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CH 4 and 5 - Slides

This document summarizes key concepts from a college business course module on internal analysis, competitive advantage, and business models. It discusses the resource-based view of the firm and how resources and capabilities can provide competitive advantages. Specific frameworks are described for assessing resources according to their value, rarity, imitability and organization. The document also covers topics like dynamic capabilities, value chain analysis, measures of firm performance, balanced scorecards, triple bottom lines, and common business models.

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Maria
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28 views

CH 4 and 5 - Slides

This document summarizes key concepts from a college business course module on internal analysis, competitive advantage, and business models. It discusses the resource-based view of the firm and how resources and capabilities can provide competitive advantages. Specific frameworks are described for assessing resources according to their value, rarity, imitability and organization. The document also covers topics like dynamic capabilities, value chain analysis, measures of firm performance, balanced scorecards, triple bottom lines, and common business models.

Uploaded by

Maria
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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College of Business

MODULE 2
BA 569 – ADVANCED STRATEGIC
MANAGEMENT
INTERNAL ANALYSIS, COMPETITIVE
ADVANTAGE, FIRM PERFORMANCE
AND BUSINESS MODELS
Shifting from External to Internal
Analysis
• We now shift from an external view of the organization to an
internal view.
• We begin with a brief discussion of the Resource Based View (RBV)
of the firm.
• The RBV is an economic theory describing how firms can create
greater economic value from internal attributes – from the
resources that a firm possesses.

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 2


The Resource Based View
• Firm resources are the key to superior firm performance.
• Resources are the assets, capabilities and competencies that a firm
possesses.
• Resources can be:
• Tangible – having physical attributes and visible in the firm. This could
include land, real estate location, machinery, supplies, labor, and capital.
• Intangible – theses do not have physical attributes and can include things
like knowledge, culture, and brand image or reputation.

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 3


Critical Assumptions of the RBV
• Resource Heterogeneity
• A firm is a unique bundle of resources, capabilities, and competences.
• These bundles differ across firms.

• Resource Immobility
• Resources are “sticky” and cannot move easily from firm to firm.
• Resources are difficult or costly to replicate.
• Resources can last for a long time.

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 4


Linking Core Competencies, Resources, Capabilities, and Activities to Competitive
Advantage
• Exhibit 4.4

• Access the text alternative for slide images.


The VRIO Framework
• The VRIO framework is a tool to help us understand whether certain
resources/capabilities/competencies exhibit the characteristics to serve as a source of a
competitive advantage.
• To be the basis of a competitive advantage, a resource/capability/core competence must be:
• Valuable
• Rare
• Costly to Imitate and poor resource substitutions
• Organized to capture the value of the resource (within the firm).

NOTE: Barriers to resource imitation include path dependence, causal ambiguity, social complexity,
and intellectual property protection.

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 6


VRIO Framework to Reveal Competitive
Advantage
• Exhibit 4.6

• Access the text alternative for slide images.


Dynamic Capabilities
• Over time, with events changing in the external environment, firms need
to be able to adjust their resource base in light of the opportunities and
threats which arise through these changes.
• The ability to sense the need for change and implement these changes
are what we term “dynamic capabilities.”
• Dynamic capabilities result in a process of refashioning new resources or
capabilities from what the firm already possesses or adding new
resources to the organization to develop new capabilities.

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 8


Value Chain Analysis
• Value chain describes the internal activities of a firm as it transforms
inputs into outputs.
• Activities in the firm are broken down into its constituent parts and
strategic leaders can identify how each activity impacts economic
value creation (V) and the costs (C) to perform those activities.

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 9


A Generic Value Chain
• Exhibit 4.8

• Access the text alternative for slide images.


Firm Performance
• Traditional frameworks to assess firm performance:
• Accounting performance
• Shareholder value creation
• Economic value creation

• Integrative frameworks (utilizing qualitative assessments)


• Balanced scorecard
• Triple bottom line

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 11


Firm Performance
• Accounting Performance
• Accurately assesses firm performance using accounting statements, and financial
performance ratios which are germane to the industry.
• These measures allow for direct comparisons with competitors.
• Examples: ROA, ROIC, Gross Margin, Inventory turnover ratio, debt to equity ratio.
• Limitations of Accounting Data
• Historical and backward-looking.
• Does not consider off-balance sheet items such as pension obligations
• Focuses mainly on tangible assets and does not capture some important activities which are
difficult to measure such as innovation, product quality, customer perceptions.

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 12


Firm Performance
• Shareholder Value Creation
• Shareholders own shares of stock and are the legal owners of public companies.
• They provide risk capital and are residual claimants to the firm’s income after
all other obligations are met.
• Total Return to Shareholders is measured by: Stock price appreciation +
dividends.
• Market Capitalization is the dollar value of total shares outstanding and is
measured by: No. of shares outstanding x share price.
• Limitations: Macroeconomic factors can affect stock prices. Stock prices can be
volatile. Although stock prices incorporate all publicly available information,
investors can be irrational and bid up some stocks (e.g., GameStop).

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 13


Firm Performance
• Economic Value Creation
• This is the difference between a buyer’s willingness to pay for a product
or service and the total cost to produce it: (V) – (C)

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 14


Firm C’s Competitive Advantage: Same Total Perceived Consumer
Benefits as Firm D but Firm C Creates More Economic Value
• Exhibit 5.5

• Access the text alternate of slide image.


Competitive Advantage and Economic Value Created: The Role of
Value, Cost, and Price

• Exhibit 5.7
• Access the text alternate of slide image.
Balanced Scorecard
• The Balanced Scorecard uses a series of internal and external
performance metrics that managers track relative to their strategic
objectives.
• This tool balances both financial and strategic goals.

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 17


Balanced-Scorecard Approach to Creating and Sustaining
Competitive Advantage

• Exhibit 5.8
• Access the text alternate for slide image.
The Triple Bottom Line
• The focus of the triple bottom line is on economic, social, and
ecological performance.
• Three dimensions:
• Profits: Economic Dimension
• People: Social Dimension
• Planet: Ecological Dimension

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 19


Sustainable Strategy: A Focus on the Triple Bottom Line
• Exhibit 5.9
• The simultaneous
pursuit of performance
along social, economic,
and ecological
dimensions provides a
basis for a triple-
bottom-line strategy.
Business Model
• Details a firm’s competitive tactics and initiatives.
• Explains how the firm:
• Intends to make money.
• Conducts its business with buyers, suppliers, and partners.

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 21


Popular Business Models
Razor-razorblades: pay for replacements.

Subscription: pay for access.

Pay as you go: pay for what you consume.

Freemium: pay for extra features / add-ons.

Wholesale: products sold at a discount.

Agency: products sold on commission.

Bundling: more than one product sold at a discount

OREGON STATE UNIVERSITY COLLEGE OF BUSINESS | 22


THANK YOU.
Jonathan Arthurs
Professor of Strategy & Entrepreneurship

For further information or if you have questions, please contact me at


[email protected]

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