Dr.

Harris Turino
harristk@indo.net.id harristk.blogspot.com

1. Conceptual Thinking 2. Strength and Weakness 3. Value Configuration

Politic/Regulation
Socio Culture
Supplier

General Environment
Economy

New Entrant

Buyer

Industry Environment

Demography

Substitute

Technology Globalization

Competitive Environment

Company Environment (internal analysis)

 Internal analysis is identification factors inside the company boundary that might influence business performance (strength and weakness). This analysis helps us to:
o Provide an update overall internal condition to compete in defined industry. o Additional information to guide strategy formulation o Identify the strategic assets that can be exploited for future growth.

External Environment

Insight/Idea

Internal Environment

Business Model

PEST analysis Industrial analysis Market analysis Competitive analysis (Five Forces, Strategic group), etc

Vision Mission Objectives

Resources Process Performance

O and T

Strategy

S and W

Edith Penrose (1959):

Firm as bundle of resources o Resource and capabilities o Differentiate among firms Firm growth is driven by excess resources o Entrepreneurial spirit o Zero marginal cost o Growth limit Firm growth relates to the environmental context o Productive opportunities o Environmental changes

Jay Barney (1986):

Firm Performance = Sustainable above average profit

SCA (Sustainable Competitive Advantage)

Strategic advantages of the firm that are superior among its rivals, and make firm gains long term superior profit Strategic resources (and capabilities) that significantly contribute to build firms SCA

VRIO Resources (Strategic assets)

Company
Toyota

SCA
Efficient production cost Low price Industry Breaker (trend setter) Market leader

Strategic Resources
Kaizen Lean manufacturing Global sourcing Operational excellent Innovative culture Visionary leader Huge market share Product expansion Pool of creative engineers

Walmart Apple

Microsoft

Valuable?

Rare?

Costly to Imitate?

Organized by Competitive superior Implication capabilities?

Disadvantage

Profit Implication

NO YES YES YES YES NO YES NO

Below normal Normal Above and short run Above+ and short run Above and long run

Parity Temporary Advantage NO YES Temporary+ Advantage Sustained Advantage

YES YES

YES YES

 Strategic assets are deteriorated over time. To maintain VRIO, strategic assets stock need to be added, accumulated, expanded, or increased its quality continuously. Example:
o Toyotas lean manufacturing has adopted by its rivals or different industries. o But they can not achieve the quality as high as Toyota.

Experience, knowledge creation, acquisition, R&D, etc

Strategic Assets Stock

Where should we find them?

 Identify industry critical success factors (CSFs).

Analyze the strength of those CFSs in our company (compare to rivals, especially within strategic group or closest strategic group). The weak CFSs should become the consideration to build strategic initiatives.

Emphasize

Improve

STRENGTHS

WEAKNESSES

From Internal Analysis

OPPORTUNITIES

THREATS

From External Analysis

Graps

Anticipate

Strategy Formulation
Strategy Formulation is the process of choosing a set of different activities to:
o create or preserve unique and valuable position by: o exploit opportunities (O) and strengths (S) and in the same time: o anticipate threats (T) and improve weakness (W)

Through SWOT analysis, we then creatively choose a set of different activities.

Those set of different activities can be depicted on the value configuration model.

Value Configuration
Firm can be viewed as collection of activities that are performed to design, produce, market, and support its products (Porter, 1985). All these activities can be represented using value configuration model (value activities system). There are three models of value configurations:
o Value Chain: transform input into product o Value Network: serve exchange between customers o Value Shop: solve customer problem

Basic Value Chain

Porter (1980) C U S T O M E R
Costs Selling Price

Value

Basic Value Network

Stabell & Fjedstad (1998)
o Infrastructure o HR Management o Technology Development o Procurement

Support Activities Primary Activities

Network promotion & contract mgt Service provisioning Infrastructure operation

Basic Value Shop

Stabell & Fjedstad (1998)
o Infrastructure o HR Management o Technology Development o Procurement
Problem Finding and Acquisition
Control (Evaluation)

Support Activities

Primary Activities

Problem Solving Choice

Execution

Example
Competitive Strategy

Source of CA
Different Set of Activities

Competitive Advantage (CA)

Valuable Unique Superior Performance

Direct selling JIT inventory Integrated process with global suppliers Efficient working capital management, etc

Dell Computer:
Customized product Lower price

Value Chain: Dell Computer

Support Activities
Infrastructure Exclusive agreement with Intel and Microsoft Exclusive agreement with Samsung, Kodak, Fuji (for printer) Manage network of suppliers around the world

HR Mgt
Tech Dev.

Recruitment, training, performance management, etc.

Little spending on R&D Total quality management to improve supply chain mgt and assembly line Global sourcing for generic component Local sourcing for microprocessor & OS Online communication (e.g. internet, phone)

Procurement

Inbound Logistic:
No warehouse Integrated process JIT inventory 36 days payment

Production (Operation):
Assembly components from supplier

Outbound Logistic:
Immediate delivery No warehouse Zero finished product inventory

Marketing and Sales:

Direct selling Direct payment 7-10 days delivery

After Sales Service:

Online Complain handling