Lecture 6 - Context of strategy: analytical tools Flashcards
What does VRIN stand for?
Value
Rarity
Inimitability
Non substitutability
When are strategic capabilities of value?
Take advantage of opportunities and neutralise threats
Provide value to customers
Provide potential competitive advantage
At a cost that allows an organisation to realise acceptable levels of return
Rare capabilities:
Possessed uniquely by one organisation or by a few others only, e.g. patented products, talented staff, powerful brand
Rarity can be temporary
- patents expire, key people leave
Inimitability
Capabilities that competitors find difficult to imitate, copy or obtain
Competitive advantage can be built on unique resources (key individual/IT system) but these may not be sustainable
Non-substitutability
Threat of substitution
Product or service substitution from a different industry/market
- e.g. postal services and email
R&C substitution, e.g. skill substituted by expert systems or IT solutions
What does SWOT stand for?
Strengths
Weaknesses
Opportunities
Threats
Internal SWOT analysis:
Identify firm level strengths and weakness
What supporting tools could be used for an internal SWOT analysis?
VRIN
7S McKinsey
External SWOT analysis:
Identity environmental opportunities and threats
What supporting tools could be used for an external SWOT analysis?
PESTEL
Porters 5 forces
Name 4 drawbacks of SWOT
Long lists with no attempt at prioritisation
Over generalisation
- sweeping statements often based on biased, unsupported opinions
Substitute for analysis
- it should result from detailed analysis
WOT is not used to guide strategy
- it is seen as end in itself
TOWS matrix
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What is benchmarking?
Means of understanding how an organisation compares with others
Name the 2 broad approaches to benchmarking
Industry/sector benchmarking
Best-in-class benchmarking
Name some of the tools that can be used in benchmarking
Financial ratios
Systems analysis
Value chain analysis
Who coined value chain analysis and in what year?
Porter, 1985
Porter, 1985
Value chain analysis
What is value chain analysis?
Tool that maps the sequence of events that lead to the company’s competitive advantage
- it helps determine strengths and weaknesses
- focuses on how activities add or lose value
Name two different approaches/strategies of value chain analysis
Cost advantage
Differentiation advantage
What is the cost advantage strategy/approach?
Approach used when organisations try to compete on costs and want to understand the sources of their cost advantage or disadvantage and what factors drive those costs
What is the differentiation advantage strategy/approach?
For firms that strive to create superior products or services
What are the 5 steps in cost advantage?
Step 1. Identify the firm’s primary and support activities.
Step 2. Establish the relative importance of each activity in the total cost of the product.
Step 3. Identify cost drivers for each activity.
Step 4. Identify links between activities.
Step 5. Identify opportunities for reducing costs.
What are the 3 steps in differentiation advantage?
Step 1. Identify the customers’ value-creating activities.
Step 2. Evaluate the differentiation strategies for improving customer value.
Step 3. Identify the best sustainable differentiation.
What 4 fundamental questions does VCA prompt?
Do the support activities truly add value?
Should we buy or make?
What linkages in the chain truly provide more than competitors?
How can the chain be reconfigured to either lower costs or increase customer benefits?
Name the 7S in the McKinsey framework
Strategy Structure Systems Style Staff Skills Shared values
How is the McKinsey 7S framework better than other analytical tools?
Provides useful overview tool of how different elements fit together
Does not focus in one area only
Considers the softer side of organisations, e.g style and shared values
Useful structuring device to gather the data on which analysis of resources, capabilities, value chains etc. is based
Questions for STRATEGY
What is the strategy?
How does the company intend to achieve its objectives?
How does the company deal with competitive pressure?
How are changes in customer demands dealt with?
How is strategy adjusted for environmental issues?
Questions for STRUCTURE
How is the company/team divided?
What is the hierarchy?
How do the various departments coordinate activities?
How do the team members organize and align themselves?
Is decision making and controlling centralized or decentralized? Is this as it should be, given what they are doing?
Where are the lines of communication? Explicit and implicit?
Questions for SYSTEMS
What are the main systems that run the organization? Consider financial and HR systems as well as communications.
Where are the controls and how are they monitored and evaluated?
What internal rules and processes does the organisation use to keep on track?
Questions for SHARED VALUES
What are the core values?
What is the corporate/team culture?
How strong are the values?
What are the fundamental values that the company/team was built on?
Questions for STYLE
How participative is the management/leadership style?
How effective is that leadership?
Do employees/team members tend to be competitive or cooperative?
Are there real teams functioning within the organization or are they just nominal groups?
Questions for STAFF
What positions or specializations are represented within the company?
What positions need to be filled?
Are there gaps in required competencies?
Questions for SKILLS
What are the strongest skills represented within the company/team?
Are there any skills gaps?
What is the company/team known for doing well?
Do the current employees/team members have the ability to do the job?
How are skills monitored and assessed?
Overall 7S questions
Are there gaps and inconsistencies between elements?
Are the shared values consistent with the structure, strategy, and systems? If not, what needs to change?
Hard elements (e.g. systems, structures). How well does each one support the others? Identify where changes need to be made.
Softer elements (e.g. style, skills). Do they support the desired hard elements?
Do they support one another? If not, what needs to change?
