Week 2 - Analysing the environment and org capabilities.

Question 1

What is the external business environment, name it’s 2 aspects.

Answer 1

Factors outside the organisation that influence its strategy.

Macro- environment - general influences affecting an industry. Industry environment - Factors within industry affect profitability and competitive position of the organisations within it

Question 2

Describe the macro environmental factors.

(PESTLIED)

Answer 2

• P - political • E – economic • S – socio cultural • T - technology • L – legal • I - international • E - environmental • D - demographic

Question 3

Define industry What do we mean by an industry analysis?

Answer 3

The group of organisations or business units producing close substitutes The current and future trends that affect profitability or orgs within this group.

Question 4

An industry analysis is well represented by Porters 5 forces model. Porters measures the competitive tension within industry sectors to give an indication of overall competitiveness/profitability. What are the sectors.

Answer 4

o Rivalry of competitors or competing areas within the organisation. o Threat of new entrants to the market. o Threat of those selling substitutes. o Buying power of suppliers o Buying power of customers.

Profitability high when all 5 forces are low

Question 5

Industry life cycle (ILC) models aim to explain organisation and industry growth and decline over time. The stages, similar to the product life cycle are:

SGC MSD

Answer 5

Start up – small, different visions, different approaches.

Growth – gaining establishment. Growth rates cause rapid expansion.

Control – struggle to meet demand v longer term goals.

Maturity – proven track record, evening out. Shakeout – market gets selective & demanding. Decline – strategic planning needed. Competitive phase.

Question 6

What is competitive advantage?

Answer 6

A product is created in such a way as to be thought the most favourable in the minds of customers compared to similar offerings from competitors.

How is it created?

• Organisation applies capabilities to resources through activities.
• Those activities performed in a superior way create superior value for customers.
• This outperforms competing offerings and develops a sustainable competitive advantage.

Question 7

How do we define resources? (Tangible & intangible)

Answer 7

Resources - The tangible and intangible assets of the organisation.

Question 8

• How can we define capabilities?

Peter Says Ong

Answer 8

Processes, systems or organisational routines

coordinate an orgs. resources for productive use.

Question 9

What are strategic capabilities?

How do they relate to Competitive advantage?

Answer 9

• Those capabilities that create value for customers

In CA usually expressed as:

• Cost leadership, where products are sold cheaper than competitive offerings
• Differential advantage, when a firms products differ and are seen as better than the competition.

Question 10

• The VRIO framework is 4 tests indicative of a capability being a strategic capability. (All 4 tests must be passed). What are they?

Answer 10

•1. Valuable – capability worth more to a customer than it’s cost.

2. Rare - better / not present in competitors offerings?
3. Inimitable - difficult to imitate or substitute/replicate?
4. Organised to deliver - organisation can actually deliver the potential value and create the CA

Question 11

• What are dynamic capabilities? Give examples.

Answer 11

The ability to combine and re-combine existing resources, capabilities and strategic capabilities to create new strategic capabilities.

Examples:

1. Knowledge management - Management of knowledge within and between the learning cycles in an organisation. Increase spread of ideas to develop different outcomes is a dynamic capability.
2. Learning – can lead to decisions and new actions & is seen as an underlying dynamic capability.
3. Innovation - doing new things or doing things in a new way, drawing on knowledge and creativity to add value to products, services and processes

Question 12

• What are the elements of Leonard’s core technical capacity model?

PNEIL

PRO NEW EXP IMP LEA

Answer 12

Leonard states that 5 core technical capabilities are required to develop CA:

• problem solving
• new methodologies
• experimenting / prototyping
• importing technical knowledge f
• learning from market.

Question 13

• How can capability performance be measured?

II B CC

Answer 13

• Internal self-perception
• Intra-industry comparisons
• Benchmarking - comparing performance of an activity, system or process against that of the best in class organisation.
• Cost drivers and strategic cost analysis
• Competitive intelligence.

Question 14

Core ridgidities are strategic capabilities which become frozen, limiting necessary capability change.

What are Leonard’s 3 management behaviours that contribute?

Answer 14

1. Believe attacking core rigidities attacks economic foundation of organisation.
2. Believe attacking current strategic capabilities attacks power structure,
3. routines are ingrained. Habits govern behavior.

Question 15

Draw porters 5 forces.

Answer 15

Question 16

Draw the industry life cycle

Answer 16

Question 17

How is competitive advantae created?

Answer 17

• Organisation activities apply capabilities to resources
• Those activities hopefully create superior value for customers.
• Outperforms competing offerings and develops a sustainable competitive advantage.