Chapter

4
Analyzing a
Companys 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 Companys Present

Strategy Working?
Question 2: What Are the Companys Resource
Strengths and Weaknesses and Its External Opportunities
and Threats?
Question 3: Are the Companys 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 Companys Strategy

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Q #1: How Well Is the Companys

Present Strategy Working?
Key Issues
Identify competitive approach
Low-cost

leadership

Differentiation
Focus

on a particular market niche

Determine competitive scope

Geographic
Operating

market coverage

stages in industrys 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

What is the strategy?

Completeness

Internal consistency

Rationale

Relevance

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Quantitative assessment

What are the results?

Is company achieving its

financial and strategic
objectives?

Is company an aboveaverage industry

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 Companys Strengths,

Weaknesses, Opportunities and Threats ?
S W O T represents the first letter in
S

trengths

eaknesses

pportunities

hreats

S
O

W
T

For a companys 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 companys 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 companys

competitiveness and profitability
Often, a core competence results from collaboration

among different parts of a company

Typically, core competencies reside in a companys

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
capability rivals do not have

#1

Presents

attractive potential for

being a cornerstone of strategy

provide a competitive edge in the marketplace

because it represents a competitively superior resource
strength

Can

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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 Companys
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

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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 Companys

Prices and Costs Competitive?
Assessing whether a firms 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 companys business consists of all activities

undertaken in designing, producing, marketing,

delivering, and supporting its product or service
A companys value chain consists of a linked set of

value-creating activities performed internally

The value chain contains two types of activities

activities where most of

the value for customers is created

Primary

activities facilitate
performance of the primary activities

Support

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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--vis major competitors?

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Assessing a Companys
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 companys

competitiveness, what items should be
on a companys worry list?
Requires thinking strategically about
Pluses

and minuses in the industry

and competitive situation
Companys 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 companys high costs?
How to sustain a companys present growth

in light of slowing buyer demand?

Whether to expand a companys 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 companys

customer base?
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