Lecture 6 - Context of strategy: analytical tools

Question 1

What does VRIN stand for?

Answer 1

Value
Rarity
Inimitability
Non substitutability

Question 2

When are strategic capabilities of value?

Answer 2

Take advantage of opportunities and neutralise threats

Provide value to customers

Provide potential competitive advantage

At a cost that allows an organisation to realise acceptable levels of return

Question 3

Rare capabilities:

Answer 3

Possessed uniquely by one organisation or by a few others only, e.g. patented products, talented staff, powerful brand

Rarity can be temporary
- patents expire, key people leave

Question 4

Inimitability

Answer 4

Capabilities that competitors find difficult to imitate, copy or obtain

Competitive advantage can be built on unique resources (key individual/IT system) but these may not be sustainable

Question 5

Non-substitutability

Answer 5

Threat of substitution

Product or service substitution from a different industry/market
- e.g. postal services and email

R&C substitution, e.g. skill substituted by expert systems or IT solutions

Question 6

What does SWOT stand for?

Answer 6

Strengths
Weaknesses
Opportunities
Threats

Question 7

Internal SWOT analysis:

Answer 7

Identify firm level strengths and weakness

Question 8

What supporting tools could be used for an internal SWOT analysis?

Answer 8

VRIN

7S McKinsey

Question 9

External SWOT analysis:

Answer 9

Identity environmental opportunities and threats

Question 10

What supporting tools could be used for an external SWOT analysis?

Answer 10

PESTEL

Porters 5 forces

Question 11

Name 4 drawbacks of SWOT

Answer 11

Long lists with no attempt at prioritisation

Over generalisation
- sweeping statements often based on biased, unsupported opinions

Substitute for analysis
- it should result from detailed analysis

WOT is not used to guide strategy
- it is seen as end in itself

Question 12

TOWS matrix

Answer 12

Insert image

Question 13

What is benchmarking?

Answer 13

Means of understanding how an organisation compares with others

Question 14

Name the 2 broad approaches to benchmarking

Answer 14

Industry/sector benchmarking

Best-in-class benchmarking

Question 15

Name some of the tools that can be used in benchmarking

Answer 15

Financial ratios

Systems analysis

Value chain analysis

Question 16

Who coined value chain analysis and in what year?

Answer 16

Porter, 1985

Question 17

Porter, 1985

Answer 17

Value chain analysis

Question 18

What is value chain analysis?

Answer 18

Tool that maps the sequence of events that lead to the company’s competitive advantage

• it helps determine strengths and weaknesses
• focuses on how activities add or lose value

Question 19

Name two different approaches/strategies of value chain analysis

Answer 19

Cost advantage

Differentiation advantage

Question 20

What is the cost advantage strategy/approach?

Answer 20

Approach used when organisations try to compete on costs and want to understand the sources of their cost advantage or disadvantage and what factors drive those costs

Question 21

What is the differentiation advantage strategy/approach?

Answer 21

For firms that strive to create superior products or services

Question 22

What are the 5 steps in cost advantage?

Answer 22

Step 1. Identify the firm’s primary and support activities.

Step 2. Establish the relative importance of each activity in the total cost of the product.

Step 3. Identify cost drivers for each activity.

Step 4. Identify links between activities.

Step 5. Identify opportunities for reducing costs.

Question 23

What are the 3 steps in differentiation advantage?

Answer 23

Step 1. Identify the customers’ value-creating activities.

Step 2. Evaluate the differentiation strategies for improving customer value.

Step 3. Identify the best sustainable differentiation.

Question 24

What 4 fundamental questions does VCA prompt?

Answer 24

Do the support activities truly add value?

Should we buy or make?

What linkages in the chain truly provide more than competitors?

How can the chain be reconfigured to either lower costs or increase customer benefits?

Question 25

Name the 7S in the McKinsey framework

Answer 25

``` Strategy Structure Systems Style Staff Skills Shared values ```

Question 26

How is the McKinsey 7S framework better than other analytical tools?

Answer 26

Provides useful overview tool of how different elements fit together Does not focus in one area only Considers the softer side of organisations, e.g style and shared values Useful structuring device to gather the data on which analysis of resources, capabilities, value chains etc. is based

Question 27

Questions for STRATEGY

Answer 27

What is the strategy? How does the company intend to achieve its objectives? How does the company deal with competitive pressure? How are changes in customer demands dealt with? How is strategy adjusted for environmental issues?

Question 28

Questions for STRUCTURE

Answer 28

How is the company/team divided? What is the hierarchy? How do the various departments coordinate activities? How do the team members organize and align themselves? Is decision making and controlling centralized or decentralized? Is this as it should be, given what they are doing? Where are the lines of communication? Explicit and implicit?

Question 29

Questions for SYSTEMS

Answer 29

What are the main systems that run the organization? Consider financial and HR systems as well as communications. Where are the controls and how are they monitored and evaluated? What internal rules and processes does the organisation use to keep on track?

Question 30

Questions for SHARED VALUES

Answer 30

What are the core values? What is the corporate/team culture? How strong are the values? What are the fundamental values that the company/team was built on?

Question 31

Questions for STYLE

Answer 31

How participative is the management/leadership style? How effective is that leadership? Do employees/team members tend to be competitive or cooperative? Are there real teams functioning within the organization or are they just nominal groups?

Question 32

Questions for STAFF

Answer 32

What positions or specializations are represented within the company? What positions need to be filled? Are there gaps in required competencies?

Question 33

Questions for SKILLS

Answer 33

What are the strongest skills represented within the company/team? Are there any skills gaps? What is the company/team known for doing well? Do the current employees/team members have the ability to do the job? How are skills monitored and assessed?

Question 34

Overall 7S questions

Answer 34

Are there gaps and inconsistencies between elements? Are the shared values consistent with the structure, strategy, and systems? If not, what needs to change? Hard elements (e.g. systems, structures). How well does each one support the others? Identify where changes need to be made. Softer elements (e.g. style, skills). Do they support the desired hard elements? Do they support one another? If not, what needs to change?