Strategic Management - Chapter 4

Support activities (value chain analysis)

Firm activities that add value indirectly, but are necessary to sustain primary activities. Research and development (R&D). Information systems. Human resources. Accounting and finance. Firm infrastructure including processes, policies, and procedures.

The Rise and Fall of Groupon

A daily-deal website, offering group coupons that grew quickly 260 million subscribers, 500,000 merchants $6 billion buyout offer (Google 2011), was declined It was valuable, and rare, but not costly to imitate. More specialized local startups began Share price falls 90 percent from $26 to $2.63

Dynamic Capabilities (DC perspective)

A firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources over time in its quest for competitive advantage. DCs are essential to move beyond a short-lived advantage and create a sustained competitive advantage. For a firm to sustain its advantage, any fit between internal strengths and the external environment must be dynamic.

Value Chain Analysis

A firm's core competency is generally found in a network linking different but distinct activities, each contributing to the firm's strategic position as either a low-cost leader or differentiator.

Core Rigidity (The Dynamic Capabilities (DC) Perspective)

A former core competency that turned into a liability because the firm failed to hone, refine, and upgrade the competency as the environment changed.

Resource based view (RBV)

A model that sees certain types of resources as key to superior firm performance.

Social Complexity (Isolating Mechanisms)

A situation in which different social and business systems interact with one another.

Casual Ambiguity (Isolating Mechanisms)

A situation in which the cause and effect of a phenomenon are not readily apparent.

Resource Heterogeneity

Assumption in the RBV that a firm is a bundle of resources and capabilities that differ across firms.

Isolating Mechanisms

Barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy: Better expectations of future resource value. Path dependence. Causal ambiguity .Social complexity. Intellectual property (IP) protection.

Primary Activities (value chain analysis)

Firm activities that add value directly by transforming inputs into outputs as the firm moves a product or service horizontally along an internal value chain. Supply chain management Operations. Distribution. Marketing and sales. After-sales service.

SWOT Analysis

Framework allows managers to synthesize insights obtained from an internal analysis of the company's strengths and weaknesses (S and W) with those from analysis of external opportunities and threats(O and T) to derive strategic implications. In a first step, managers gather information for a SWOT analysis in order to link internal factors (Strengths and Weaknesses) to external factors (Opportunities and Threats). Next, managers use the SWOT Matrix to develop strategic alternatives. In the final step, the strategist needs to carefully evaluate the pros and cons of each strategic alternative.

Resource Immobility

The assumption in the RBV that a firm has resources that tend to be "sticky" and that do not move easily from firm to firm.

Dynamic Capabilities perspective

The firm must be able to change its internal resource base as its external environment changes. The goal should be to develop resources, capabilities, and competencies that create a strategic fit with the firm's environment. Rather than creating a static fit, the firm's internal strengths should change with its external environment in a dynamic fashion. Not only allow firms to adapt to changing market conditions, but they also enable firms to create market changes that can strengthen their strategic position. A model that emphasizes a firm's ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage.

Resource Stocks (DC perspective)

The firm's current level of intangible resources.

Resource Flows (DC perspective)

The firm's level of investments to maintain or build a resource.

Value Chain

The internal activities a firm engages in when transforming inputs into outputs; each activity adds incremental value .•Primary activities directly add value •Support activities add value indirectly

VRIO Framework

Theoretical framework that explains and predicts firm-level competitive advantage.

W-T column

derive "defensive" alternatives by eliminating or minimizing an internal weakness in order to mitigate and external threat.

S-O quadrant

derive "offensive" alternatives by using an internal strength to exploit and external opportunity.

W-O column

focus here in shoring up and internal weakness to improve ability to take advantage of an external opportunity.

Intangible resources

invisible, no physical attributes culture knowledge brand equity reputation intellectual property: patents, designs, copy rights, trademarkes, trade secrets

A resource is organized to capture value if

oAn effective strategy/structure relation exists. oThe characteristic of having in place an effective organizational structure, processes, and systems to fully exploit the competitive potential of the firm's resources, capabilities, and competencies.

A resource is costly to imitate if

oFirms that do not possess the resource are unable to develop or buy the resource at a reasonable price. oIf the resource is valuable, rare, and costly to imitate, then it is an internal strength and a core competency.

A resource is valuable if

oIt enables the firm to exploit an external opportunity. oIt enables the firm to offset an external threat. oIt enables a firm to increase its economic value creation (V - C).

A resource is rare if

oOnly one or a few firms possess it. oThe number of firms that possess it is less than the number of firms it would require to reach a state of perfect competition.

S-T quadrant

use an internal strength to minimize the the effect of an external threat.

Tangible resources

visible, physical attributes labor capital land buildings plant equipment supplies

Intellectual Property (IP) Protection (Isolating Mechanisms)

•A critical intangible resource that can provide a strong isolating mechanism, and thus help to sustain a competitive advantage. •Can make direct imitation attempts difficult, if not outright illegal.

Path Dependence (Isolating Mechanisms)

•A situation in which the options one faces in the current situation are limited by decisions made in the past.

Resources

•Any assets that a firm can draw in when formulating and implementing strategy.

Better Expectations of Future Resources (Isolating Mechanisms)

•Better expectations—sometimes firms acquire a resource at a low cost which lays the foundation for competitive advantage and more a greater resource future value.

Activities

•Distinct and fine-grained business processes that enable the firm to add incremental value by transforming inputs into goods and services.

Capabilities

•Organizational and managerial skills needed to orchestrate a diverse set of resources and deploy them strategically.

Core Competenices

•Unique strengths, embedded deep within a firm, that are critical to gaining and sustaining competitive advantage.