A Strategy Should be

Stealth
Prepared by: Geoff Linton

Fall ‘06
SCA Quotes
 “the first man gets the oyster, the second man
gets the shell” Andrew Carnegie

 “all men see the tactics whereby I conquer,

but what none can see is the strategy out of
which great victory is evolved”
Sun-Tzu, Chinese military strategist

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 What is Your Strategy?
 Identify competitive approach
 Low-cost leadership
 Differentiation
 Focus on a particular market niche
 Determine competitive scope
 Stages of industry’s production/distribution chain
 Geographic coverage
 Customer base
 Identify functional strategies
 Examine recent strategic moves
4-3
Developing The Marketing Strategy
Product Concept Profile
Gap Consumer
Analysis
Market Target Market Behavior
Segmentatio
Level Of Share Market n
Market
Involvemen Selectio Market Research
t Method Of
Entry n Attractivenes
s
& TAP

The
Marketing
Objective

The Market
Strategy

Finance Human resource Operations

Organizationa
Objective and objective and Objective and
l Implications
Strategy strategy Strategy
4-4
 Internal Scanning
“Organizational Analysis
Chapter 4
Prepared by: Geoff Linton

Fall ‘06
5.0 Resource-Based Approach –
Identify strengths and weaknesses
 Internal strategic factors:
 Critical strengths and weaknesses that are
likely to determine if the firm will be able to
take advantage of opportunities while
avoiding threats.
 Build on strengths which are also sustainable
competitive advantages
 Correct glaring weaknesses

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5.0 Sample - Rollerblade
 Strengths  Weaknesses
 Industry leader  Premium priced
 Innovative in products position puts off the
and design value conscious
 Strong brand consumer
 Limited distribution in
awareness
 Strong position in mass merchandising
outlets
sporting goods
 Strong position in
specialty outlets

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5.1 Resource-Based Approach
 Organizational Resource (tangible or intangible)
 An asset, competency, process, skill, or knowledge controlled by
the organization.
 Capability – ability to exploit resources
Note: Resources have little strategic value unless you have the capability
to exploit them!
 Core competency – an organizational resource which
crosses functional boundaries, done “exceedingly well”
 Distinctive competency – superior to competition
 Often intangible are harder to copy, more unique

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5.1 Core Competencies
 Explicit competencies:
 Knowledge/skills/behaviours that can be easily articulated
and communicated
 Example:

 Tacit competencies:
 K/S/B that is not easily communicated because it is deeply
rooted in employee experience or in a corporation’s culture.
 Example:

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 Competitive Advantage
 Competitive advantage exists when a firm’s
strategy gives it an edge in
 Defending against competitive forces and
 Securing customers

Key to Gaining a Competitive Advantage

 Convince customers firm’s product / service
offers superior value
 Offerbuyers a good product at a lower price
 Use differentiation to provide a better product
buyers think is worth a premium price
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GL
Sustainable Competitive
Advantage
 sustainable over time
 build loyalty
 true differentiation
 hard to imitate
 use barriers to entry

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5.3 Building Blocks of SCA
 Identify strengths and weaknesses
 Analyze strengths to identify core competencies
 Analyze core competencies to identify distinctive
competencies
 Assess distinctive competencies using VRIO
questions to determine those which could be the
basis for a strategy
 From those selected, identify SCA

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 Reported SCA’s
Sustainable Competetive Advantages of 248 Businesses
High Tech Service Other Total
Reputation for quality 26 50 29 105
Customer service/product support 23 40 15 78
Name recognition/high profile 8 42 21 71
Retain good management and engineering staff 17 43 5 65

1. Can you have more Low cost production

Financial resources
17
11
15
26
21
14
53
51
Customer orientation/feedback/market research 13 26 9 48
than 1 SCA? Product line breadth
Technical superiority
11
30
23
7
13
9
47
46
Installed base of satisfied customers 19 22 4 45
2. Which SCA’s are Segmentation/focus
Product characteristics/differentiation
7
12
22
15
16
10
45
37

soft? Continuing product innovation

Market share
12
12
17
14
6
9
35
35
Size/location of distribution 10 11 13 34
Dow price/high value offering 6 20 6 32
3. Who’s perception is Knowledge of business
Pioneer/early entrant into industry
2
11
25
11
4
6
31
28
most important? Efficient, flexible production adaptable to customers
Effective sales force
4
10
17
9
4
4
25
23
Overall marketing skills 7 9 7 23
Shared vision/culture 5 13 4 22
Strategic goals 6 7 9 22
Powerful, well-known parent 7 7 6 20
Location 0 10 10 20
Effective advertising/image 5 6 6 17
Enterprising/entrepreneurial 3 3 5 11
Good coordination 3 2 5 10
Engineering research and development 8 2 0 10
Short-term planning 2 1 5 8
Good distributor relations 2 4 4-13
1 7
GL Other 6 20 5 31
5.3 Evaluating Key Resources
 TIROD Framework to identify SCA

 Transparency: ability of others to understand your SCA?

