Manjemen

Stratejik

Universitas Indonesia
Fakultas Ilmu Sosial dan
Ilmu Politik
Program Pasca Sarjana
Komunikasi
Topik Assessing the Internal Environment of the Firm
a. Value Chain Analysis
b. Resource Base View of the Firm
c. Evaluating Firm Performance Two approach

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Instruktur :Henry Faizal Noor

Email : dika1708@Yahoo.com
Henry.faisal@ui.ac.id
2014
Henry F Noor.doc

Kegiatan Ekonomi Masyarakat dan Investasi

Deman
d

Keinginan
(Wants)

KONSUMEN

PEMUASAN

Kebutuhan
(Needs)

SUMBER
PENDAPATAN

KONSUMSI
Barang

SuppPRODUKSI
ly

Dimulai
dengan
investasi
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Barang
dan jasa
Publik
Oleh Negara
merupakan
Tugas dan
Kewajiban
Negara
Melayani
Masyarakat
Henry F Noor.doc

Jasa

Barang dan
Jasa
Privat
Oleh
Swasta
merupakan
PELUANG
USAHA
(BISNIS)

MENCARI
LABA

Bisnis : Adalah kegiatan memproduksi barang dan jasa untuk memuaskan

konsumen

dan pihak terkait lainnya, (stakeholder) dalam rangka

laba. Bisnis
=fungsimelaksanakan
(laba).
Bagaimana
Bisnis

mencari

agar tujuan dapat

dicapai ?
Manejemen Sumber Daya
* Manusia
* Keuangan, dll

Aktivitas

Manejemen Usaha

Manejemen Kegiatan
* Produksi
* Pemasaran, dll

Memerlukan berbagai jenis informasi

Bagaimana berbisnis

Alat untuk menilai

Apakah Tujuan tercapai ?

* Perencanaan *Pelaksanaan
Perlu Informasi Keuangan
Informasi Pemasaran

Pencatatan ---- > Akuntansi

Informasi Teknologi

Pengolahan - Akuntansi

Informasi Sumberdaya lainnya

Strategic Planning
Strategy :large-scale action plan that sets the direction for an organization
Strategic management : process that involves managers from all parts of
the organization in the formulation and the implementation of strategies and
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3
strategic goals

Hubungan dgn Pelanggan

Moral
Judgment
Hubungan
dgnHarga,
Konstituent
Perasaan
Penetapan
Janji
What
mydan
feelings
tell me
Iklan
Promosi,
Normatif
Komitmen
Pelayanan
Is right

Hubungan dg
Hubungan
dg
Merupakan
Stakeholder lainnya
Nilai Nilai
Luhur
Stakeholder
lainnya
Standar

Etika

Pemerintah (aturan, pajak)

Golden Rule
merintah
Masyarakat
dan Lingkungan
Moral
Masyarakat kehidupan
dan Lingkungan
Calon pendukung
bermasyarakat
Pemasok

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Hubungan
Partai
Sesuaidg
dengan
Hubungan
dg
Pekerjalain

Bersifat
Ajaran
agama
Komunikasi
Kondisi
kerja,
UNIVERSAL
In accord
with my
Kemitraan
Hak
Pekerja

Religious believed

Penyusunan Rencana Strategis

VISI
Misi

Tujuan
External
Analysis

Rumusan
Strategi
Corporate
Business-unit
Functional
Operating

Internal
(Compan
y)
Analysis

Implementasi

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Pengendal
ian
&
Pengawas
an

Henry F Noor.doc

ON : What we are going To be

Kemampuan untuk melihat inti persoalan

Pandangan, Wawasan
Pengamatan, Penglihatan
Arah tentang masa depan
Guiding Star, Core Values, Beliefs

Sense of beliefs, values

Sense of purpose
Sense of mission

1. engages our hearts and our spirits

EY ELEMENT
2. It
taps
KEY
ELEMENTOF
OFAAVISION:
VISION:
Itis
isinto embeded concerns and needs
3. is an assertion of what we and our colleagues want to create
4. provides meaning to the work that people in the organization do
5. is simple
6. is a living document that can always be modified
7. is a starting place for increasing levels of specificity
8. is based on two deep human needs : quality and dedication

