Chapter 5 - Organizational Strategy Flashcards
Resources
the assets, capabilities, processes, information, and knowledge that an organization uses to improve its effectiveness and efficiency, create and sustain competitive advantage, and fulfill a need or solve a problem
Resources are vital to an organization’s ________ because they can help companies create and _________________
Resources are vital to an organization’s strategy because they can help companies create and sustain an advantage over competitors.
competitive advantage
providing greater value for customers than competitors can
competitive advantage - example info
the newest iPod’s competitive advantages continue to come from its simple, attractive design relative to its price. But Apple’s most important advantage was being the first company to make it easy to legally purchase music online. Remember that prior to the iTunes store at iTunes.com; the only way to acquire digital music was by illegal file sharing. Apple negotiated agreements with nearly all of the major record labels to sell their music, and iTunes.com quickly became the premier platform for music downloading. Apple was a computer company, not a music company. Even so, it was able to use its resources to create a competitive advantage with an easy-to-understand site that provided free downloadable software for customers to use when organizing and managing their digital music libraries.Footnote What will Apple do now that Spotify is on the market, giving you unlimited songs for $10 per month?Footnote Well, “Apple Music” might be a strategic answer, and Apple has sold more than a billion iOS devices and maybe those iOS users will purchase Apple Music (also at $10/month).Footnote Even allowing for those Apple iOS devices no longer in use, and multiple devices owned by the same customers, that’s a lot of customers. Additionally, thanks to extremely high adoption rates of new iOS versions, those customers will automatically be exposed to Apple Music.Footnote Both companies are also trying to get strategic deals with automobile companies to have their systems installed as original equipment on new vehicles.
sustainable competitive advantage
a competitive advantage that other companies have tried unsuccessfully to duplicate and have, for the moment, stopped trying to duplicate
Sustainable competitive advantage is not the same as a long-lasting competitive advantage, although companies obviously want a competitive advantage to last a long time. Rather, a competitive advantage is sustained if competitors have tried and failed to duplicate the advantage and have, for the moment, stopped trying to do so. It’s the corporate equivalent of your competitors saying, “We give up. You win. We can’t do what you do, and we’re not even going to try to do it anymore.”
Jay Barney introduced the VRIO framework, which stands for four questions asked about a resource (or capability)
Is it valuable?
Is it rare?
Is it costly or difficult to imitate?
Is the firm organized to capture the value of the resources?
A resource or capability that meets all four requirements can bring sustained competitive advantage for the company.Footnote Exhibit 5.2 shows a graphical depiction of the VRIO framework.
Valuable resources
resources that allow companies to improve efficiency and effectiveness
Unfortunately, changes in customer demand and preferences, competitors’ actions, and technology can make once-valuable resources much less valuable. Also, for competitive advantage to be sustainable, the valuable resources must also be rare.
How can a company sustain a competitive advantage if all of its competitors have similar resources and capabilities?
rare resources are necessary in order to sustain a competitive advantage
rare resources
resources that are not controlled or possessed by many competing firms
When Apple introduced the iPod, it was unique. The technology that powered the iPod was readily available, however, so competitors were able to quickly imitate iPod’s basic storage capacity. As competitors began introducing iPod look-alikes, Apple released new models for the iPod Touch, Nano, or Shuffle, the iPad Air 2, and the iPad Mini 3. With Wi-Fi and two cameras, these latest devices have the ability to play on-demand songs, surf, text, make phone calls, or open Skype as long as you have an Internet connection through Wi-Fi or a G4 chip.
Imperfectly imitable resources
resources that are impossible or extremely costly or difficult for other firms to duplicate
Valuable, rare, imperfectly imitable resources can produce sustainable competitive advantage only if the firm is organized to capture the resources’ value.
The resources do not confer any advantage for a company if it’s not _________ to capture the value from them.
Valuable, rare, imperfectly imitable resources can produce sustainable competitive advantage only if the firm is organized to capture the resources’ value. The resources do not confer any advantage for a company if it’s not organized to capture the value from them.
A firm must organize its management systems, processes, policies, organizational structure and culture to be able to fully realize the potential of its valuable, rare, and costly to imitate resources and capabilities. Only then the companies can achieve sustained competitive advantage.
In order to produce sustainable competitive advantage, a company must have a ________.
In order to produce sustainable competitive advantage, a company must have a strategy.
With customers’ needs constantly growing and changing, and with competitors working harder, faster, and smarter to meet those needs, the first step in creating a strategy is to determine the need for ____________.
the first step in creating a strategy is to determine the need for strategic change.
In other words, the company should determine whether it needs to change its strategy to sustain a competitive advantage.
