week 3 internal env Flashcards
Firms share the same industry conditions but can generate above average returns in their industry why?-
how the firm runs inside the org
The way of earning above average returns
Cost advantage: processes tech, size advantages, access to low cost inputs (walmart )
Differentiation advantage: brands, product tech, marketing, distribution and service capabilities (apple)
core competencies
firms distinct talents aka crown jewels, processes perfected over time, signature approaches to conducting business, distinguish a company comoeitivey and reflect its personality
tools to conduct internal analysis
Resource based view approach
Value chain analysis
Strength and weaknesses analysis (SW part of the swot)
desired outcome to conducting internal analysis
We want to understand internal activities
Want to find the edge a firm might have over competitors
Identify possible areas of improvement and devise corresponding strategies
what are the six resources
financial, human, physical, technological, reputation, organizational
financial
could be related to a parent company that already has capital to aide
Human Resources
may have the best talent , related to the financial resources (if you oay more you attract better people), can the firm retain talented employees
physical resources
doesn’t apply to all companies, some may have factories or facilities ex: amazon invests millions into robots at their huge fulfillment centers, another could be Starbucks with its vast network of prime locations
technological
any tech development, patents, copyrights, intellectual property, online platforms
reputation resources
some companies have a powerful brand (can sell more bc of the brand, sell products at a higher price )
organizational resources
the way the company is set up, the way its made into teams and divided up, if it has geographical presence all over the world
All 6 are interlinked
what do resources lead to
capabilities (strengths)
what do capabilities lead to
core competencies
what are the different criteria that a capability needs to be in order to be a core competency
rare, valuable, costly to imitate, nonsubstituabe
valuable
valuable ex: Netflix vast selection of content vs blockbusters former vast physical distribution network
A core competency must provide value to the firm by allowing it to exploit opportunities or neutralize threats in the marketplace. A competency is valuable if it helps the company:
Lower costs or increase revenue.
Meet customer needs more effectively than competitors.
Improve efficiency or differentiation, which can result in a competitive advantage
rare
Needs to be rare, coca-cola and PepsiCo have valuable but similar capabilities and have struggled for decades to create an advantage. They Compete on marketing and being more available
few companies have it
costly to imitate
If you have an advantage that is easy for competitors to copy, not good and not sustainable
Amazon has perfected customer experience, has invested tons in technology and personalized recommendations
non substitutable
Not have any strategic equivalents
Dell pioneered a cost-effective direct-to-consumer online sales model, but HP achieved the same cost savings through operational efficiencies
value chain analysis
allows us to dissect the companies activities internally to see which activities create value
two sets of core activities in value chain?
support and core activities
core activities
Supply chain management→ the quality suppliers deliver to you, etc
Operations→ how you transform the raw materials into the finished product, ho wwe add to the quality
Distribution→ how we get our finished product to consumers or other businesses: online, retail stores, etc
Marketing and sales: how the company does its marketing (does it hire externally and complete its marketing internally)
Follow-up service: repairs, warrantees, etc
surooting activities
finance: how the company manages finances, could add value
Human resource management: need talent to execute
Management information systems: what tech are we using to support our main activities
resourced based view
looking at different aspects, not to miss anything, looking at how much better the resources are and if they serve as a competitive advantage
Value chain analysis is useful to:
Identify firms activities that create value as well as spot these that dont→ 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
what is outsourcing
purchase of a value creating activity from an external supplier. Firms should outsource activities where they cannot create value or are at a substantial disadvantage compared to competitor
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 activity
find posies really interesting attributes
disadvantage of outsourcing
limited control over outsourced functions and completion timelines
Limited differentiation
Loss of domestic jobs when outsourcing overseas
Risk of intellectual property theft
Lucy loves losing ryon
