Competitive Advantage Questions

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Read CH 3+ CH4 and figure 3.5 

1.Many companies announce in their corporate communications: ‘Our people are our greatest resource.’ In terms of the criteria listed in Figure 3.5 (from textbook), can employees be considered of the utmost strategic importance? 

2.The company ‘Apple’ has been highly successful in dominating the market for touch-screen tablet computers with its iPad product. Can Apple sustain its leadership in this market? If so, how?


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Resources and Capabilities ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 1 Learning Objectives By the time you have completed this topic you will be able to: •appreciate the role of a firm’s resources and capabilities play in formulating strategy; •identify and appraise the resources and capabilities of a firm; •evaluate the potential for a firm’s resources and capabilities to confer sustainable competitive advantage; •use resource and capability analysis to formulate strategies that exploit internal strengths while defending against internal weaknesses. 2 Structure of the session • The role of resources and capabilities in strategy formulation • Identifying the organization’s resources • Identifying the organization’s capabilities • Appraising resources and capabilities • Putting resources and capabilities analysis to work ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 3 Analysing resources and capabilities: the interface between strategy and the firm ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 4 Rationale for the Resource-based Approach to Strategy • When the external environment is subject to rapid change, internal resources and capabilities offer a more secure basis for strategy than market focus. • Resources and capabilities are the primary sources of profitability ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 5 The links among resources, capabilities and competitive advantage ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 6 Identifying resources RESOURCE Tangible Resources CHARACTERISTICS INDICATORS Financial Borrowing capacity Internal funds generation Debt/Equity ratio Credit rating Net cash flow Physical Plant and equipment: Size, location, technology flexibility. Land and buildings Raw materials Market value of fixed assets. Scale of plants Alternative uses for fixed assets Technology Patent, copyrights, know-how, R&D facilities Technical and scientific employees Number of patents owned Royalty income R&D expenditure R&D staff Reputation Brands, customer loyalty, company reputation (with suppliers, customers, government) Brand equity Customer retention Supplier loyalty Training, experience,adaptability, commitment and loyalty of employees Employee qualifications, Pay rates, turnover Intangible Resources Human Resources ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 7 Major firms with the highest valuation ratios, April 2014 Company Valuation Ratio Country Company Valuation Ratio Country Unilever (Hindustan) 46.6 India Alexion Pharma. 11.9 US Tesla Motors 37.7 US Starbucks 11.8 UK Colgate Palmolive 26.3 US ITC Ltd 11.7 India Altria 18.3 US Mastercard 11.4 US AbbVie 16.7 US Roche Holding 11.3 Swz Yum! Brands 15.4 US GlaxoSmithKline 11.0 UK Regeneron Pharma 15.0 US Salesforce.com 11.0 US Amazon 14.9 US Hermes Intl. 11.0 US British Sky Broadcasting 14.0 UK ARM Holdings 10.7 UK United Parcel Services 13.8 US CSL 10.6 Australia ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 8 The world’s most valuable brands, 2013 Rank Brand Brand Value $ Billion Change from 2009 (%) Country of Origin 1 Apple 98.3 +28 USA 2 Google 93.3 +34 USA 3 Coca-Cola 79.2 +2 USA 4 IBM 78.8 +4 USA 5 Microsoft 59.5 +3 USA 6 GE 46.9 +7 USA 7 McDonald’s 42.0 +5 USA 8 Samsung 39.6 +20 South Korea 9 Intel 37.2 -5 USA 10 Toyota 35.3 +17 Japan 11 Mercedes-Benz 31.9 +6 Germany 12 BMW 31.8 +10 Germany 13 Cisco 29.0 +7 USA 14 Disney 28.1 +3 USA 15 Hewlett-Packard 25.8 -1 USA 16 Gilette 25.1 +1 USA 17 Louis Vuitton 24.9 +6 France 18 Oracle 24.1 +9 USA 19 Amazon 23.6 +27 USA 20 Honda 18.5 +7 Japan n ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 9 Source: Interbrand Identifying organizational capabilities by function FUNCTION CAPABILITY EXEMPLARS CORPORATE FUNCTIONS Financial control Management development Strategic innovation Multidivisional coordination Acquisition management International management ExxonMobil, PepsiCo General Electric, Shell Google, Haier Unilever, Shell Cisco Systems, Luxottica Shell, Banco Santander MANAGEMENT INFORMATION Comprehensive, integrated MIS network linked to managerial decision making Wal-Mart, Capital One, Dell R&D Research Innovative new product development Fast-cycle new product development IBM, Merck 3M, Apple Canon, Inditex (Zara) OPERATIONS Efficiency in volume manufacturing Continuous improvements in operations Flexibility and speed of response Briggs & Stratton, YKK Toyota, Harley-Davidson Four Season Hotels PRODUCT DESIGN Design capability Nokia, Apple MARKETING Brand management Building reputation for quality Responsiveness to market trends Procter & Gamble, Altria Johnson & Johnson MTV, L’Oreal SALES AND DISTRIBUTION Effective sales promotion and execution Efficiency and speed of order processing Speed of distribution Customer service PepsiCo, Pfizer L. L. Bean, Dell Amazon.com Singapore Airlines, Caterpillar ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 10 Identifying resources and capabilities: Porter’s value chain ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 11 Hierarchy of organizational capabilities ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 12 Appraising resources and capabilities ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 13 Using resource and capability analysis to formulate strategy ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 