There’s a great deal of __________ in strategic business environments.
There’s a great deal of uncertainty in strategic business environments.
top-level managers are often _______ to recognize the need for strategic change, especially at successful companies that have created and sustained competitive advantages.
top-level managers are often slow to recognize the need for strategic change, especially at successful companies that have created and sustained competitive advantages.
top-level managers are acutely aware of the strategies that made their companies successful, so _______________________________
top-level managers are acutely aware of the strategies that made their companies successful, so they continue to rely on those strategies even as the competition changes.
success often leads to ________________
success often leads to competitive inertia
competitive inertia
a reluctance to change strategies or competitive practices that have been successful in the past
Besides being aware of the dangers of competitive inertia, what can managers do to improve the speed and accuracy with which they determine the need for strategic change? One method is to actively look for signs of ________________.
Besides being aware of the dangers of competitive inertia, what can managers do to improve the speed and accuracy with which they determine the need for strategic change? One method is to actively look for signs of strategic dissonance.
Strategic dissonance
a discrepancy between a company’s intended strategy and the strategic actions managers take when implementing that strategy
Strategic dissonance can indicate that managers are not doing what they should to carry out company strategy; but it can also mean that the intended strategy is out of date and needs to be changed.
A _______________ can help managers determine the need for strategic change.
A situational analysis can help managers determine the need for strategic change.
situational analysis (SWOT analysis)
an assessment of the Strengths and Weaknesses in an Organization’s internal environment and the opportunities and Threats in its external environment.
SWOT analysis helps a company determine how to increase ____________ and minimize ___________ while maximizing ____________ and minimizing external threats.
SWOT analysis helps a company determine how to increase internal strengths and minimize internal weaknesses while maximizing external opportunities and minimizing external threats.
It is important to note that external factors that are positive in nature are ________; negative external factors are called _________.
It is important to note that external factors that are positive in nature are opportunities; negative external factors are called threats.
The internal assessment often begins with an assessment of its ___________ and ____________
The internal assessment often begins with an assessment of its distinctive competencies and core capabilities
distinctive competence
what a company can make, do, or perform better than its competitors
For example, Consumer Reports magazine consistently ranks Toyota cars number one in quality and reliability. Similarly, PC Magazine readers ranked Apple’s desktop and laptop computers best in terms of service and reliability.
Core capabilities
the internal decision-making routines, problem-solving processes, and organizational cultures that determine how efficiently inputs can be turned into outputs
Distinctive competencies cannot be sustained for long without superior core capabilities.
Core capabilities - example
Offering Asian food products is a distinctive competency at T & T Supermarkets. At these stores, one can find every kind of Asian food imaginable. Most of the products T & T sells are exotic and unique. This company’s goal is to enrich the lives of Asian families in Canada by offering them choice foods and household items in a comfortable shopping environment. It also hopes to introduce the colourful Asian food culture to Canada’s multicultural society. “Freshness” is its most important operating value, one that it practises along with “customer satisfaction” to enhance its one-stop shopping convenience and personable service standards. This is an example of a focused differentiated approach. T & T Supermarkets is just one of Loblaw’s acquisitions that were meant to enhance Weston’s corporate strategy.
In a situational analysis, managers use ______________ to identify specific opportunities and threats that can either improve or harm the company’s ability to sustain its competitive advantage.
In a situational analysis, managers use environmental scanning to identify specific opportunities and threats that can either improve or harm the company’s ability to sustain its competitive advantage.
PESTEEL analysis
analysis of the Political, Economic, Social/demographic, Technological, Environmental, External-employee, and Legal factors that affect a company and shape the company’s strategy
Political forces include…
Political forces include government trade agreements, taxation, government ownership, and globalization issues.
Economic forces include…
Economic forces include interest rates, exchange rates, gross domestic product (GDP) and other general economic indicators, unemployment, and other factors over which a company has no control.
Social and demographic factors include…
Social and demographic factors include age, ethnicity, housing, purchasing psychometrics, and other changes or trends that affect consumer behaviours.
Technological factors include…
Technological factors include new processes, new methods, new discoveries, and new ways of communicating, again, none of which a company can control.
Environmental factors include…
Environmental factors include effect on climate, waste, impact on nature, air/water/ ground pollution, and energy usage.
External-employee factors include…
External-employee factors include concern for employees all the way down the chain (global suppliers), fair wages, providing healthy and safe work environments, providing workplaces free from harassment and discrimination, and employee assistance programs.
Legal factors would include…
Legal factors would include laws and regulations that affect companies, compliance with provincial and federal laws (labour laws), international law, and legal obligations for things like pipelines and mining in Canada or other countries.
