Professional Documents
Culture Documents
Last week
Lessons from the past for company
Sources, types/patterns, standards, timing Emphasise more in case-study
This class
Part III: Setting the strategic direction
Importance strategic capability Analyse internal resources and competences
Apply VRIN framework
Organizational (culture and reputation; collective experience through systems, routines & activities)
Firms with the Highest Ratios of Market value to Book Value (December 2006)
Company Valuation Country ratio 72.0 20.8 13.4 Japan US UK Company Valuation ratio 7.8 7.4 7.3 Country Yahoo! Japan Colgate-Palmolive Glaxo Smith Kline Anheuser-Busch eBay SAP Yahoo! Dell Computer Sumitomo Mitsui Financial Procter & Gamble Qualcomm Schlumberger Unilever PepsiCo Coca-Cola Diageo 3M US UK US
6.7 CHECK12.6 US MARKET Nokia BOOK VALUE Finland TO 11.2 US FOR YOUR Sanofi-Aventis COMPANY! 6.3 France 10.8 10.7 10.0 8.8 8.4 8.3 8.2 8.1 8.0 Germany US US Japan US US US Neth/UK US AstraZeneca Johnson & Johnson Boeing Eli Lily Cisco Systems Roche Holding LOreal Altria Novartis 5.9 5.7 5.7 5.6 5.5 5.5 5.3 5.2 5.1 UK US US US US Switz. France US Switz.
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Google: resources?
User base. With about 60% of the worlds internet searches, the Google.com website is the worlds 2nd most visited website gives it a massive potential for market access. Similarly its dominance of online advertising (>30% of US online adverting revenue) gives it a powerful position in the entire advertising sector. Financial resources. With its cash reserves, huge cash flow from advertising and massive capacity for raising debt and equity capital as a result of it huge market capitalization, Google is well able to broaden its product range through acquisition.
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Google: resources?
Human resources. Google is committed to hiring the best and brightest. Its technical staffsoftware engineers in particularare considered among the best in the industry. Culture. The Google vibrant, entrepreneurial culture combines informality with a huge emphasis on innovation, creativity, and initiative
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Google: competences?
Software development. Googles search engine was based upon the technical brilliance of its founders in creating new search algorithms. Google continues to build depth and breadth to its software engineering capability. Product design. The dominance of the Google search engine over its early rival can be attributed primarily to its ease of use. Google continues to develop products that are easy to use even by the users with few computer skills. Entrepreneurship and innovation. As a result of its culture, systems and people, Google shows a tremendous capacity to generate new product ideas and new business initiatives.
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Applying VRIN
V Value of strategic capabilities
in theory: Does the resource or competence provide customer value? distinctive or threshold? the practical: Does the resource result in an increase in revenues, a decrease in costs, or some combination of the two?
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Scientific & technical knowledge (human-intellectual) Organizational commitment to risktaking and exploration
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Value chain
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Applying VRIN
R Rarity
Rare capabilities are those possessed uniquely by one organisation or by a few others only.
E.g. a company may have patented products, have supremely talented people or a powerful brand
Applying VRIN
I Inimitability
Inimitable capabilities are those that competitors find difficult to imitate or obtain. Competitive advantage can be built on unique
resources (a key individual or IT system) but these may not be sustainable (key people leave or others acquire the same systems). Sustainable advantage is more often found in competences (the way resources are managed, developed and deployed) and the way competences are linked together and integrated.
Inimitability Criteria
Social Complexity History
Causal ambiguity
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Applying VRIN
The Question of Inimitability
Social Complexity
(Monsanto & government lobbying)
the social relationships entailed in resources may be so complex that managers cannot really manage them or replicate them
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Applying VRIN
The Question of Inimitability
Unique Historical Conditions
first mover advantages
e.g. Caterpillar
path dependence
e.g. Qwerty standard for typewriters
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Applying VRIN
The Question of Inimitability
Causal Ambiguity
(Apple, Steve Jobs & product design)
causal links between strategic capability and competitive advantage understood? bundles of resources and competences fog these causal links
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Applying VRIN
The Question of Inimitability
Patents
patents may be a two-edged sword
offer a period of protection if the firm is able to defend its patent rights required disclosure may actually decrease the cost of imitation, and the timing
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Non-substitutability
Product or service substitution
E.g. e-mail systems vs postal systems No matter how VRI postal services were!
Competence substitution
Over-reliance on particular competences
E.g. Kodak & chemical vs digital processes But Rolex vs Casio ?
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Case Dyson
Analyse the strategic capabilities of Dyson in terms of threshold & distinctive resources and competences Can of any of these capabilities be imitated by competitors? Effect of Sir Dyson leaving company?
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N: none in sight, but innovative culture could help to protect in the future
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Core Competencies
Most important distinctive competences!
Core Competences
A set of integrated and harmonized abilities that distinguish the firm in the marketplace and that are hard to imitate or obtain
Result of collective learning in the organisation, especially how to co-ordinate diverse production skills and integrate multiple streams of technologies. Competence that several business units draw on
Market focus << core competency in tech innovation
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Home cogeneration system
4 cycle engine
Honda Civic
MicroElectronics
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Group assignment
List threshold & distinctive capabilities of your company Do any of the most distinctive capabilities qualify as core competences?
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Quiz
You get 10 minutes!
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