Chapter 6: Strategic Capability Flashcards
(9 cards)
What are critical success factors?
A small number of key vital goals that are vital to the success of a business. They are features that are valued by a group of customers and therefore the organisation must excel in order to outperform the competition.
What are threshold and unique resources?
Threshold resources are the basic resources needed by any organisation within the market. Unique resources are resources that give them a competitive advantage over the competition as they are difficult to replicate
What are the 9 M’s
Men, machines, money, Management information systems, material, management, makeup, methods, market
Describe Kay’s competence’s model
Core competences are the processes and activities that allow a firm to meet critical success factors and thus have a competitive advantage. They must be difficult to replicate. Kay outlined three key competences:
reputation - the reason why customers are attracted to an organisation,
innovative ability - being able to develop new products and services, and
competitive architecture - the network of relationships within and surrounding a business: internal architecture : relationship with employees,external: relationship with customers, suppliers and intermediaries, network srchitecture - relationship with collaborating businesses.
What is Porter’s value chain analysis?
The value/ margin is measured by the difference between the cost of the activities to the sales revenue created by sales to customers. The activities are divided into primary activities: which directly act value to the product/ service given to the client and support activities which do not directly add value but ensures the primary activities are performed to maximum activities.
What are linkages in Porter’s value chain analysis model and why are they important?
Linkages are connections between a business’s internal activities and its external partners (suppliers/customers) that help create value and competitive advantage.
• Internal linkages:
• Co-ordination – Activities align with the overall strategy.
• Optimisation – Strength in one area reduces effort in another (e.g. good product design = less after-sales support).
• External linkages:
• The business’s value chain should align with both:
• The supplier’s chain
• The customer’s needs
These linkages improve efficiency, c onsistency, and make the business harder to copy.
Example: Hotel Chocolat → John Lewis → Customer
(All focused on high quality = strong value chain)
What are three ways to strengthen the value chain?
Outsourcing - using third parties to perform processes that could be performed in house, automation - using automatic equipment to replace a process and Shared service centres - putting internal activities which were previously conducted separately in each department together in one shared organisation. Ie having one hr department one finance department etc
Outline Harmon’s process-strategy matrix
Low importance and low complexity processes are simple and straightforward and can therefore be automated.
Low importance and high complexity process add little value but are too complex to automate but can be outsourced.
High importance but low complexity processes can be either automated or outsourced as they are essential but can be performed easily.
High importance and high complexity processes are vital core competences to the business and must be improved as much as possible.
What is the product life cycle and what are its stages?
The product life cycle is used to perform portfolio analysis and is an application of the life cycle theory but to products and services of a business.
In the development stage
- negative cash flow as will be spent on research and development and initial marketing
- market research is essential in the success of the product
In the introduction stage
- continued cash outflow - money spent on r+d and marketing can outweigh sales initially,
- initial demand determines how the product will be priced, price skimming = setting a high price for typically new or unique products where adopters are willing to pay higher prices, goal is to recover development costs quickly and maximise early profits vs penetration = setting a low price to attract more customers and increase market share - typically done in already competitive markets, goal is to gain customers and make the product widely adopted.
In the growth stage
- new competition
- economies of scale may emerge due to mass production
In the maturity stage
- critical mass should be achieved in order to achieve cost efficiencies (benefit from economies of scale) - i.e. selling a minimum size of products to still be profitable and run efficiently especially in maturity phase where sales growth slows,
- positive cash inflow - maximum sales revenue with minimum marketing and investment
In the decline stage
- heavy price discounting to utilise spare capacity and cover overheads
- brand loyalty may be essential to retaining customers