14 Summary: a framework for analyzing resources and capabilities ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 15 The Nature and Sources of Competitive Advantage ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 1 Learning Objectives By the time you have completed this topic you will be able to: •understand the meaning of the term ‘competitive advantage’ and identify the circumstances in which a firm can create a competitive advantage over a rival •predict the potential for competition to wear away competitive advantage through imitation •recognise how resource conditions create imperfections in the competitive process that offer opportunities for competitive advantage •distinguish the two primary types of competitive advantage: cost advantage and differentiation advantage •identify potential sources of cost and differentiation advantage and recommend strategies to enhance competitiveness •appreciate the pitfalls of being ‘stuck in the middle’ and the challenge of achieving effective differentiation and low cost together ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 2 Emergence of Competitive Advantage ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 3 Competitive Advantage from Innovation: New Game Strategies • Strategic Innovation: Creating customer value from novel products, experiences or modes of product delivery. • Strategic innovation may involve: o Creating new industries, e.g. Xerox and plain paper copies; Craig McCaw and wireless telephone technology o Creating new customer segments, e.g. Apple established the market for home computers; the Nintendo Wii extended the market for video games to new types of customer o New sources of competitive advantage; novel approaches to creating consumer value, e.g. Dell Computer’s direct sales model; Cirque du Soleil’s reinvention of the circus ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 4 Sustaining Competitive Advantage: Types of Isolating Mechanism ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 5 Sources of Competitive Advantage ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 6 Features of Cost Leadership and Differentiation Strategies ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 7 Drivers of Cost Advantage ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 8 Value Chain Analysis of Cost Advantage 1. Disaggregate the firm into separate activities 2. Establish the relative importance of different activities with respect to the total cost of the product 3. Identify cost drivers and linkages within the value chain 4. Identify opportunities for reducing costs ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 9 Using the Value Chain Analysis to Explore Cost-Saving: Singapore Airlines Porter’s category Examples of airline activities that fit Porter’s categories Cost-saving opportunities and initiatives Inbound logistics Aircraft, fuel, food and drink Young fleet – the lower average age of SIA’s aircraft offer greater fuel efficiency. Staff are trained to reduce food and drink wastage. Operations Airport and gate operations, ticketing, flight scheduling, baggage handling, repair & maintenance SIA endeavors to reduce costs through improving efficiency and adopting best practices. Outbound logistics Flight connections, partnerships and alliances with other operators Routes are constantly being added and subtracted from the company’s route map to optimize load factors. Marketing & sales Promotion, advertising The company’s success in achieving awards provides free publicity and promotes the company and its brand. Service Pre and post flight service Firm infrastructure Management system – yield management, IT services, budgeting Online booking of meals and seats allows better forward planning. Social media provides a low cost means of building connections with customers. Small headquarters located in low-cost location. HRM Recruitment and Reward Training Training is in-house and delivered by senior cabin crew rather than third parties. Training emphasizes both attentive service and waste control. Technology development IT systems Non-strategic IT services outsourced to low-cost providers. Off-the shelf software systems purchased. Procurement Acquisition of aircraft and other inputs A culture of hard bargaining ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 10 Using the Value Chain to Identify Differentiation Potential on the Supply Side ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 11 Porter’s Generic Strategies ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 12 Stuck in the Middle: Porter’s Three Generic Strategies ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 13
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Running head: COMPETITIVE ADVANTAGE

Competitive Advantage
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COMPETITIVE ADVANTAGE
Question One

Yes, the employees are of utmost strategic importance. Without the employees, the
organization would not have performed as well. However, it is important to note that the employees
ought to have the capability and the skill that is needed. In this case, the employees had the skill
and the knowledge that was necessary for the innovations that led to the success of the company.
Employees are the ones who normally get the job done. They know the organization better and
they know what its goals are, therefore, they work towards them. The employees are also aware
of what will get the innovations or their projects done quickly. This means that for a company to
be successful it needs to have productive employees.
One of the other reason why the employees are of utmost importance is because of
communication. Employees normally have opinions to share a...


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Just what I was looking for! Super helpful.

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