LECTURER Week 4 (1/10/2013)

Chapter 4: Evaluating a Company Resources, Capabilities and Competitiveness.

In this chapter we discuss the techniques of evaluating a company’s internal situation. There are six key questions to consider in analysis and evaluating resources, capabilities and competitive strength:

    1)   How well is the firm’s present strategy working?

The best indicators of how well a company’s strategy is working are whether the company is achieving its stated financial and strategic objectives and whether the company is an above-average industry performer. The stronger a company's current overall performance, the less likely the need for radical strategy changes and the weaker a company's performance or the faster the changes in its external situation which can be gleaned from industry and competitive analysis. In Malaysia, the currently product that become the market leader is such as Colgate, Maggie, Shell, Nestle and so forth.

    2)   What are the firm’s competitively important resources and capabilities?

A company’s business model and strategy must be well-matched to its collection of resources and capabilities. An attempt by management to create and deliver customer value in a manner that depends on resources or capabilities that are deficient and cannot be readily acquired is unwise and positions the company for failure. A company’s competitive approach requires a tight fit with a company’s internal situation and is strengthened when it exploits resources that are competitively valuable, rare, hard to copy, and not easily trumped by rivals’ equivalent substitute resources. In fact, many companies pursue resource-based strategies that attempt to exploit company resources in a manner that offers value to customers in ways rivals are unable to match.

     3)   What are the company's resource strengths and weaknesses, and its able to seize market opportunities and nullify external threats?

A SWOT analysis provides an overview of a firms situation and is an essential component of crafting a strategy tightly matched to the company's situation. The two most important parts of SWOT analysis are drawing conclusions about the company's overall situation and acting on those conclusions to better match with the company's strategy. A company's resource strengths, competencies, and competitive capabilities are strategically relevant because they are the most logical and appealing building blocks for strategy and the resource weaknesses are important because they may represent weakness that need correction. External opportunities and threats come into play because a good strategy necessarily aims at capturing a company's most attractive opportunities and at defending against threats to its well-being.

     4)   Are the company's prices and costs competitive?

One telling sign of whether a company's situation is strong or precarious is whether its prices and costs are competitive with those of industry rivals. Value chain analysis and benchmarking are essential tools in determining whether the company is performing particular functions and activities cost-effectively, learning whether its costs are in line with competitors, and deciding which internal activities and business processes need to be improvement. Value chain analysis teaches that how competently a company manages its value chain activities relative to rivals is a key to building a competitive advantage based on either better competencies and competitive capabilities or lower costs than rivals. The example company who use the concept of value chain is Dell. The component of Dell comes from all around the world because they seek supply from the country who can supply with lowest price.

     5)   Is the firm competitively stronger or weaker than key rivals?

How the company matches up against key rivals on industry key success factors and other chief determinants of competitive success and why the company has a competitive advantage or disadvantage. These indicate where a company is competitively strong and weak, and provide insight into the company's ability to defend or enhance its market position. When a company has important competitive strengths in areas where one or more rivals are weak, it makes sense to consider offensive moves to exploit rivals competitive weaknesses. When a company has important competitive weaknesses in areas where one or more rivals are strong, it makes sense to consider to moves to reduce the weakness.

    6)   What strategic issues and problems merit front-burner managerial attention?

The last question defines about Strategic “How to” Issues and Strategic “Should We” Issues. Zeroing in on the strategic issues a company faces and compiling a list of problems and roadblocks creates a strategic agenda of problems that merit prompt managerial attention. It involves using the results of both industry and competitive analysis and company situation analysis to identify a "worry list" of issues to be resolved for the company to be financially and competitively successful in the years ahead. The purpose is to identify the specific issues or problems that management needs to address. Actual deciding on a strategy and what specific actions to take is what comes after the list of strategic issues and problems that merit front-burner management attention is developed.