ON
ON STATEMENT
STATEMENT ::(VALUE,
(VALUE,MISSION,
MISSION,AND
ANDGOALS)
GOALS)IS
ISSHOWN
SHOWNSISTIMATICA
SISTIMATIC

USTOMER SERVICE

EXCELENCE

INNOVATION

Proud To be Trust

INTEGRITY

on without action is a daydream, Action without vision is a nightmare. (Japanese Proverb)

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MISSION
MISSION :: What
What should
should we
we do
do to
to reach
reach the
the Vi
Vi
COMPONENTS
COMPONENTSOF
OFMISSION
MISSION
STRATEGIC
STRATEGIC INTENT
INTENT
Vision of what
Vision of what
you want to be
you want to be

ORGANIZATIONAL
ORGANIZATIONAL
VALUES
VALUES

MISSION
MISSION

Objectives
Objectivesand
and
Strategy
Strategy

Guiding Principles
Guiding Principles

DISTINCTIVE
DISTINCTIVE
COMPETENCIES
COMPETENCIES
Core Skills
Core Skills

MISSION
MISSIONWE
WEPROVIDE
PROVIDESUPERIOR
SUPERIORQUALITY
QUALITY

MARKET
MARKET
DEFINITION
DEFINITION

Customer targets
Customer targets
needs and wants
needs and wants

COMPETITIVE
COMPETITIVE
POSITIONING
POSITIONING
Differential advantage
Differential advantage

1. GOAL 1 GROWTH Ensure long-term growth and increase market

NDUSTRIAL
share
INDUSTRIALAND
ANDCOMMERCIAL
COMMERCIALBEARINGS
BEARINGSAND
AND
RELATED
SUPPORT
SERVICES
TO
OUR
CUSTOMERS
2. GOAL 2. QUALITY Guarantee Customer satisfaction through
RELATED SUPPORT SERVICES TO OUR CUSTOMERS
continues quality improvement
WE
WEASPIRES
ASPIRESTO
TOBE
BETHE
THEPERFORMANCE
PERFORMANCELEADER
LEADER 3. GOAL 3. PEOPLE Increase productivity and opportunity through
N
INOUR
OURINDUSTRY
INDUSTRYAND
ANDPROVIDE
PROVIDEAASUPERIOR
SUPERIOR
improved training and communication
RETURN
TO
OUR
SHAREHOLDERS
WITH
4. GOAL 4. SHAREHOLDERS Achievea total return in top quartile of our
RETURN TO OUR SHAREHOLDERS WITHPARTICULAR
PARTICULAR
EMPHASIS
EMPHASISON
ONAATEAM
TEAMEFFORT
EFFORTAMONG
AMONGOUR
OURPEOPLE
PEOPLE industry
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1.

Based on a need to continually

accomplish

2.

Vision

Goals are measured by

progress

toward vision

Mission

3.

Hollistic, multidimensional

4.

Create purpose, focus, and

Create energy

Goal
1.

Based on a need to
accomplish

2.

Measured by results

3.

Linear, one dimensional

4.

create focus

5.

Provide direction

6.

Based on past experience

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5.

Establish new possibilities

Strategy (HOW)
Tactics (If)

Strategic
Advantage

Henry F Noor.doc

SWOT Analysis
Opportunity

Go
(No Problem)

Ada peluang
Aliansi ?
Weakneses

AL
IA
NS
Internal Environment
I

Get Out
(Too much Problem)

Extern
al
Environ
ment

Strength

Ada peluang
Aliansi ?

Threat
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Internal Analysis
S, W
Distinctive
Resources

External Analysis
O, T
Customer analysis by segment
Financial viability
Valued benefits
Desired customer experience

Distinctive
Distinctive
Capabilities Competencies

Value Chain

Market Opportunities and Preferences

of Firms Desired Target Customers

Does it contribute to
outcomes valued by target customers?

YES

Source of Competitive Advantage

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Competitor analysis by industry

Industry competitors

Nature of customers

Does the firm want to compete?

