Strategic Management Process Strategic Analysis External Analysis Internal Analysis Strategy Vision/Mission Objectives/G oals Arena Vehicle Differentiation Staging Economic Logic Supporting Organizational Arrangements Hambrick & Fredrickson (2001) Bundles….Bundles....! Resources COMPETITIVE ADVANTAGE CORE COMPETENCIES CAPABILITIES RESOURCES (TANGIBLE & INTANGIBLE)  Tangible  Easily observable and quantifiable  Intangible  Difficult to account for or imitate  Deep in firm’s history  Accumulate over time Tangible Resources  Easy to identify and quantify  Financial resources  Firm’s cash accounts  Firm’s capacity to raise equity  Firm’s borrowing capacity  Physical resources  Modern plant and facilities  Favorable manufacturing locations  State-of-the-art machinery and equipment  Technological resources  Legally protected trade secrets  Standardized production processes  Patents, copyrights, trademarks  Organizational resources  Formal evaluation and control systems  Formal reporting structure Intangible Resources  Difficult to account for or imitate  Human Resources  Experience and capabilities of employees  Trust built over the years  Managerial skills  Firm-specific practices and procedures (noncodified)  Innovation and creativity  Technical and scientific skills  Innovation capacities  Reputation  Brand name  Reputation with customers  Reputation with suppliers Capabilities and Core Competencies  Competencies or skills to transform inputs to outputs  Emerge over time through complex interactions among resources Scientists/Engineers  Some capabilities become core competencies  But, not all capabilities are core competencies. Now, discover core competencies…. Financial Resources Research Labs Patents R&D Capability History of Success Frameworks for Capability Discovery a. VRIN Criteria b. Value Chain Analysis In a nutshell….  Valuable: Neutralize threats and exploit opportunities  Rare: Not many firms possess  Inimitable: Historical/Cultural, Causal Ambiguity, and Social Complexity  Non-substitutable: No equivalent strategic resources or capabilities Support Activities General Management Finance Human Resources MIS Customer Value In-bound Logistics Operations Out-bound Logistics Primary Activities Marketing/Sales Follow-Up Service Where are the competencies? Design Sourcing/Procur ement Manufacturing and Assembly Inventory Management/D istribution (online) Store Operations and Sales Service Fulfillment Customer Use/Support (online) Store Operations and Sales Service Fulfillment Customer Use/Support Store Operations and Sales Service Fulfillment Customer Use/Support Warby Parker Value Chain Design Sourcing/Procur ement Manufacturing and Assembly Inventory Management/D istribution Other Eyewear Manufacturers Design Sourcing/Procur ement Manufacturing and Assembly Inventory Management/D istribution Typical Brick-n-Mortar Eyewear Retailers In-bound logistics Capabilities Effective sourcing strategies for raw materials and some assembly VRIN? VRIN Needs for Improvement Priority (H, M, L) Resource ? (Y, N) H N Priority (H, M, L) Resource ? (Y, N) Shortening delivery days (5 to 3) H Y Reducing inventory and delivery cost (Online) Store Operations/Sales Capabilities Effective use of logistics mgmt for sample delivery and purchase VRIN? VRIN Needs for Improvement Effective in-store customer service VR Providing eye-exam service M N Innovative merchandising VR Enhancing luxury images H Y Internal Analysis . The goal of this section is to identify strengths and weaknesses of your company relative to your competitors. Start with a brief introduction to this section that explains the analysis and identifies the subsections of the internal analysis. Each section that has multiple parts should also have a brief introduction to each section. You want to guide the reader through your paper. Your internal analysis should include five subsections (title each section clearly): 1. Similar to the industry section, begin this section with an introduction. Provide a brief description of the company that include the followings: a. Description of the company’s products or services b. Description of the customers c. Geographic location or regions of operations d. Description of the company’s size in terms of sales, number of employees, etc. e. Company’s history including the founding year and growth history/trend. 2. Clearly identify the vision/mission of the company. If the company does have a vision/mission statement, evaluate its effectiveness (does it address all the components we discussed in class that a vision/mission should?). However, If the company does not currently have a mission statement, note that as a weakness. You should plan to write one for the client and include it in the recommendations section. 3. Assess Performance: (3 steps) a. What is the company’s generic strategy and is it implemented well? Provide a brief discussion of what functional level strategies the company uses to fulfill its strategy. If the current strategy is not clear, identify issues and give examples of implementation problems. You can more fully discuss the success or shortcomings of the company in the VRIN or value chain analysis. You should propose how the company can better clarify and develop their strategy in the recommendations section. b. How well does the company meet the key success factors you identified in the external/industry analysis? You must refer back to the list of key success factors you identified in the industry analysis and rate your company on those factors. Please give examples of what your company does to fulfill KSF and examples of what competitors do better than your company. As you may cover some of content raised in this section later in the VRIN analysis or the value chain analysis, you can briefly address whether the company fulfills the key success factor, note your reasons and refer the reader to the section where this may be more fully discussed later in the company analysis. c. Conduct a financial analysis. In addition to looking at sales growth rates for the last three years, this analysis should include analysis using the four types of financial ratios for the same three-year period. Don’t just crunch the numbers here, you want to also analyze the trends and try to explain what is contributing to these trends. Don’t just present the numbers; discuss what they mean and what factors are affecting the numbers. 4. Identify resources and capabilities of the firm and evaluate them using the VRIN analysis. You have two basic approaches you can use to analyze resources and capabilities: a. One approach is to categorize resources and capabilities into four categories (physical, human, organizational, and financial) and assess each of these four types of resources and capabilities on each of the VRIN dimensions (value, rareness, imitability, nonsubstitutable). If you use this approach, you do not want to repeat the financial analysis in this section. For financial resources, focus more whether the financial resources that the firm has at is disposal (cash flow, equity/retained earnings, debt, outside investors for example) are sufficient to develop/pursue opportunities and sustain operating performance. By applying these dimensions to various resources and capabilities, strengths and weaknesses should become obvious. Core competencies that lead to a competitive advantage are those resources and capabilities that meet all four VRIN criteria b. An alternative approach is to utilize a value chain approach to classify strengths and weaknesses. To do this you will need to first identify what this company’s value chain looks like and then evaluate firm performance at each stage in the value chain (organizational infrastructure, human resource management, technology development, procurement, inbound logistics, operations, outbound logistics, marketing and sales, and service). If the traditional value chain does not reflect the activities of your company, you may have to redefine the value chain to reflect what your company does. For each stage, decide whether this value chain activity represents strength or weaknesses by applying the VRIN dimensions. Regardless of whether you use resources and capabilities or the value chain approach (or Both), you must make sure that you demonstrate how performance is affected. Demonstrate how a resource, capability, or value chain activity is a strength or weakness. For example, does the resource/capability/value chain activity hurt performance? Does it hurt efficiency? Does it weaken corporate culture? How does your company compare to competitors? In other words, you need to support your assertion that something is a strength or weakness. Be specific about how you know this is a strength or weakness. 5. Conclude this section with a summary of the strengths and weaknesses you have already identified and discussed throughout this section. If you haven’t discussed a strength or weakness in this section, you cannot include it on the list. Again, develop a list of strengths and weaknesses (maybe in bullet) that summarizes what you covered in the section of the company analysis-- mission, KSF, performance assessment or evaluation of resources and capabilities/value chain activities.
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