Frameworks definitions Flashcards
Layers of the business environment
Macro
Industry (or sector)
Competitors (or market)
Organisation
Porter’s Value Chain
a sequence of activities through which the organisation’s inputs are transformed into valuable outputs
What does Porter’s Value Chain do?
Maps out an organisation’s process & identifies opportunities to increase value.
Wants to split final value into multiple activities so these can be properly distributed based on competitive advantage
How do you utilise Porter’s value chain?
- Identify key success factor of the business
2. Use Value Chain to identify Resources and Capabilities
Porter’s value chain primary activities vs support acitivities
directly add value to final product
Support activities indirectly add value to final product
Critique of value chain
- Hard to measure generated value from each component
- View organisations as just linear
- Better for manufacturing
- Created when being big was a key aspect to CA
- Less applicable to smaller businesses
- No distinction btw generic & distinct goods
Difference between value chain analysis and RBV
Value chain focuses on evaluating distribution & logistics, whilst RBV more grounded in economics
Value chain depicts all of the key
profit-building activities a company engages in.
- Inbound logistics
- Operations
- Outbound logistics
- Marketing
- Sales
- Service.
By analysing each step of value you create, you can figure out how to reduce your business’ costs or improve your ability to generate more revenue through marketing and sales.
Value Chain: By analysing each step of value you create, you can figure out how to
By analysing each step of value you create, you can figure out how to reduce your business’ costs or improve your ability to generate more revenue through marketing and sales.
RBV
certain assets with certain characteristics will lead to sustainable competitive advantage. All the traits are required to be present to result in a sustainable competitive advantage
Why is RBV good?
Every organisation is different which is why RBV is very powerful way of understanding organisations.
RBV outline
RBV relies on tangible & intangible resources that must be heterogenous or immobile and have VRIN attributes to become VRIN resources that provide CA
The RBV highlights that resources & capabilities are the interface
between strategy & the firm. Must implement a strategy based on the firm’s strengths
Profitiability under RBV is seen as key
to exploit one’s differences
Types of resources
- Tangible
- Intangible
- Human
RBV: Resources and capabilities lead to a CA when they are
Valuable
Rare
Imperfectly Imitable
Non-substitutable
SWOT internal
Strengths Weaknesses Opportunities Threats (attributes of the organisation)
SWOT external
(attributes of the environment) opportunities and threats
SWOT analysis points to
the importance of both external & internal factors in the understanding of sources & CA
Limitations of SWOT
- Strengths may not lead to an advantage
- Doesn’t prioritise issues or offer alternative solutions
- focus on the external environment is too narrow
- gives a one-shot view of a moving target
- overemphasizes a single dimension of strategy
- Potential for human error, people aren’t prevalent
Limitations of VRIN and RBV
Doesn’t provide a strategy
What must we note about all analyses?
No analysis is perfect. The most effective outcome can be achieved when used in conjunction with other frameworks.
LAN resources
Staff, aircraft, low cost model, expansive routes (oneworld alliance), combined cargo & passenger model, subsidiaries, strong leadership, reputation, brand image, longstanding history
RBC criticisms
- Fails to address and acknowledge that these resources do not exist and in isolation
- Fails to address the creation and development of resources
- Difficult to assignment what are resources
- Many times resource is also caught across multiple organisations
- Who owns?
o E.g. network, relationships - Documented?
- Simplified view of complex aspects of business
- Resources go through evolutions
- Silent to explain evolution
- Hold onto it! Important ability
Although a firm’s resources and capabilities may have added value in the past, changes in
customer tastes, industry structure, or technology can render them less valuable in the future
More commonly, changes in a firm’s environment may reduce the value of a firm’s resources in their current use, while
leaving the value of those resources in other uses unchanged. Such changes might even increase the value of those resources in those other uses.
Question of Value
Do a firm’s resources and capabilities add value by enabling it to exploit opportunities/neutralise them?