Competitor analysis by segment

Can the firm serve the segment

better than its competitors?
Other External Environments

Economic/Technological

Political/Legal

Cultural/Social

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10

Tahapan Internal Analisis untuk menemukan

ggulan Kompetitif (Competitive Advantage) da
ategi yang Unggul (Strategic Competitiveness
a. Value Chain Analysis
b, Resource Base View of the Firm
c. Evaluating Firm Performance Two approach
a. Valuable
b. Rare
c. In-imitable (Costly to imitate)
d. Non-substitutable

Discoveri
ng
Core

Competen
cies

Resourc
es
*Tangible
*Intangibl
e
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Capabilit
ies

Strategic
Competitive
ness

Competitiv
e
Advantage
s

Competen
cies

Four Criteria
of
Sustainable
Advantages
(VRCN)
or(VRIN)

Is it enough
?

Henry F Noor.doc

Value
Chain
Analysis
Do we need
Outsorcing
?

11

What constitutes a "resource"?

A firm resources include all assets, capabilities, organizational processes, firm
attributes, information, knowledge, etc; controlled by a firm that enable the firm
to conceive of and implement strategies that improve its efficiency and
effectiveness
Assets:
Assets which
Which
firm-specific and
are tradable
can be used to
and nonimprove firm
specific to the
competence
firm

Resources:
Semua sumberdaya yang dapat digunakan
1. Tidak semua resources ini berada dalam
untuk mencapai tujuan
kendali manejemen
2. Tidak semua resources ini terlihat pada
Neraca Perusahaan
3. Pada umumnya tidak semua tergambar secara
Yang
Peluang
akuntansi
Yang

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Kelihata
n
(Tangibl
e)

Pasar,
Teknologi,
prasarana,
Henry F Noor.doc
keuangan,

tidak
Kelihatan
(Intangib
le)

12

Capabilities Kemampuan yang dimiliki perusahaan

dalam memanfaatkan
Competencies are particular strengths relative to other organizations
sumber daya (Resources) guna mencapai

in the industry which provide the fundamental basis for the provision of
tujuan
added value. Core competencies are the collective learning in
organizations, and involve how to coordinate diverse production skills
and integrate multiple streams of technologies. It is communication, an
involvement and a deep commitment to working across organizational
boundaries.
A core competency is a specific factor that a business sees as being
central to the way it, or its employees work. It fulfils three (3) key criteria:
a. It provides consumer benefits
b. It is not easy for competitors to imitate
c. It can be leveraged widely to many products and markets.

Competitive advantage: Keunggulan dalam

bersaing
Strategic Competitiveness

: Strategi yang menghasilkan

keunggulan dalam bersaing

secara berkesinambungan
(Sustainable)
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Value
Chain

Core
Competence

Sustainability
of the
competitivenes
s

Competiti
ve
firm

A competing firm can enter the market with a resource that has the ability to invalidate the
prior firm's competitive advantage, which results in reduced normal cost

Sustainability of the competitive advantage is independent with regards to the time

frame. The competitive Advantage can be seen as a sustainable if:
a.The imitative actions can not disrupting the firms competitiveness
b.It Provide above average returns in the long run
A core competency can take various forms, including technical/subject matter know-how, a
reliable process and/or close relationships with customers and suppliers. It may also include
product development or culture, such as employee dedication.

The Value Chain is a systematic approach to examining the development of competitive

advantage. The chain consists of a series of activities that create and build value. They
culminate in the total value delivered by an organization. The 'margin' depicted in the diagram
is the same as added value. The organization is split into 'primary activities' and 'support
activities'.
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Barriers to imitation of resources (Why do we need ?)

1. Resources are the inputs or the factors available to a company which helps to perform its
operations or carry out its activities. To make resources in productivity, if considered as
isolated factors doesnt result in productivity. hence coordination of resources is important.
2. The ways a firm can create a barrier to imitation is known as isolating mechanisms and are
reflected in the aspects of corporate culture, managerial capabilities, information
asymmetries and property rights. Except for legislative restrictions created through
property
rights,
three
aspects are
direct orfor
indirect
results
of managerial
practices.
3. By using
theother
above
developed
framework
Resource
Based
View, it reflects
a unique
feature which is, sustainable competitive advantage is achieved in an environment where
competition doesnt exist.
4. Rivalry firms may not perform at a level that could be identified as a considerable
competition for the incumbents of the market since they do not possess the required resources
to perform at a level that creates a threat hence create competition.
5.Through barriers to imitation incumbents ensure that rivalry firms do not reach a level to
perform in a similar manner to them. In other words, the sustainability of the winning edge is
determined by the strength of not letting other firms compete in the same level.