 Imitability: Is it costly for others to imitate?
 Rareness/Replicability: Do other competitors possess it?
 Organization/Transferability: Is the firm organized to exploit
the resource? Can it be transferred across functions?
 Durability: Is it unlikely to depreciate or become obsolete?

SCA’s are the building blocks of strategy!

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5.3 Examples of SCA? (TIROD)
 Advertising campaign
 Product colour
 Manufacturing process
 Distributor network
 Research and development process
 Patents
 Workforce skills and knowledge

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 Name that SCA...
 Honda  Body Shop
 Air Cda  Gap
 SouthWest Airlines  Walmart
 Shell
 McDonald’s  Disney
 Tim Hortons
 Linnamar
 3M
 Sony 

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GL
 Do they have a SCA?
 Toyota  Microsoft
 Coke  IBM
 Levi’s  Tommy Hilfinger
 Walmart  Tragically Hip
 Harvard  Eidelweiss Tavern

4-17
GL
5.3 Resource Sustainability

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5.4 Business Model – Strategy Map
 Description of how the organization will exploit SCA in
order to compete
 Method of making money in current business
environment
 Who do we serve?
 What do we provide?
 How do we make money?
 How do we differentiate and sustain competitive advantage?
 How do we provide our product/service?
 (Map takes it one step further – links goals to specific
initiatives in 4 Balanced Scorecard categories)

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5.4 Types of Business Models
 Customer Solutions – IBM (expertise)
 Multi Component System – Gillette (margins)
 Advertising Model – Google (volume)
 Switchboard Model – realtors (intermediary)
 Efficiency Model – Walmart (standardized)
 Time Model – Sony (first in)
E.g. Video - Dell

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Example

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Strategic Practice Exercise
 Watch the Dell Video:
 Does this firm have any core competencies?
 Are any of these distinctive competencies?
 Does the firm have any sustainable competitive
advantages?
 What are the most important aspects of its value
chain?
 What is the likely future of this firm? Will the company
survive industry consolidation?

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 Example: Key Value Chain Activities

HOME APPLIANCE INDUSTRY

Parts and components manufacture

Assembly
Wholesale distribution
Retail sales

4-23
GL
 Example: Key Value Chain Activities

SOFT DRINK INDUSTRY

Processing of basic ingredients

Syrup manufacture
Bottling and can filling
Wholesale distribution
Retailing Kroger

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GL
5.5 Value Chain Analysis
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5.5 Value Chain Analysis
 Examine each product line’s value chain
 Core competencies & core deficiencies

Examine the “linkages” within each product line’s value chain

 Connections between the way one value activity is performed
and the cost of performance of another activity
 Look for economies of scale
 Look for experience curve effect

 Examine the synergies among the value chains of different

product lines or business units
 Look for economies of scope
 Secondary functions may provide opportunities for outsourcing –
trick is to determine what is secondary to your business model

4-26
See p59 figure 4.2 for a Manufacturer
4-27
5.6 Value Proposition

 Why is a customer going to buy from you?

 Linked to notion of Key Success Factors (What we need to do
well to get them to buy from us – essential components of
operations – like key strategic initiatives in map)
 Walmart?
 Winners?
 Toyota?
 McDonalds
 Value chain should deliver these Key Success Factors –
provides clarity, focus and priority for your operations

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5.7 Corporate Structure and culture
 Should support business model and value proposition – not
work against it – should be situationally appropriate
 Bureaucratic – emphasis on consistency, minimizing risk, long cycle
times, standardization of process, process emphasis, need
specialization and coordination at managerial level, opportunity for
de-skilling
 Empowered – emphasis on quick response, low risk of poor
decisions, need cross functional knowledge, little need for
specialization, coordination at lowest level, focus on intangibles and
competencies
 Boundaryless – emphasis on outcomes and objectives,
collaboration essential to success, opportunity for outsourcing to
supplier or customer, highly self managed workforce, complex cycle
or extremely well defined outcomes

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5.8 Key Strategic Issues
 Marketing –
 position and segmentation, mix, life cycle
 Finance
 Leverage, capital budget
 R&D
 Intensity, competence, transfer, mix, discontinuity
 Operations
 Intermittent vs continuous, experience curve, scale and scope, supply chain
 HR
 SMWT, unions, diversity, competencies
 IT
 Internet, extranet, ERP

