Chapter 4 - Evaluating a company's resources, capabilities, and competitiveness. The main goals of this chapter are to: Learn how to assess how well a company's strategy is working, understand why a company's resources and capabilities are central to its strategic approach and how to evaluate their potential for giving the company a competitive edge over rivals, grasp how a company's value chain activities can affect the company's cost structure and customer value proposition,. | Student Version 1 Evaluating a Firm’s Internal Situation Question 1 How well is the firm’s strategy working? Question 2 What are the firm’s competitively important resources and capabilities? Question 3 Are the firm’s cost structure and customer value proposition competitive? Question 4 Is the firm competitively stronger or weaker than key rivals? Question 5 What strategic issues and problems merit front-burner managerial attention? 2 Question 1: How Well Is the Company’s Strategy Working? The two best indicators of how well a firm’s strategy is working are: Whether the firm is recording gains in financial strength and profitability. Whether the firm’s competitive strength and market standing is improving. Other Strategy Performance Indicators Trends in the firm’s sales and earnings growth. Trends in the firm’s stock price. The firm’s overall financial strength. The firm’s customer retention rate. The rate at which new customers are acquired. Changes in the firm’s image and reputation with customers. Evidence of improvement in internal processes such as defect rate, order fulfillment, delivery times, days of inventory, and employee productivity Question 2: What Are the Company’s Competitively Important Resources and Capabilities? A company’s strategy and business model: Must be well-matched to its collection of resources and capabilities. Requires a tight fit with a company’s internal situation. Is strengthened when exploiting resources that are competitively valuable, rare, hard to copy, and not easily trumped to rivals’ equivalent substitute resources Resource and Capability Analysis Analyzing the resources and capabilities of a company is a two-step process: Identify the company’s most competitively important resources and capabilities Apply the four tests of competitive power to ascertain which resources and capabilities can support a sustainable competitive advantage over rival firms. Identifying Competitively Important Resources and Capabilities Common types | Student Version 1 Evaluating a Firm’s Internal Situation Question 1 How well is the firm’s strategy working? Question 2 What are the firm’s competitively important resources and capabilities? Question 3 Are the firm’s cost structure and customer value proposition competitive? Question 4 Is the firm competitively stronger or weaker than key rivals? Question 5 What strategic issues and problems merit front-burner managerial attention? 2 Question 1: How Well Is the Company’s Strategy Working? The two best indicators of how well a firm’s strategy is working are: Whether the firm is recording gains in financial strength and profitability. Whether the firm’s competitive strength and market standing is improving. Other Strategy Performance Indicators Trends in the firm’s sales and earnings growth. Trends in the firm’s stock price. The firm’s overall financial strength. The firm’s customer retention rate. The rate at which new customers are acquired. Changes in the firm’s image and reputation