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15

Developing resources
future
Based on the empirical Resources

for

the

Based View, provides us the understanding that certain

unique existing resources will result in superior performance and ultimately build
a competitive advantage. Sustainability of such advantage will be determined by the
ability of competitors to imitate such resources. However, the existing resources of a firm
may not be adequate to facilitate the future market requirement due to volatility of the
contemporary markets. There is a vital need to modify and develop resources in order to
encounter the future market competition.
An organization should exploit existing business opportunities using the present resources
while generating and developing a new set of resources to sustain its competitiveness in the
future market environments, hence an organization should be engaged in resource
management and resource development in order to sustain the competitive advantage. Its
crucial to develop resources that will strengthen their ability to continue the superior
performance. Any industry or market reflects high uncertainty and in order to survive and
stay ahead of competition New resources becomes highly necessary. The existing winning
edge needed to be developed since various market dynamics may make existing value
Complementary
creating resourceswork
obsolete
Building on the Resources Base View (RBV) ,it was suggested a more expansive discussion of
sustained differences among firms and develop a broad theory of competitive heterogeneity.
The RBV seems to assume what it seeks to explain. This dilutes its explanatory power. For
example, one might argue that the RBV defines, rather than hypothesizes, that sustained
performance differences are the result of variation in resources and capabilities across firms.
The difference is subtle, but it frustrates understanding the RBVs possible contributions
(Hoopes et al., 2003: 891).
Competitive heterogeneity can obtain for reasons other than sticky resources (or
capabilities) Competitive heterogeneity refers to enduring and systematic performance
differences among close competitors

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16

Porter's Generic Value Chain

Inbou
nd
Operati
>
Logist
ons
ics

Outbou
nd
> Logistic
s

>

Market
ing
&
Sales

> Service

>

M
A
R
G
I
N

Firm Infrastructure
HR Management
Technology Development

Procurement
The goal of these activities is to offer the customer a level of value that exceeds the cost of
the activities, thereby resulting in a profit margin.
The primary value chain activities are:
Inbound Logistics: the receiving and warehousing of raw materials, and their distribution
to manufacturing as they are required.
Operations: the processes of transforming inputs into finished products and services.
Outbound Logistics: the warehousing and distribution of finished goods.
Marketing & Sales: the identification of customer needs and the generation of sales.
Service:
the products
and services are sold to them.
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17

These primary activities are supported by:

The infrastructure of the firm: organizational structure, control systems, company culture, etc.
Human resource management: employee recruiting, hiring, training, development, and
compensation. Technology development: technologies to support value-creating activities.
Procurement: purchasing inputs such as materials, supplies, and equipment.
The firm's margin or profit depends on its effectiveness in performing these activities
efficiently, so that the amount that the customer is willing to pay for the products exceeds
the cost of the activities in the value chain. It is in these activities that a firm has the
opportunity to generate superior value.
A competitive advantage may be achieved by reconfiguring the value chain to provide lower
cost or better differentiation.
The value chain model is a useful analysis tool for defining a firm's core competencies and
the activities in which it can pursue a competitive advantage as follows:
1. Cost advantage: by better understanding costs and squeezing them out of the valueadding activities.
2. Differentiation: by focusing on those activities associated with core competencies and
capabilities in order to perform them better than do competitors.
Cost Advantage and the Value Chain
A firm may create a cost advantage either by reducing the cost of individual value chain
activities or by econfiguring the value chain.
Once the value chain is defined, a cost analysis can be performed by assigning costs to the
value chain activities. The costs obtained from the accounting report may need to be
modified in order to allocate them properly to the value creating activities.