4-30
 Marketing Mix Variables
Product Place Promotion Price
Quality Channels Advertising List price
Features Coverage Personal selling Discounts
Options Locations Sales promotion Allowances
Style Inventory Publicity Payment periods
Brand name Transport Credit terms
Packaging
Sizes
Services
Warranties
Returns
Source: Philip Kotler, Marketing Management: Analysis, Planning, and Control, 4th ed. (Englewood Cliffs, N.J.: Prentice-
Hall, 1980), p. 89. Copyright © 1980. Reprinted by permission of Prentice-Hall, Inc.

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 The Product Life Cycle
Sales

*The right end of the Growth

stage is often called
Competitive Turbulence
because of price and
distribution competition that
shakes out the weaker
competitors. For further
information, see C. R.
Introduction Growth* Maturity Decline Wasson, Dynamic Competitive
Strategy and Product Life
Time Cycles, 3rd ed. (Austin, Tex.:
Austin Press, 1978).

4-32
Technological Discontinuity
What the S-Curves Reveal
Product Performance

Mature
Technology

New
Technology

Research Effort/Expenditure
In the corporate planning process, it is generally assumed
that incremental progress in technology will occur. But past
developments in a given technology cannot be extrapolated
into the future, because every technology has its limits. The
key to competitiveness is to determine when to shift re-
sources to a technology with more potential.
Source: P. Pascarella, “Are You
Investing in the Wrong Technology?”
Industry Week (July 25, 1983), p. 38.
Copyright © 1983 Penton/IPC. All rights
reserved. Reprinted by permission.

4-33
Summary of Chapter 4
 SCA is determined by resource endowments
 Durability and imitability are key factors for
building SCA
 Value chain analysis
 corporate level
 industry level

4-34
Discussion Questions
1. What is the relevance of the resource-based
view of the firm to strategic management in a
global environment?
2. How can value-chain analysis help identify a
company’s strengths and weaknesses?
3. In what ways can an organization’s structure
and culture be internal strengths or
weaknesses?

4-35
Discussion Questions
4. What are the advantages and disadvantages of
management’s using the experience curve to
determine strategy?
5. How might a firm’s management decide
whether it should continue to invest in current
known technology or in new, but untested
technology? What factors might encourage or
discourage such a shift?

4-36
Enviro Case

4-37
Identifying Industry
Key Success Factors
 Answers to three questions pinpoint KSFs
 On what basis do customers choose between
competing brands of sellers?
 What resources and competitive capabilities
does a seller need to have to be competitively
successful?
 What does it take for sellers to achieve a
sustainable competitive advantage?
 KSFs consist of the 3 - 5 really major
determinants of financial and
competitive success in an industry
4-38
 Table 3.3: Common Types of
Key
Technology-
related
Success Factors
Scientific research expertise; Product innovation capability; Expertise
in a given technology; Capability to use Internet to conduct various
business activities
Manufacturing- Low-cost production efficiency; Quality of manufacture; High use of
fixed assets; Low-cost plant locations; High labor productivity; Low-
related cost product design; Flexibility to make a range of products
Strong network of wholesale distributors/dealers; Gaining ample
Distribution-
space on retailer shelves; Having company-owned retail outlets; Low
related distribution costs; Fast delivery
Fast, accurate technical assistance; Courteous customer service;
Marketing- Accurate filling of orders; Breadth of product line; Merchandising
related skills; Attractive styling; Customer guarantees; Clever advertising
Superior workforce talent; Quality control know-how; Design
Skills-related expertise; Expertise in a particular technology; Ability to develop
innovative products; Ability to get new products to market quickly
Organizational Superior information systems; Ability to respond quickly to shifting
market conditions; Superior ability to employ Internet to conduct
capability business; More experience & managerial know-how
Favorable image/reputation with buyers; Overall low-cost; Convenient
Other types locations; Pleasant, courteous employees; Access to financial capital;
Patent protection
4-39
Example: KSFs for Apparel
Manufacturing Industry

 Fashion design -- to create

buyer appeal

 Low-cost manufacturing efficiency --

to keep selling prices competitive

4-40
Example: KSFs for Beer
Industry
 Utilization of brewing capacity -- to keep manufacturing
costs low
 Strong network of wholesale distributors -- to gain
access to retail outlets
 Clever advertising -- to induce beer drinkers to buy a
particular brand

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Value Chain

4-42
Is this a Good Scorecard?

4-43
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