Strategic Management CHPT 3 Flashcards
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Value-chain analysis
a strategic analysis of an organization that uses value creating activities.
Value is the amount that buyers are willing to pay for what a firm provides them and is measured by total revenue
The Limitations of SWOT Analysis
Strengths may not lead to an advantage
SWOT’s focus on the external environment is too narrow
SWOT gives a one-shot view of a moving target
SWOT overemphasizes a single dimension of strategy
Primary activities
contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after the sale.
inbound logistics, operations, outbound logistics, marketing and sales, and service
Support activities
activities of the value chain that either add value by themselves or add value through important relationships with both primary activities and other support activities
procurement, technology development, human resource management, and general administration
Inbound Logistics
Associated with receiving, storing and distributing inputs to the product
Location of distribution facilities
Warehouse layout and designs
Operations
Associated with transforming inputs into the final product form
Efficient plant operations
Incorporation of appropriate process technology
Efficient plant layout and workflow design
Outbound Logistics
Associated with collecting, storing, and distributing the product or service to buyers
Effective shipping processes to provide quick delivery and minimize damages
Shipping of goods in large lot sizes to minimize transportation costs.
Marketing and Sales
Associated with purchases of products and services by end users and the inducements used to get them to make purchases
Innovative approaches to promotion and advertising
Proper identification of customer segments and needs
Service
Associated with providing service to enhance or maintain the value of the product
Quick response to customer needs and emergencies
Quality of service personnel and ongoing training
Procurement
Function of purchasing inputs used in the firm’s value chain
Procurement of raw material inputs
Development of collaborative “win-win” relationships with suppliers
Analysis and selection of alternate sources of inputs to minimize dependence on one supplier
Human Resource Management
Activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel
Effective recruiting, development, and retention mechanisms for employees
Quality relations with trade unions
Reward and incentive programs to motivate all employees
Technology Development
Related to a wide range of activities and those embodied in processes and equipment and the product itself
Effective R&D activities for process and product initiatives
Positive collaborative relationships between R&D and other departments
Excellent professional qualifications of personnel
General Administration
Typically supports the entire value chain and not individual activities
Effective planning systems
Excellent relationships with diverse stakeholder groups
Effective information technology to integrate value-creating activities
Interrelationships among Value-Chain Activities within and across Organizations
Two levels
- Interrelationships among activities within the firm
- Relationships among activities within the firm and with other organization (e.g., customers and suppliers)
Resource-based view of the firm
perspective that firms’ competitive advantages are due to their endowment of strategic resources that are valuable, rare, costly to imitate, and costly to substitute.
Resource-based view of the firm
Two perspectives
The internal analysis of phenomena within a company
An external analysis of the industry and its competitive environment
Tangible resources
.
organizational assets that are relatively easy to identify, including physical assets, financial resources, organizational resources, and technological resources
Intangible resources organizational
assets that are difficult to identify and account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and repu
Organizational capabilities
The competencies and skills that a firm employs to transform inputs into outputs.
Firm Resources and Sustainable Competitive Advantages
First, the resource must be valuable in the sense that it exploits opportunities and/or neutralizes threats in the firm’s environment.
Second, it must be rare among the firm’s current and potential competitors.
Third, the resource must be difficult for competitors to imitate.
Fourth, the resource must have no strategically equivalent substitutes.
Sources of Inimitability
Physical uniqueness
Path dependency
Causal ambiguity
Social complexity
The Generation and Distribution of a Firm’s Profits
Four factors help explain the extent to which employees and managers will be able to obtain a proportionately high level of the profits that they generate
- Employee bargaining power
- Employee replacement cost
- Employee exit costs
- Manager bargaining power
Evaluating Firm Performance: Financial ratio analysis
Balance sheet Income statement Historical comparison Comparison with industry norms Comparison with key competitors
Evaluating Firm Performance: Stakeholder
perspective
Employees
Customers
Owners
Five types of financial ratios
Short-term solvency or liquidity Long-term solvency measures Asset management (or turnover) Profitability Market value
Financial Ratio Analysis
Historical comparisons
Comparison with industry norms
Comparison with key competitors
The Balance Scorecard
Provides a meaningful integration of many issues that come into evaluating a firm’s performance
The Balance Scorecard
Four key perspectives
How do customers see us?
What must we excel at?
Can we continue to improve and create value?
How do we look to shareholders?
Customer Perspective
Time
Quality
Performance and service
Cost
Internal Business Perspective
Processes Decisions Actions Coordination Resources and capabilities
Innovation and Learning Perspective
Introduction of new products and services
Greater value for customers
Increased operating efficiencies
Financial Perspective
Profitability Growth Shareholder value Increased market share Reduced operating expenses Higher asset turnover
Potential Limitations of the Balanced Scorecard
Lack of a clear strategy
Limited or ineffective executive sponsorship
Too much emphasis on financial measures rather than non-financial measures
Poor data on actual performance
Inappropriate links to scorecard measures to compensation
Inconsistent or inappropriate terminology
