business policy lecture 4
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FEKH11 Business Policy Lecture 4TRANSCRIPT
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
Business Policy Lecture 4 OLA MATTISSON
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• 2 Swedish minutes • RBV perspective - resources and capabilities • RBV for competitive advantage • Positioning for competitive advantage • Organization
Strategy in single-business firms
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Resource Based View
Two assumptions: »Resource heterogeniety
–Resources and capabilities are heterogeously distributed across competing firms
»Resource immobility –Resources and capabilities are stable over time and difficult to move/transfer
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Resorces & capabilities (Grant)
Tangible resources »financial, physical
Intangible resources »Technology, reputation, culture
Human resources »Know-how, capacity for communication,
collaboration, motivation
Create organizational capabilities
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Links between resources, capabilities and competitive advantage
Organizational capabilities
Industry key success factors
Strategy Competitive advantage
Resources Tangible Intangible Human
Financial Technology SkillsKnow-how (cash, borrow) Reputation Communication/ Physical (brands) Colloboration (plant, land) Culture Motivation
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Value chain
Primary activities
Secondary (support) activities
Value creation
Marketing & sales
Service
Firm infrastructure
Human resource development
Research and development
Inbound logistics
Production Outbound logistics
Procurement
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Firm specific assets
• It must be built, because it cannot be bought • Hamel and Prahalahad use the term “core
competence” to describe central strategic capabilities
– Make a disproportionate contribution to end customer value
– Basis for entering new markets
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Capabilities
• They are collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technology
• Oragnizational routines
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Profit-earning potential (Grant)
1. Extent of competitive advantage – Scarcity – Relevance
2. Sustainability
– Durability – Transferability – replicability
3. Appropriability
– Property rights – Relative bargining power – Embeddedness
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
Appraising resources and capabilities
Relative strength
Strategic importance
Key Weaknesses
Superfluous strengths Key strengths
Zone of irrelevance
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Competitive advantage from
• External sources
– Changing demand – Changing prices – Technological change
• Internal sources
– Internal changes
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Positioning for competitive advantage • Two sources of competitive advantages
Low cost Cost advantage
Differentiation Customer value
• Position gap Difference in profitability between actual firm and industry average Steaming from costs and customer value
• Competitive scope Firm ‘s choice of markets (products/services, distribution,
geograpy
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Porter’s generic strategies
• Porter: Cost leadership and differentiation is mutually excluding
– Stuck in the middle
• Scope and competitive advantage Source of competitive advantage
Competitive scope
Industry-wide
Single segment
Cost leadership
Differentiation
Focus
Differentiation Low cost
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Drivers of cost advantage
• Economies of scale • Economies of learning • Production techniques • Product design • Input costs • Residual efficiency
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– Disaggregate the firm into separate activities – Establish the relative importance in total costs of the
product – Compare costs by activity – Identify cost drivers – Identify linkages – Identify opportunities to reduce costs
Value chain to analyze costs
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The value chain in cost advantage analysis
• Figure 7:8 in Grant
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Differentiation strategy
• Potential to differentiation from physical characteristics – Complex products/services
• Differentiation goes beyond physical characteristics – Relationships firm-customer
• Tangible differentiation – Size, shape, colour, weight, design etc – Performance such as reliability, consistency, durability, safety
• Intangible differentiation – Experience, exclusivity, image, status, etc.
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Drivers of uniqueness
• Analyzing customers’ needs – analyze firm ability to offer differentiated features
• Drivers of uniqueness » Product features and performance » Complementary services » Intensity in marketing » Technology in design and production » Input quality control » Procedures control for delivery, quality etc. » Skill and experience
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Value chain in differentiation analysis • Construct value chain for the firm and the
customer • Identify drivers of uniqueness in each activity • Select the most promising differentiation
variables for the firm » Potential vs competitors » Linkages among activities » Potential for sustainability
• Locate linkages between the value chain of the firm and of the buyer
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The value chain in differentiation analysis
• Figure 7:11 in Grant
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The match of internal and external conditions
• Consider industry cycle; emergent, mature or declining • Fragmented industries • Both low-cost and differentiation possible?
– Seek unique position • Stability and consistency
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Organization
• Specialization vs coordination and cooperation
• Hierarchy for coordination and control
• Alternative forms
– Functional structure
– Divisional structure
– Matrix structure
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Read also
• Porter HBR article Jan 2008
”The five competitive forces that shape strategy”
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School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|