficiently a firm delivers value to its customers, relative to its competitors

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23
Q

Explain the value chain analysis process

A
  • Segregates the firm’s operations into different types of primary and secondary activities to identify the major components of its internal cost structure
  • Uses activity-based costing to evaluate the activities
  • Does the same for significant competitors
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24
Q

What is the industry value chain?

A
  • The firm’s internal value chain
  • The value chains of industry suppliers
  • The value chains of channel intermediaries
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25
Q

What are the effects of the industry value chain?

A
  • Costs and margins of suppliers and channel partners can affect prices to end consumers
  • Activities of channel partners can affect industry sales volumes and customer satisfaction
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26
Q

State primary activities of value chain

A
  • Supply chain management
  • Operations
  • Distribution
  • Sales and Marketing
  • Services
27
Q

State secondary activities of value chain

A
  • Product R&D, Technology, and System development
  • Human resource management
  • General Administration
28
Q

Define benchmarking

A

Benchmarking is a potent tool for improving a company’s own internal activities that is based on learning how other companies perform them and borrowing their “best practices.”

29
Q

Explain benchmarking

A
  • Involves improving a firm’s internal activities based on learning from other firms’ “best practices”
  • Assesses whether the cost competitiveness and effectiveness of a firm’s value chain activities are in line with its competitors’ activities
30
Q

What are the sources of benchmarking information

A
  • Reports, trade groups, analysts, and customers
  • Visits to benchmark companies
  • Data from consulting firms
31
Q

True or False

Benchmarking the costs of a firm’s activities against those of rivals provides hard evidence of whether the firm is cost-competitive

A

True

32
Q

Which areas can improve the value chain system efficiency and effectiveness?

A
  • The firm’s own internal activity segments
  • The suppliers’ part of the value chain system
  • The forward channel portion of the value chain system
33
Q

How can value chain activities be improved internally?

A
  • Implement best practices throughout the firm, particularly for high cost activities.
  • Eliminate cost-producing activities altogether by redesigning products and revamping the internal value chain.
  • Relocate high-cost activities to areas where they can be performed more cheaply.
  • Outsource activities that can be performed by vendors or contractors more cheaply than if done in-house.
  • Invest in productivity-enhancing, cost-saving technological improvements.
  • Find ways to detour around activities or items where costs are high.
  • Redesign products or components to facilitate speedier and more economical manufacture or assembly
34
Q

How the customer value proposition effectiveness be improved and enhancing differentiation?

A
  • Implement best practices for quality of high-value activities.
  • Adopt best practices and technologies that spur innovation , improve design, and enhance creativity.
  • Implement the best practices in providing customer service .
  • Reallocate resources to activities having the most impact on value for the customer and their most important purchase criteria.
  • For intermediate buyers, gain an understanding of how the activities the firm performs impact the buyer’s value chain.
  • Adopt best practices for marketing, brand management , and enhancing customer perceptions.
35
Q

How can supplier related value chain activities be improved?

A
  • Pressure suppliers for lower prices. u Switch to lower-priced substitute inputs.
  • Collaborate closely with suppliers to identify mutual cost-saving opportunities.
  • Work with suppliers to enhance the firm’s differentiation.
  • Select and retain suppliers who meet higher quality standards.
  • Coordinate with suppliers to enhance design or other features desired by customers.
  • Provide incentives to suppliers to meet higher-quality standards, and assist suppliers in their efforts to improve.
36
Q

How can the value chain activities of distribution partners be improved?

A
  • Achieving cost-based competitiveness
    ● Pressure forward channel allies to reduce their costs and markups.
    ● Collaborate with forward channel allies to identify win-win opportunities to reduce costs.
    ● Change to a more economical distribution strategy, including switching to cheaper distribution channels.
37
Q

How to enhance differentiation through activities at the forward end of the value chain system?

A
  • Engage in cooperative advertising and promotions with forward channel allies.
  • Use exclusive arrangements with downstream sellers or other mechanisms that increase their incentives to enhance delivered customer value.
  • Create and enforce standards for downstream activities and assist in training channel partners in business practices
38
Q

True or False

Performing value chain activities with capabilities that permit the firm to either outmatch rivals on differentiation or on costs will give the firm a competitive disadvantage.

A

False

Performing value chain activities with capabilities that permit the firm to either outmatch rivals on differentiation or on costs will give the firm a competitive advantage.

39
Q

Explain supply chain management

A

Activities, costs, and assets associated with purchasing fuel, energy, raw materials, parts and components, merchandise, and consumable items from vendors; receiving, storing, and disseminating inputs from suppliers; inspection; and inventory management

40
Q

Elaborate on operations

A

Activities, costs, and assets associated with converting inputs into final products (production, assembly, packaging, equipment maintenance, facilities, operations, quality assurance, environmental protection)

41
Q

Discuss distributions

A

Activities, costs, and assets dealing with physically distributing the product to buyers (finished goods warehousing, order processing, order picking and packing, shipping, delivery vehicle operations, establishing and maintaining a network of dealers and distributors)

42
Q

What is sales and marketing?

