Industries and Business

• Industries – Primary industries – Secondary industries – Tertiary industries – Quaternary industries

• Business: – Tertiary industries – Quaternary industries

Rationale for the Internal AnalysisRationale for the Internal Analysis

• When the external environment is subject to rapid change, internal resources and capabilities offer a more secure basis for strategy than market focus.

• Resources and capabilities are the primary sources of profitability

Strength and Weakness

• Resource-Based View of the Firm

1.Resource 2. Capabilities

3. Core competences

4. Competitive advantages5. Strategy

6. ResourceGaps

7. Strategies to

Obtain Competitive

Advantages:

Strategic Alliances;

JV; M&A;

Diversification

Resources

• Tangible resources

–Financial assets (cash, debt, equity)

–Physical assets (buildings, equipment,

inventory, land, raw materials)

•Intangible resources

Such as: patent, human assets, relational assets, goodwill, brand loyalty, know-how,etc.

•To create competitive advantages resources

must be Rare / Uniqueness and Valuable

Capability

A company’s skill at coordinating its resources and putting them to productive use.

Structure / Process - Centralization vs Decentralization - Coordination - Control - Communication Capabilities Culture - Corporate culture - Value systems - Innovation & Learning

The Things a Firm Do (verb)

Resources Internal process

Efficiency Effectiveness

Resources, Capabilities

Core Competencies

Distinctive Competencies

Above average profitability

Sustainability of Competitive Advantage

In-imitability

Non-Transferability

Non-Transparency

Non-Replicability

Porter’s Value Chain: A Tool for Internal AnalysisPorter’s Value Chain: A Tool for Internal Analysis

Firm Infrastructure

Human Resource Management

Technology Development (R&D)

Procurement

Inbound Operations Outbound Marketing Service

Logistics Manufacturing Logistics & Sales

PRIMARY ACTIVITIES

SUPPORTACTIVITIES

Porter’s Five Forces of Competition FrameworkPorter’s Five Forces of Competition Framework

SUPPLIERS

POTENTIALENTRANTS SUBSTITUTES

BUYERS

INDUSTRYCOMPETITORS

Rivalry amongexisting firms

Bargaining power of suppliers

Bargaining power of buyers

Threat of

new entrants

Threat of

substitutes

1.RIVALRY AMONG ESTABLISHED FIRMS

(1) Industrial Competitive Structure

Perfect Competition

Oligopoly

Monopoly

(2) Exit Barriers

What Causes the Exit Barriers?

Why Firms Still in the Industry Even When Not

Profitable?

(3) Demand Conditions

Growing Demand

Declining Demand

2.RISK OF ENTRY OF POTENTIAL COMPETITORS

Entry Barriers

(1) Capital requirement

(2) Brand Loyalty

(3) Absolute Cost Advantages

(4) Economies of Scale

(5) Learning Effect/Experience Curves

(6) Legal and Government Regulation

3.THREAT OF SUBSTITUTE PRODUCTS

Substitute Elasticity

4. BARGAINING POWER OF SUPPLIERS

(1) Few Substitute

(2) Critical to the Company

(3) The Company’s Industry Not Important to Suppliers

(4) High Switch (Supplier) Cost for the Company

(5) High Possibility of Suppliers Forward Integration

(6)Low Possibility of Buying Company Backward

Integration

5. BARGAINING POWER OF BUYERS

(1) Few Number of Large Buyers

(2) Possibly of Purchasing from Many Companies

(3) Purchase in Large Quantity

(4) Low Switch (Order) Costs for Buyers

(5) High Possibility of Buyer Background Integration.

Business Chain

• Regular Chain, RC

• Voluntary Chain, VC

• Franchise Chain, FC

• Cooperation Chain, CC

• Value Chain, VC

Value Chain

Efficient Consumer Response (ECR)/Quick Response (QR)

• Used in grocery industry and by mass merchandisers

• POS data used to trigger order• Keyed to more orderly, regular flow of prod

uct, smaller inventory

Benchmarking

• The search for the best practices among competitors and noncompetitors that lead to their superior performance.

• By analyzing and copying these practices, firms can improve their performance.

Steps in Benchmarking

Source: Based on Y.K. Shetty, “Aiming High: Competitive Benchmarking for Superior Performance,” Long Range Planning. February 1993, p. 42.

Customer Service Strategies

• Giving the customers what they want.

• Communicating effectively with them.

• Providing employees with customer service training.

Current Trends and Issues (Cont’d)

• E-Business (Electronic Business)

– The work preformed by an organization using electronic linkages to its key constituencies

– E-commerce: the sales and marketing component of an e-business

• Categories of E-Businesses

– E-business enhanced organization

– E-business enabled organization

– Total e-business organization

Real-Time e-Business (1)

• Business Process Management (BPM)

• Business- to- Business Integration (B2Bi)

• Best-in-class Enterprise Application Integration (EAI)

• Real-Time Process Analysis (RTA)

Real-Time e-Business (2)