Chapter

4
Analyzing a
Company’s Resources
and Competitive Position

Screen graphics created by:

Jana F. Kuzmicki, Ph.D.
Troy State University-Florida and Western Region

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 Chapter Roadmap
 Question 1: How Well Is the Company’s Present
Strategy Working?
 Question 2: What Are the Company’s Resource
Strengths and Weaknesses and Its External Opportunities
and Threats?
 Question 3: Are the Company’s Prices and Costs
Competitive?
 Question 4: Is the Company Competitively Stronger or
Weaker than Key Rivals?
 Question 5: What Strategic Issues and Problems Merit
Front-Burner Managerial Attention?
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 Fig. 4.1: Identifying the Components of a
Single-Business Company’s Strategy

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 Q #1: How Well Is the Company’s Present
Strategy Working?
Key Issues
 Identify competitive approach
 Low-cost leadership
 Differentiation
 Focus on a particular market niche
 Determine competitive scope
 Geographic market coverage
 Operating stages in industry’s production/distribution chain
 Examine recent strategic moves
 Identify functional strategies
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 Approaches to Assess How Well the
Present Strategy Is Working
 Qualitative assessment –  Quantitative assessment –
What is the strategy? What are the results?
 Completeness  Is company achieving its
financial and strategic
 Internal consistency objectives?
 Rationale  Is company an above-
average industry
 Relevance performer?

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 Key Indicators of How Well
the Strategy Is Working
 Trend in sales and market share
 Acquiring and/or retaining customers
 Trend in profit margins
 Trend in net profits, ROI, and EVA
 Overall financial strength and credit ranking
 Efforts at continuous improvement activities
 Trend in stock price and stockholder value
 Image and reputation with customers
 Leadership role(s) – Technology, quality,
innovation, e-commerce, etc.
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 Q #2: What Are the Company’s Strengths,
Weaknesses, Opportunities and Threats ?
 S W O T represents the first letter in
 S trengths
S W
 W eaknesses

 O pportunities

 T hreats O T
 For a company’s strategy to be well-conceived, it must
be
 Matched to its resource strengths and weaknesses
 Aimed at capturing its best market opportunities and
erecting defenses against external threats to its well-being
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 Identifying Resource Strengths
and Competitive Capabilities
 A strength is something a firm does well or an attribute that
enhances its competitiveness
 Valuable competencies or know-how
 Valuable physical assets
 Valuable human assets
 Valuable organizational assets
 Valuable intangible assets
 Important competitive capabilities
 An attribute that places a company in a position of market
advantage
 Alliances or cooperative ventures with partners

Resource strengths and competitive

capabilities are competitive assets!
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 Competencies vs. Core Competencies vs.
Distinctive Competencies
 A competence is the product of organizational learning
and experience and represents real proficiency in
performing an internal activity

 A core competence is a well-performed

internal activity central (not peripheral or incidental)
to a company’s competitiveness and profitability

 A distinctive competence is a competitively valuable

activity a company performs better than its rivals
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 Core Competencies -- A
Valuable Company Resource
 A competence becomes a core competence when the
well-performed activity is central to a company’s
competitiveness and profitability
 Often, a core competence results from collaboration
among different parts of a company
 Typically, core competencies reside in a company’s
people, not in assets on a balance sheet
 A core competence gives a company a
potentially valuable competitive capability
and represents a definite competitive asset
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 Distinctive Competence -- A
Competitively Superior Resource
 A distinctive competence is a competitively significant
activity that a company performs better than its
competitors
 A distinctive competence
 Represents a competitively valuable #1
capability rivals do not have
 Presents attractive potential for
being a cornerstone of strategy
 Can provide a competitive edge in the marketplace —
because it represents a competitively superior resource
strength
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 Determining the Competitive
Value of a Company Resource
 To qualify as competitively valuable or to be the basis for
sustainable competitive advantage, a “resource” must
pass 4 tests:

1. Is the resource hard to copy?

2. Does the resource have staying power –

is it durable?

3. Is the resource really competitively superior?

4. Can the resource be trumped by

the different capabilities of rivals?
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 Identifying a Company’s
Market Opportunities
 Opportunities most relevant to a
company are those offering

 Good match with its financial and

organizational resource capabilities

 Best prospects for profitable

long-term growth

 Potential for competitive advantage

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 Identifying External Threats
 Emergence of cheaper/better technologies
 Introduction of better products by rivals
 Entry of lower-cost foreign competitors
 Onerous regulations
 Rise in interest rates
 Potential of a hostile takeover
 Unfavorable demographic shifts
 Adverse shifts in foreign exchange rates
 Political upheaval in a country
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 Fig. 4.2: The Three Steps
of SWOT Analysis

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 Q #3: Are the Company’s
Prices and Costs Competitive?
 Assessing whether a firm’s costs are competitive with
those of rivals is a crucial part of company analysis

 Key analytical tools

 Value chain analysis

 Benchmarking

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 The Concept of a
Company Value Chain
 A company’s business consists of all activities
undertaken in designing, producing, marketing,
delivering, and supporting its product or service
 A company’s value chain consists of a linked set of
value-creating activities performed internally
 The value chain contains two types of activities
 Primary activities – where most of
the value for customers is created
 Support activities – facilitate
performance of the primary activities
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 Fig. 4.3: Representative
Company Value Chain

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 Fig. 4.4: Representative Value Chain for
an Entire Industry

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 Benchmarking Costs of
Key Value Chain Activities
 Focuses on cross-company comparisons of how certain
activities are performed and costs associated with these
activities
 Purchase of materials
 Payment of suppliers
 Management of inventories
 Getting new products to market
 Performance of quality control
 Filling and shipping of customer orders
 Training of employees
 Processing of payrolls
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 Table 4.3: Options for Attacking Cost
Disadvantages Associated with Supply Chain Activities or
Forward Channel Allies

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 Fig. 4.5: Translating Performance of Value Chain
Activities into Competitive Advantage

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 Q. #4: Is the Company Stronger or
Weaker than Key Rivals?
 Overall competitive position involves
answering two questions

 How does a company rank relative

to competitors on each important
factor that determines market success?

 Does a company have a net

competitive advantage or disadvantage
vis-à-vis major competitors?

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 Assessing a Company’s Competitive
Strength vs. Key Rivals
1. List industry key success factors and other relevant
measures of competitive strength
2. Rate firm and key rivals on each factor using rating scale
of 1 to 10 (1 = very weak; 5 = average; 10 = very strong)
3. Decide whether to use a weighted or unweighted rating
system (a weighted system is superior because chosen
strength measures are unlikely to be equally important)
4. Sum individual ratings to get an overall measure of
competitive strength for each rival
5. Based on overall strength ratings, determine overall
competitive position of firm
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 What Strategic Issues
Merit Managerial Attention?
 Based on results of both industry and competitive
analysis and an evaluation of a company’s
competitiveness, what items should be
on a company’s “worry list”?
 Requires thinking strategically about
 Pluses and minuses in the industry
and competitive situation
 Company’s resource strengths and weaknesses and
attractiveness of its competitive position

A “good” strategy must address “what to do”

about each and every strategic issue!
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 Identifying the Strategic Issues
 How to stave off market challenges from new foreign
competitors?
 How to combat price discounting of rivals?
 How to reduce a company’s high costs?
 How to sustain a company’s present growth
in light of slowing buyer demand?
 Whether to expand a company’s product line?
 Whether to acquire a rival firm?
 Whether to expand into foreign markets rapidly or cautiously?
 What to do about aging demographics of a company’s
customer base?
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