Internal Organization Flashcards
competitive advantage
using core competencies to create a unique advantage that will allow you to maximize profitability and earn above average returns
cost advantage
process technology, size advantages, access to low-cost inputs
ex. Walmart
differentiation advantage
brands, product tech, marketing, distribution, service capabilities
ex. apple
core competencies
Firm’s distinct “talents”, “crown jewels”, processes perfected over time,
signature approaches to conducting business – distinguish a company
competitively and reflect its personality
what is an example of differentiation advantage
Apple
- Innovation based on R&D
- Customer Service
What is an example of cost advantage
Walmart
- Efficient logistics and distribution based on IS
- Size and scale advantages
What are some tools to conduct internal analysis?
- Resource Based View Approach
- Value Chain Analysis
- Strengths and Weaknesses analysis (SW part of the SWOT)
these create desired outcomes:
• Understand internal activities through which a firm achieves its current results
• Find the edge a firm might have over competitors and its sources
• Identify possible areas of improvement and devise corresponding strategies
describe the resource based view approach
analyzing financial, human, physical, tech, reputation, and organizational resources to determine strengths. Then looking at how these capabilities/strengths can become core competencies, and ultimately competitive advantage
TO CREATE A SUSTAINABLE COMPETITIVE ADVANTAGE, CORE COMPETENCIES MUST
MEET THE CRITERIA:
- VALUABLE
(Netflix vast selection of content vs. Blockbuster’s former vast physical distribution network) - RARE
(Coca-Cola & Pepsico have valuable but similar capabilities and struggle for decades to created an advantage) - COSTLY TO IMITATE
(Amazon’s online personalization of customer experience based on years of R&D and artificial intelligence) - NONSUBSTITUTABLE
(Dell pioneered cost-effective direct-to-consumer online sales model, but HP achieved the same cost savings through operational efficiencies)
describe value chain
Primary activities
- supply chain management
- operation
- distribution
- marketing and sales
- follow-up service
support activities
- finance
- HR management
- management IS
Value chain analysis is useful to:
▪ Identify firm’s activities that create value as well as spot those that don’t:
▪ ▪ The firm can then decide to either improve non-value creating activities, or outsource them to outside experts.
▪ Evaluate and critique pricing and profit margins that the firm established for its product / services.
▪ Recognize conflicting activities and make corrections to ensure alignment.
▪ Trace and understand the firm’s business-level strategy or lack thereof (next week’s topic).
outsourcing
purchase of a value-creating activity from an external supplier
when should firms outsource
Firms should outsource activities where they cannot create value or are at a substantial disadvantage compared to competitors
advantages of outsourcing
- Flexibility to change suppliers
- Predictability of costs by not having to run project internally
- Reduction in capital investment
- Improved quality when rely on expertise of another firm
- Ability to concentrate on core activities
concerns of outsourcing
• Limited control over outsourced functions
and completion timelines
• Limited differentiation
• Loss of domestic jobs when outsourcing overseas
• Risk of intellectual property theft
