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Strategy Arc

STRATEGY

Environment

Firm

Search for resources and capabilities that provide the


firm with sustainable competitive advantage

Assumptions

All firms are alike and all firms are


different
Firms develop unique qualities based on
their history, experiences and strategies
Success of individual firms depends on
how well firms develop and utilize their
skills, resources, and capabilities to

create profits (provide value, control costs)


satisfy their stakeholders
create barriers to competitors

Internal Analysis
STRATEGY
Environment

Firm

Internal Analysis has two parts


1.

2.

Evaluation of the firms strategy to


determine how well the strategy
integrates the firm with the external
environment.
Systematic analysis of the skills,
resources, capabilities, and
competencies the firm utilizes to
support its strategy

Strategy

STRATEGY
Environment

Firm

Identify the strategy approach

Rational v. Emergent
Low Cost v. Differentiated v. Integrated
Broad v. Focused

Evaluate the effectiveness of the

strategy

Financial
Balanced Scorecard
Stakeholder

Models of Business
and Strategic
Management

STRATEGY

Environment

Traditional or IO Model

Stakeholder Model

Value Chain Model

Resource-Based View (RBV)

Firm

IO Model

Views the firm as an economic actor


responding to market forces
The external environment is the primary
determinant of success
Strategic decisions involve choosing
products and markets
Primary Tools:

Industry Analysis
Financial Ratios

Stakeholder Model

Views firm as an extended network of


relationships and dependencies
Key stakeholders determine sustainability
Primary Tools

Stakeholder Analysis
Financial Ratios

Value Chain Model

Views firm as a set of linked value


creating activities that transform inputs
into outputs
Market determine success
Strategic decisions involve creating
superior value at lowest cost
Primary Tools:

External Analysis
Value Chain Analysis
Financial Ratios

The Value Chain


General administration
Human resource management
Technology development
Procurement
Inbound
logistics

Operations

Outbound
logistics

Marketing
and sales

Service

Value-Chain Analysis

Firm is profitable to the extent the revenue


it receives exceeds the total costs involved
in creating its products or services
Value chain analysis involves

identifying key activities that support the firms


strategy
Evaluating the effectiveness of key activities

Compare the costs and value added of key activities


in the value chain
Benchmarking to compare key activities to
competitors
VRIN

Resource Based
View

Views firm as a unique collection of


resources and competencies
Unique characteristics of the firm
determine success
Strategic decisions involve creating and
sustaining competitive advantage
through core competencies
Primary Tools:

VRIN Analysis
Financial Ratios

Resource Based
Model
Firm converts inputs into outputs using
Resources: the assets available to a firm to
develop and implement value creating strategies

Tangible: assets the firm uses to create value


financial, physical, technological, organizational
Intangible: unique routines and practices that are
developed over time
human, creative, reputation, culture

Organizational Capabilities: the procedures and

processes the firm has developed to use its


resources effectively to achieve desired ends;
the ability to put resources to productive use

Core
Competencies
Competitive advantage is derived from unique
resources and capabilities.
Firms distinguish themselves from competitors
by developing Core Competencies

The resources of a firm that allow it to differentiate


its products or services from competitors

Core competencies are the basis for strategy and


competitive advantage

Core competencies are most effective when they


are based on intangible resources and
organizational capabilities

VRIN Analysis
To be a source of sustainable competitive
advantage, a resource must have four attributes:

Valuable: Allows the firm to differentiate


products/services and create unique value
Rare: Competitors do not have access to the
resource
Inimitable: Competitors cannot easily copy or
reproduce the resource
Nonsubsitutable: Equivalent resources that may
allow similar strategy are not readily available

VRIN Analysis

Identify key competencies


Construct a VRIN Table

Competen
cy

Valuable

Rare

Inimitabl
e

NonSub

Conclusion

Superior
Engineerin
g

Yes

No

No

Yes

Comp. Parity

Automate
d
Production

Yes

Yes

No

No

Temp. comp. adv.

Integrated
Design

Yes

Yes

Yes

Yes

Sustainable comp.
adv.

Look for combinations of capabilities


Assess strategic implications for success