Lecture 3 - Chp 5.pptx abu dhabi university

Editor's Notes

1. After reading this chapter, you should be able to: Apply the resource-based view of the firm to determine core and distinctive competencies Use the VRIO framework and the value chain to assess an organization’s competitive advantage and how it can be sustained Understand a company’s business model and how it could be imitated
2. After reading this chapter, you should be able to: Assess a company’s corporate culture and how it might affect a proposed strategy Scan functional resources to determine their fit with a firm’s strategy Construct an IFAS Table that summarizes internal factors
3. Organizational analysis is concerned with identifying, developing, and taking advantage of an organization’s resources and competencies.
4. Resources are an organization’s assets and are thus the basic building blocks of the organization. They include tangible assets (such as its plant, equipment, finances, and location), human assets (the number of employees, their skills, and motivation), and intangible assets (such as its technology [patents and copyrights], culture, and reputation. Capabilities refer to a corporation’s ability to exploit its resources. They consist of business processes and routines that manage the interaction among resources to turn inputs into outputs.
5. A core competency is a collection of competencies that crosses divisional boundaries, is widespread within the corporation, and is something that the corporation can do exceedingly well. When core competencies are superior to those of the competition, they are called distinctive competencies.
6. Barney, in his VRIO framework of analysis, proposes four questions to evaluate a firm’s competencies: 1. Value: Does it provide customer value and competitive advantage? 2. Rareness: Do no other competitors possess it? 3. Imitability: Is it costly for others to imitate? 4. Organization: Is the firm organized to exploit the resource?
7. Imitability is the rate at which a firm’s underlying resources, capabilities, or core competencies can be duplicated by others.
8. Transparency is the speed with which other firms can understand the relationship of resources and capabilities supporting a successful firm’s strategy. Transferability is the ability of competitors to gather the resources and capabilities necessary to support a competitive challenge. Replicability is the ability of competitors to use duplicated resources and capabilities toimitate the other firm’s success.
9. A value chain is a linked set of value-creating activities that begin with basic raw materials coming from suppliers, moving on to a series of value-added activities involved in producing and marketing a product or service, and ending with distributors getting the final goods into the hands of the ultimate consumer. See Figure 5–1 for an example of a typical value chain for a manufactured product.
10. The value chains of most industries can be split into two segments, upstream and downstream. A company’s center of gravity is the part of the chain where the company’s greatest expertise and capabilities lie—its core competencies.
11. Each corporation has its own internal value chain of activities. See Figure 5–2 for an example of a corporate value chain.
12. Porter proposes that a manufacturing firm’s primary activities usually begin with inbound logistics (raw materials handling and warehousing), go through an operations process in which a product is manufactured, and continue to outbound logistics (warehousing and distribution), to marketing and sales, and finally to service (installation, repair, and sale of parts). Several support activities, such as procurement (purchasing), technology development (R&D), human resource management, and firm infrastructure (accounting, finance, strategic planning), ensure that the primary value-chain activities operate effectively and efficiently.
13. Corporate value-chain analysis involves the following three steps: Examine each product line’s value chain in terms of the various activities involved in producing the product or service Examine the linkages within each product line’s value chain Examine the potential synergies among the value chains of different product lines or business units
14. Examples of basic organizational structures are simple, functional, divisional, strategic business units, and conglomerate.
15. Figure 5–3 illustrates three basic organizational structures. The conglomerate structure is a variant of divisional structure and is thus not depicted as a fourth structure.
16. Corporate culture is the collection of beliefs, expectations, and values learned and shared by a corporation’s members and transmitted from one generation of employees to another.
17. Cultural intensity is the degree to which members of a unit accept the norms, values, or other cultural content associated with the unit. This shows the culture’s depth. Cultural integration is the extent to which units throughout an organization share a common culture. This is the culture’s breadth.
18. Corporate culture fulfills several important functions in an organization: 1. Conveys a sense of identity for employees 2. Helps generate employee commitment to something greater than themselves 3. Adds to the stability of the organization as a social system 4. Serves as a frame of reference for employees to use to make sense of organizational activities and to use as a guide for appropriate behavior
19. Market position deals with the question, “Who are our customers?” It refers to the selection of specific areas for marketing concentration and can be expressed in terms of market, product, and geographic locations. Marketing mix refers to the particular combination of key variables under a corporation’s control that can be used to affect demand and to gain competitive advantage.
20. Marketing mix variables are product, place, promotion, and price. Within each of these four variables are several sub-variables, listed in Table 5–1, that should be analyzed in terms of their effects on divisional and corporate performance.
21. As depicted in Figure 5–4, the product life cycle is a graph showing time plotted against the sales of a product as it moves from introduction through growth and maturity to decline.
22. As depicted in Figure 5–4, the product life cycle is a graph showing time plotted against the sales of a product as it moves from introduction through growth and maturity to decline.
23. A brand is a name given to a company’s product which embodies all of the characteristics of that item in the mind of the consumer. A corporate brand is a type of brand in which the company’s name serves as the brand.
24. A corporate reputation is a widely held perception of a company by the general public.It consists of two attributes: Stakeholders’ perceptions of a corporation’s ability to produce quality goods A corporation’s prominence in the minds of stakeholders
25. The concept of financial leverage (the ratio of total debt to total assets) is helpful in describing how debt is used to increase the earnings available to common shareholders. Capital budgeting is the analyzing and ranking of possible investments in fixed assets such as land, buildings, and equipment regarding the additional outlays and additional receipts that will result from each investment. A good finance department will be able to prepare such capital budgets and to rank them by some accepted criteria or hurdle rate (for example, years to pay back investment, the rate of return, or time to break-even point) for the purpose of strategic decision making.
26. A company’s R&D intensity (its spending on R&D as a percentage of sales revenue) is a principal means of gaining market share in global competition. A company should also be proficient in technology transfer, the process of taking a new technology from the laboratory to the marketplace.
27. Basic R&D is conducted by scientists in well-equipped laboratories where the focus is on theoretical problem areas. Product R&D concentrates on marketing and is concerned with product or product packaging improvements. Engineering (or process) R&D is concerned with engineering, concentrating on quality control, and the development of design specifications and improved production equipment.
28. Over two-thirds of large U.S. companies are successfully using autonomous (self-managing) work teams in which a group of people works together without a supervisor to plan, coordinate, and evaluate their work. With cross-functional work teams various disciplines are involved in a project from the beginning. In a process called concurrent engineering, the once isolated specialists now work side by side and compare notes constantly to design cost-effective products with features customers want.
29. Virtual teams are groups of geographically and/or organizationally dispersed co-workers that are assembled using a combination of telecommunications and information technologies to accomplish an organizational task.
30. The use of virtual teams to replace traditional face-to-face work groups is being driven by five trends: 1. Flatter organizational structures with increasing cross-functional coordination need 2. Turbulent environments requiring more interorganizational cooperation 3. Increasing employee autonomy and participation in decision making 4. Higher knowledge requirements derived from a greater emphasis on service 5. Increasing globalization of trade and corporate activity
31. The knowledgeable human resource manager should be able to improve the corporation’s quality of work life by: Introducing participative problem solving Restructuring work introducing Innovative reward systems Improving the work environment
32. Human diversity refers to the mix in the workplace of people from different races, cultures, and backgrounds. An organization’s human resources may be a key to achieving a sustainable competitive advantage.
33. Information systems/technology offers four main contributions to corporate performance: Automation of back office processes Automation of individual tasks Enhancement of key business functions Development of a competitive advantage
34. Supply chain management is the forming of networks for sourcing raw materials, manufacturing products or creating services, storing and distributing the goods, and delivering them to customers and consumers.