Strategic Management Class 7 – Ch. 4 & Minicase 6: Starbucks

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What is the focus of internal analysis?
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resources, capabilities, and core competencies
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core competencies
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unique strengths embedded deep within the firm that enable value creation
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capabilities
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organizational/managerial skills necessary to orchestrate a diverse set of resources to deploy them strategically
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resources
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any asset leveraged for strategy formulation or implementation
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resources, capabilities, and core competencies are used to:
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gain and sustain a competitive advantage
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competencies enable:
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differentiation of products and services to create perceived value and cost leadership to offer products/services of comparable value at lower cost
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types of resources
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tangible and intangible
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qualities of tangible resources
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-units of transaction clear -transparent -opportunities recognizable -boundaries and property rights clear
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qualities of intangible resources
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-units of transaction unclear -opaque -opportunities harder to recognize -boundary and property rights unclear *competitive advantage more likely to be based on intangible resources
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2 critical assumptions of resource-based view of the firm
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resource heterogeneity and resource immobility
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resource-based view of the firm
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-firms are a bundle of resources that differ across firms and are not easily transferable from firm to firm -a good resource mix is key to superior performance -if resources exhibit the VRIO attributes, they become the building blocks for gaining and sustaining a competitive advantage (leveraged through capabilities)
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VRIO attributes
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-valuable -rare -inimitable -organized
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VRIO: valuable
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resources drive value creation; allows firm to take advantage of an external opportunity and/or neutralize an external threat
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VRIO: rare
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they are unique or uncommon; the number of firms that possess the resource is less than the number of firms it would require to reach a state of perfect competition
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VRIO: inimitable
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competitors cannot easily copy; unable to make or buy it at a comparable cost
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VRIO: organized
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the firm is structured to capture value from the resource/capability
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learning curve advantages
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focus on capabilities as opposed to resources; learning/experience/cost/efficiency/productivity curves illustrate how the cost per unit of output decreases over time as the result of cumulative workforce learning and experience
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firms have a better chance of sustaining a competitive advantage from resources, capabilities, or competencies when:
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they have the following isolating mechanisms (barriers to imitation): -they have a better expectation about a resources’ future value -they’ve accumulated resource advantages that can be imitated by competitors only over long periods of time (path dependence) -the source of competitive advantage is causally ambiguous or socially complex
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dynamic capabilities
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a firm’s ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources in its quest for competitive advantage; necessary to sustain a competitive advantage
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dynamic capabilities: creating a sustained competitive advantage
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essential to find dynamic fit between firm’s internal strengths and external opportunities
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resource dynamism involves
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resource stocks (current level of a firm’s valuable resources) and resource flows (investments to maintain a resource) -the strategist must reinvest, scan the environment, recognize opportunities, and reconfigure assets continually in quest of sustained advantage
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value creation
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-differentiating products and services to create more value than competitors -offer products and services of acceptable value at lower cost
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value chain
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describes the internal activities a firm engages in when transforming inputs into outputs; each activity add incremental value and costs
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Activities
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distinct and fine-grained business processes that enable firms to add incremental value by transforming input into goods and services
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value chain analysis
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where along the set of activities can managers add incremental value to create a profit margin and where does the firm choose to “play”-look to resources, capabilities, and competencies
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value chain analysis: primary activities
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supply chain management operations distribution marketing & sales after-sales service
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value chain analysis: support activities
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R&D information systems human resources accounting and finance firm infrastructure, processes, policies, and procedures
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SWOT analysis
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matches internal analysis with external analysis through vision, mission, and strategy -exploit opportunities and mitigate threats -leverage strengths and minimize weaknesses matrix structure: ——–exploit O mitigate T leverage S minimize W

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