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18

Cost drivers related to value chain activities:

1.Economies of scale 2.Learning
3.Capacity utilization 4.Linkages among activities
5.Interrelationships among
business units
6. Degree of vertical integration 7. Timing of market entry 8.Firm's
policy of cost or
Adifferentiation
firm develops
a cost advantage
controlling
these
drivers
betterunion
than activity,
do the
9.Geographic
location by10.
Institutional
factors
(regulation,
competitors.
taxes, etc.)
A cost advantage also can be pursued by reconfiguring the value chain. Reconfiguration
means structural changes such a new production process, new distribution channels, or a
different sales approach. For example, FedEx structurally redefined express freight service
by acquiring its own planes and implementing a hub and spoke system.
Value Reference Model
A Value Reference Model (VRM) developed by the global not for profit Value Chain Group
offers an open source semantic dictionary for value chain management encompassing one
unified reference framework representing the process domains of product development,
customer
relations
and supply
networks.
The integrated
process
framework
guides the modeling, design, and measurement of
business performance by uniquely encompassing the plan, govern and execute
requirements for the design, product, and customer aspects of business. The Value Chain
Group claims VRM to be next generation Business Process Management that enables value
reference modeling of all business processes and provides product excellence, operations
excellence,
andfunctions
customer of
excellence.
Six business
the Value Chain:
1.
2.
3.
4.
5.
6.

Research and Development

Design of Products, Services, or Processes
Production
Marketing & Sales
Distribution
Customer Service

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19

The value chain, also known as value

chain analysis:
is a chain of activities.

Products pass through all activities of the chain gains some value.
The chain of activities gives the products more added value than the
sum of added
values of all activities
The value chain categorizes the generic value -adding activities of
an organization. The "primary activities" include: inbound logistics
operations (production), outbound logistics marketing and sales
(demand), and services (maintenance)
The support activities include: administrative infrastructure
management, human resource management, technology (R&D), and
procurement. The costs and value drivers are identified for each value
activity
The value chain framework quickly made its way to the forefront of
management thought as a powerful analysis tool for strategic
Planning. The simpler concept of value stream, a cross-functional
process which was developed over the next decade, had some success
in the early 1990s
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20

The value-chain concept has been extended beyond

individual organizations.

It can apply to whole supply chains

and distribution networks. The

delivery of a mix of products and services
to the end customer will mobilize
different economic factors, each
managing its own value chain. The
industry wide synchronized interactions of
those local value chains create an
extended value chain, sometimes global
in extent. Porter terms this larger
interconnected system of value chains the
"value system.

A value system includes the value

chains of a firm's supplier (and
their suppliers all the way back),
the firm itself, the firm distribution
channels, and the firm's buyers
(and presumably extended to the
buyers of their products, and so on

Capturing the value generated along the chain is the new approach
taken by many management strategists. For example, a manufacturer
might require its parts suppliers to be located nearby its assembly
plant to minimize the cost of transportation. By exploiting the
upstream and downstream information flowing along the value chain,
the firms may try to bypass the intermediaries creating new business
models or in other ways create improvements in its value system.
To better understand the activities through which a firm develops a
competitive advantage and creates shareholder value, it is useful to
separate the business system into a series of value-generating activities
referred to as the value chain.
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21

Differentiation and the Value Chain

A differentiation advantage can arise from any part of the value chain. For example,
procurement of inputs that are unique and not widely available to competitors can create
differentiation, as can distribution channels that offer high service levels.

Differentiation stems from uniqueness. A differentiation advantage may be achieved either by

changing individual value chain activities to increase uniqueness in the final product or by
reconfiguring the value chain.
Several drivers of uniqueness: (by Porter)
1. Policies and decisions 2. Linkages among activities 3.Timing
4.Location
5.Interrelationships
6
Learning 7.Integration
8.Scale (e.g. better service as a result of
of these
dirvers
of
uniqueness
also
serve
large scale) 9.Institutional factors as cost drivers.
Differentiation often results in greater costs, resulting in tradeoffs between cost
and differentiation
Value Chain and Uniqueness
1.There are several ways in which a firm can reconfigure its value chain in order to create
uniqueness. Value chain Uniqueness
2.It can forward integrate in order to perform functions that once were performed by its
customers.
3. It can backward integrate in order to have more control over its inputs.
4. It may implement new process technologies or utilize new distribution channels.
5.4.Ultimately, the firm may need to be creative in order to develop a novel value chain
configuration that increases product differentiation.
Technology and the Value Chain
Because technology is employed to some degree in every value creating activity, changes in
technology can impact competitive advantage by incrementally changing the activities
themselves or by making possible new configurations of the value chain. Various technologies
are used in both primary value activities and support activities.
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22

Inbound Logistics Technologies

Transportation
1. Material handling
2. Material storage
3. Communications
4. Testing
5. Information systems
Outbound Logistics Technologies
1. Transportation
2. Material handling
3. Packaging
4. Communications
5. Information systems
Service Technologies
1. Testing
2. Communications
3. Information systems
To the extent that these technologies
affect cost drivers or uniqueness, they
can lead to a competitive advantage.