A

Activities, costs, and assets related to sales efforts, advertising and promotion, market research and planning, and dealer/distributor support

43
Q

Discuss services

A

Activities, costs, and assets associated with providing assistance to buyers, such as installation, spare parts delivery, maintenance and repair, technical assistance, buyer inquiries, and complaints

44
Q

State the different secondary activities of value chain

A
  • Product research and development, technology, and systems development
  • Human resource management
  • General administration
45
Q

Explain product research and development, technology, and systems development

A

Activities, costs, and assets relating to product research and development, process R&D, process design improvement, equipment design, computer software development, telecommunications systems, computer-assisted design and engineering, database capabilities, and development of computerized support systems

46
Q

Explain human resources management

A

Activities, costs, and assets associated with the recruitment, hiring, training, development, and compensation of all types of personnel; labour relations activities; and development of knowledge-based skills and core competencies

47
Q

Explain general administration

A

Activities, costs, and assets relating to general management, accounting and finance, legal and regulatory affairs, safety and security, management information systems, forming strategic alliances and collaborating with strategic partners, and other overhead functions

48
Q

What does the company’s cost competitiveness depends on?

A

The costs of its own value chain but also on costs in the value chains of its suppliers and distribution-channel partners.

49
Q

Why is the supplier’s value chain relevant?

A

Suppliers perform activities and incur costs in creating and delivering the purchased inputs utilized in a company’s own value-creating activities.

50
Q

True or false

A

The costs, performance features, and quality of these inputs influence a company’s own costs and product differentiation capabilities

51
Q

Why is the value chain of a company’s distribution channel partners are relevant?

A

The costs and margins of a company’s distributors and retail dealers are part of the price the ultimate consumer pays and the activities that distribution allies perform affect sales volume and customer satisfaction.

52
Q

How can benchmarking be accomplished?

A
  1. Collect information from published reports, trade groups, and industry research firms or by talking to knowledge industry analysts, customers, and suppliers.
  2. Arrange field trips to facilities of competing or noncompeting companies to observe how things are done, compare practices and processes, and exchange data on productivity and other cost components.
  3. Hiring organizations to gather benchmarking data, distribute information about best practices, and provide comparative cost data without identifying the names of companies.
53
Q

Disclose the strategic options for remedying a cost/value disadvantage

A
  1. Improving internally performed value chain activities
  2. Improving the effectiveness of the customer value propositions and enhancing differentiation
  3. Improving supplier related value chain activities
  4. Improving distribution partners’ value chain activities
54
Q

Elaborate on the improving internally performed value chain activities

A
  • Implement best practices throughout the firm, particularly for high-cost activities.
  • Eliminate cost-producing activities altogether by redesigning products and revamping the internal value chain.
  • Relocate high-cost activities to areas where they can be performed more cheaply.
  • Outsource activities that can be performed by vendors or contractors more cheaply than if done in-house.
  • Invest in productivity-enhancing, cost-saving technological improvements.
  • Find ways to detour around activities or items where costs are high.
  • Redesign products or components to facilitate speedier and more economical manufacture or assembly.
55
Q

Explain improving the effectiveness of the customer value proposition and enhancing differentiation

A
  • Adopt best practices for quality, marketing, and customer service, brand management and enhancing customer perceptions.
  • Adopt best practices and technologies that spur innovation, improve design, and enhance creativity.
  • Reallocate resources to activities that address buyers’ most important purchase criteria.
56
Q

Explain improving supplier related value chain activities

A
  • Pressure suppliers for lower prices.
  • Switch to lower-priced substitute inputs.
  • Collaborate closely with suppliers to identify mutual cost-saving opportunities.
  • Work with suppliers to enhance the firm’s differentiation.
  • Select and retain suppliers who meet higher quality standards.
  • Coordinate with suppliers to enhance design.
  • Provide incentives to suppliers to meet higher quality standards, and assist suppliers in their efforts to improve.
57
Q

Elaborate on improving distribution partner’s value chain activities

A
  • Achieving cost-based competitiveness.
  • Pressure forward channel allies to reduce their costs and markups.
  • Collaborate with forward channel allies to identify win-win opportunities to reduce costs.
  • Change to a more economical distribution strategy, including switching to cheaper distribution channels.
58
Q

How can managers enhance differentiation through activities at the forward end of the value chain system?

A
  • Engage in cooperative advertising and promotions with forward channel allies.
  • Use exclusive arrangements with downstream sellers or other mechanisms that increase their incentives to enhance delivered customer value.
  • Create and enforce standards for downstream activities and assist in training channel partners in business practices.
59
Q

How can value chain activities relate to resources and capabilities?

A

When companies engage in a value-creating activity, they do so by drawing on specific company resources and capabilities.

60
Q

True or false

Performing value chain activities with capabilities that permit the firm to outmatch rivals on differentiation or costs will give the firm a competitive advantage.

A

True

61
Q

How to translate proficient performance of value chain activities into competitive advantage?

A
  1. Beat rivals by creating more customer value from value chain activities for a differentiation based competition advantage
  2. Beat rivals by conducting value chain activities more efficiently for a cost based competitive advantage
62
Q

Discuss beat rivals by creating more customer value from chain activities, for a differentiation-based competitive advantage

A
  • Company managers decide to perform value chain activities in ways that drive improvements in quality, features. performance and other differentiation enhancing aspects
  • Competencies gradually emerge in performing value chain activities that drive improvements in quality, features and performance
  • Company proficiency in performing some of these differentiation enhancing activities rises to the level of core competencies
  • Company proficiency in performing the core competencies continues to build and evolves into distinctive competence
  • Company gains competitive advantage based on superior differentiation capabilities
63
Q

Discuss beat rivals by conducting value chain activities efficiently for a cost based competitive advantage

A
  • Company managers decide to perform value chain activities in the most cost efficient manner
  • Competencies gradually emerge in driving down the cost of value chain activities
  • Company capabilities in performing certain value chain activities more efficiently rise to the levek of a core competencies
  • Company gains a competitive advantage based on superior cost lowering capabilities

Business Management (6 decks)

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