The internal context of strategy Flashcards
Resources are inputs to…
…an organisation’s production.
Three classifications of firm capital resources:
- Physical - location, equipment, access to raw materials
- Human - employee skills, intelligence, relationships
- Organisational - formal and informal planning, coordinating systems, informal internal and external relationships
(Barney, 1991)
Other intangible resources are:
- Reputation
2. Intelligence - R&D, patents
… resources tend to be more…
Intangible… important than tangible resources.
Intangible resources may enable a firm to conceive of and implement… that improve its…
….value creating strategies… efficiency and effectiveness (Daft, 1983)
When implementing a value creating strategy not… a firm is said to have a …
…simultaneously being implemented by current or potential competitors… competitive advantage.
Sustained competitive advantage is achieved when a firm is able to implement a value creating strategy and other firms are…
…unable to duplicate the benefits of this strategy.
In order to understand sources of SCA it must be assumed that firm resources may be…
- heterogeneous
2. immobile
For an organisation to have the potential of SCA it must have:
- Valuable resources
- Rare resource
- Inimitable resources
- Non-Substitutability
(ES - combine 3 and 4, and inlace of 4 have organisational support)
A resource is valuable if…
- They enable a firm to conceive of or implement strategies that improve its efficiency of effectiveness.
- Take advantages of opportunities and neutralise threats
- Provide value to customers
- Provide potential competitive advantages
- At a cost that allows an organisation to realise acceptable levels of return
A resource is rare if… . When the number of firms that possess the particular resource is less than… then the resource has the potential for…
…it enables a firm to implement a value-creating strategy not simultaneously implemented by a large number of other firms. …. the number needed to generate perfect competition… generating a competitive advantage.
e.g. managerial talent (Hambrick, 1987)
A resource is inimitable if…
…firms that do not possess them, cannot obtain them.
Inimitability may be due to:
- Unique historical conditions (path)
- Causal ambiguity - otherwise mangers can be hired away or their success can be systematically studied
- Social complexity - the interpersonal relations among managers in a firm
Non-substitutability refers to where two valuable firm resource are…
…not strategically equivalent, and cannot be exploited separately to implement the same strategies.
Substitutability can entail the substitute of…
a similar resource, or a different one. E.g. substitute a charismatic leader by a strategic planning process
How is organisational knowledge a VRIN factor?
V -
R
I -
N -
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A boundary condition for the RBV (VRIN) is
…high-velocity markets since it lacks the logic in change and underplays the difficulty in predicting the length of current advantage and sources of future advantage
What word could be used to explain the VRIN framework?
Hierarchical
Barney used three applications of the VRIN framework:
- Strategic planning
- Information processing systems
- Positive reputations
Resources are… , whilst capabilities are what…
…what you have, … you can do with what you have.
Core capabilities are… that an organisation possesses, which in turn allow it to…
clusters of activities… achieve competitive advantage
Henry (2008)
(This is essentially the RBV)
Capabilities are considered core if they… a company strategy.
…differentiate.
Leonard-Barton (1992)
For a capability to be core, four dimensions must be addressed:
- Technical systems
- Employee knowledge and skill
- Managerial systems
- Values and norms
How are technical systems:
- a capability
- a rigidity
- project managers tap into embedded knowledge to provide advantage in timing, accuracy, or amount of detail available
- skills and process captures in software becomes outdated
How is employee knowledge and skill:
- a capability
- a rigidity
- Where excellence in the dominant discipline then attracts professional elites
- Where less strength in non-dominant discipline does not attract individuals
How are managerial systems:
- a capability
- a rigidity
- Incorporate unusual blends of skills
2. Highly skilled people will be reluctant to fill a position that is under-utilised or undervalued
How are values and norms:
- a capability
- a rigidity
- Empowerment of project managers and location of responsibility to employees
- Where employees expect rewards, recognition, and freedom in return for dedication, and don’t receive then they may leave
Generic capabilities:
- Efficiency
- Quality
- Innovation
- Customer responsiveness
Benchmarking is used as a means of understanding how an organisation…
…compares with competitors.
Benchmarking approaches:
- Industry/sector
2. Best-in-class
The limitations of benchmarking:
- Surface comparisons - may fail to identify the reasons for relative performance
- Simply achieve competitive parity - may help organisations with competitive disadvantage, but to achieve CA an organisation needs to develop its own distinctive capabilities
Value chain analysis is used to… and which are not.
…help managers understand which activities are creating value…
(Benchmarking)
VCA can be divided into:
- Primary activities
2. Support activities
Primary activities:
- Inbound logistics
- Operations
- Outbound logistics
- Marketing and sales
- Service
Support activities:
- Procurement
- Technology development
- HR management
- Infrastructure
VCA can be used to analyse strategic capabilities in three ways:
- As a generic description of activities
- In analysing the competitive position using the VRIO criteria
- To analyse the cost and value of activities
The generic description of activities helps…
…managers identify beneficial clusters of activities
Can analyse the competitive position using the VRIO criteria:
V - which value-creating activities are especially significant for an organisation in meeting customer needs
R - whether the organisations value creation is rare
I - what aspects of the value chain are difficult to imitate because they are embedded
Can analyse the cost and value of activities:
- Identify which sets of activities best describe the operations of the organisation
- Which activities add most value, and which least
- How value and cost of of set of activities compare with the similar activities of competitors
- Where there is an imbalance between cost and significance of activity cost might be reduced without affecting value created for customer e.g. outsourcing, increase economies of scale or scope
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SWOT analysis generates… assesses…
…strategic options and… future courses of action.
Swot is most useful when…
…used comparatively, in relation to competitors
Other tools that support the:
1. internal analysis
2. external analysis
are:
- VRIN framework
2. PESTEL & Five Forces
Limitations of SWOT analysis:
- Long lists with no prioritisation
- Used as a substitute for detailed analysis - risks managers relying on preconceived and biased views, and will lack specificity
- Used to generate a final strategy
How to overcome limitations of SWOT:
- Scoring mechanism, consider strengths and weaknesses in relation to competitors, and consider opportunities and threats specific to the industry
- Should be used to summarise analysis
- Should only be used as a guide
TOWS matrix can be used to identify options that address…
a different combination of the internal factors.
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McKinseys interdependent factors:
Hard - easy to define and identify:
- Strategy - strategy statements
- Structure - organisation chart
- Systems - formal processes and IT
Soft - difficult to describe:
- Shared values
- Skills
- Style
- Staff
Management can directly influence…, whilst soft factors…
…hard factors, … are less tangible and more influenced by culture.
The 7S framework be be a… to gather data on which tour internal analysis of…
…useful structuring deice…resources, capabilities and value chains is based.