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Operations Technologies Process

1.
2.
3.
4.
5.
6.
7.
8.

Materials
Machine tools
Material handling
Packaging
Maintenance
Testing
Building design & operation
Information systems

Marketing & Sales Technologies

Media
1. Audio/video
2. Communications
3. Information systems
Note that many of these technologies are
used across the value chain. For example,
information systems are seen in every
activity. Similar technologies are used in
support activities. In addition, technologies
related to training, computer-aided design,
and software development frequently are
employed in support activities.

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23

Linkages Between Value Chain Activities

Value chain activities are not isolated from one another. Rather, one value chain activity often
affects the cost or performance of other ones. Linkages may exist between primary activities
and also between primary and support activities.
Consider the case in which the design of a product is changed in order to reduce
manufacturing costs. Suppose that in advertising the new product design results in
increased service costs; the cost reduction could be less than anticipated and even worse,
there could be a net cost increase.
Sometimes however, the firm may be able to reduce cost in one activity and consequently
enjoy a cost reduction in another, such as when a design change simultaneously reduces
manufacturing costs and improves reliability so that the service costs also are reduced.
Through such improvements the firm has the potential to develop a competitive advantage.
Analyzing Business Unit Interrelationships
Interrelationships among business units form the basis for a horizontal strategy. Such
business unit interrelationships can be identified by a value chain analysis.
Tangible interrelationships offer direct opportunities to create a synergy among business
units. For example, if multiple business units require a particular raw material, the
procurement of that material can be shared among the business units. This sharing of the
procurement activity can result in cost reduction. Such interrelationships may exist
simultaneously in multiple value chain activities.
Unfortunately, attempts to achieve synergy from the interrelationships among different
business units often fall short of expectations due to unanticipated drawbacks. The cost of
coordination, the cost of reduced flexibility, and organizational practicalities should be
analyzed when devising a strategy to reap the benefits of the synergies.

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24

Outsourcing Value Chain Activities

A firm may specialize in one or more value chain activities and outsource the rest. The extent
to which a firm performs upstream and downstream activities is described by its degree of
vertical integration.
A thorough value chain analysis can illuminate the business system to facilitate outsourcing
decisions. To decide which activities to outsource, managers must understand the firm's
strengths and weaknesses in each activity, both in terms of cost and ability to differentiate.
Managers may consider the following when selecting activities to outsource:
a. Whether the activity can be performed cheaper or better by suppliers.
b. Whether the activity is one of the firm's core competencies from which stems a cost
advantage or product differentiation.
c. The risk of performing the activity in-house. If the activity relies on fast-changing
technology or the product is sold in a rapidly-changing market, it may be advantageous to
outsource the activity in order to maintain flexibility and avoid the risk of investing in
specialized assets.
d. Whether the outsourcing of an activity can result in business process improvements such
as reduced lead time, higher flexibility, reduced inventory, etc.
The Value Chain System
A firm's value chain is part of a larger system that includes the value chains of upstream
suppliers and downstream channels and customers. Porter calls this series of value chains the
value system, shown conceptually below:

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25

The Value System

...

>

Suppli
er
Value
Chain

>

Firm
Value
Chain

>

Chann
el
Value
Chain

>

Buyer
Value
Chain

Linkages exist not only in a firm's value chain, but also

between value chains.

While a firm exhibiting a high degree of vertical integration is poised to better

coordinate upstream and downstream activities, a firm having a lesser degree of
vertical integration nonetheless can forge agreements with suppliers and channel
partners to achieve better coordination. For example, an auto manufacturer may
have its suppliers set up facilities in close proximity in order to minimize
transport costs and reduce parts inventories.

Clearly, a firm's success in developing and sustaining a competitive

advantage depends not only on its own value chain, but also on its
ability to manage the value system it self.
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26

Resource-Based View (RBV)

a.The resource-based view (RBV) is an economic tool used to determine the strategic
resources available to a firm.
b.The fundamental principle of the RBV is that the basis for a competitive advantage of a
firm lies primarily in the application of the bundle of valuable resources at the firms disposal.
c.To transform a short-run competitive advantage into a sustained competitive advantage
requires that these resources are heterogeneous in nature and not perfectly mobile.
d.Effectively, this translates into valuable resources that are neither perfectly imitable nor
substitutable without great effort.
e.If the above conditions hold and exist, the firms bundle of resources can assist the firm
sustaining above average returns.
The key points of the theory are:
1.Identify the firms potential key resources. 2. Evaluate these resources by using
(VRIN) or (VRCN) criteria:
a.Valuable - A resource must enable a firm to employ a value-creating strategy, by either outperforming its
competitors or reduce its own weaknesses. Relevant in this perspective is that the transaction costs
associated with the investment in the resource cannot be higher than the discounted future rents that flow out
of thevalue-creating strategy.
b.Rare - To be of value, a resource must be by definition rare. In a perfectly competitive strategic factor
market for a resource, the price of the resource will be a reflection of the expected discounted future aboveaverage returns.
c.In-imitable (Costly to imitate) - If a valuable resource is controlled by only one firm it could be a source of
a competitive advantage. This advantage could be sustainable if competitors are not able to duplicate this
strategic asset perfectly. Isolating mechanism is needed to protect other firms to imitate a resource to the
degree that they are able to compete with the firm having the valuable resource. knowledge-based
resources are the essence of the resource-based perspective

3.
Care for and protect
resources
that
possess
these
evaluations
doing
so can
d. Non-substitutable
- Even if
a resource is
rare,
potentially
value-creating
andbecause
imperfectly
imitable,
an
improve
organizational
performance
equally important aspect is lack of substitutabilit. If competitors are able to counter the firms value-creating
strategy with a substitute, prices are driven down to the point that the price equals the discounted future,
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resulting
in zero economic profits.

Instrumental approaches towards stakeholder theory

a. To maximize shareholder value over an uncertain time frame, managers ought to pay
attention to key stakeholder relationships.
b. Firms have a stake in the behavior of their stakeholders. Further, if prudent management
of firms' operating environments, including relationships with their stakeholders, is a part
of good management in general, good stakeholder management has clear instrumental
value for the firms.
c. A fundamental assumption of this type of model is that the ultimate objective of corporate
decisions is marketplace success.
d. Firms view their stakeholders as part of an environment that must be managed
in order to assure revenues, profits, and ultimately, returns to shareholders.
e. Attention to stakeholder concerns may help a firm avoid decisions that might prompt
stakeholders to undercut or thwart its objectives. This possibility arises because it is the
stakeholders who control resources that can facilitate or enhance the implementation of
corporate decisions.
f. Stakeholder management is a means to an end. The end, or the ultimate result, may have
nothing to do with the welfare of stakeholders in general. Instead, the firm's goal is the
advancement of the interests of only one stakeholder group--its shareholders.
g. The firm's interest in stakeholder relationships as instrumental and contingent on the
value of those relationships to corporate financial success.
h. "Instrumental [strategic] ethics enters the picture as an addendum to the rule of wealth
maximization for the manager-agent to follow"
i. In this formulation, stakeholder management is part of a company's strategy but
in no way drives that strategy. Implicit in this perspective is the assumption that
modes of dealing with stakeholders that prove upon adoption to be unproductive will be
discontinued, as will those that involve resources that are no longer needed. The concerns
of stakeholders enter a firm's decision-making processes only if they have strategic value
to the firm.
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Two variants of the Strategic Stakeholder Management approach are

the direct effects model and the moderation model.
In the direct effects model, managers' attitudes and actions toward
stakeholders (their stakeholder orientation) are perceived as having a direct effect
on firm financial performance, independent of firm strategy.
In the moderation model, managerial orientation toward stakeholders does
impact firm strategy by moderating the relationship between strategy and
financial performance
Stakeholder
Relationships

Direct Effect
Variant

Firms Strategy

Firms (Financial)
Performance

Moderation Variant
Stakeholder
Relationships
Firms (Financial)
Performance

Firms Strategy
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