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Internal Analysis: Distinctive Competencies, Competitive Advantage, and Profitability

The document discusses key concepts for analyzing a company's competitive advantage and profitability, including distinctive competencies, resources and capabilities, and the VRIO framework. It explains that competitive advantage depends on a company strengthening the value of its products so it can raise prices or increase sales. The value chain and support activities are also summarized, which work to lower costs and create more value for customers.

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Mazharul Islam Rafi
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85 views18 pages

Internal Analysis: Distinctive Competencies, Competitive Advantage, and Profitability

The document discusses key concepts for analyzing a company's competitive advantage and profitability, including distinctive competencies, resources and capabilities, and the VRIO framework. It explains that competitive advantage depends on a company strengthening the value of its products so it can raise prices or increase sales. The value chain and support activities are also summarized, which work to lower costs and create more value for customers.

Uploaded by

Mazharul Islam Rafi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 18

Chapter 3

Internal Analysis: Distinctive Competencies,


Competitive Advantage, and Profitability

1
Learning Objective

 Distinctive Competencies
 Bundle of Resources
 The VRIO Framework
 Value Creation
 Concept of Value Chain
 Building Blocks of Competitive Advantage

2
Strategy, Resources, Capabilities, and
Competencies

3
Competitive advantage, value
creation, and profitability

 Profitability of a company depends on the:


 Value customers place on its products
 Price it charges for its products
 Costs of creating those products
 When a company strengthens the value of its products, it
can:
 Raise prices to reflect the value
 Reduce prices to induce more customers to purchase its products

4
Value Creation Per Unit

5
Value Creation and Pricing Options
Option 2: Lower Option 1: Raise
prices to generate prices to reflect
demand higher utility

6
Competitive Advantage

Primary objective of strategy


 Distinctive Competencies:
 Firm-specific strengths that allow a company to differentiate its
products and/or achieve lower costs than its rivals
 Arise from resources and capabilities

7
Distinctive competencies

 Resources: Assets of a company


 Tangible resources: Physical entities
Land, buildings, and inventory, and money
 Intangible resource (advanced factors of production)- Nonphysical
entities created by managers and other employees
Brand names, company reputation, and intellectual property, organizational
architecture, process

8
Distinctive competencies

 Capabilities: Company’s skills at coordinating its


resources and putting them to productive use
 Reside in an organization’s rules, routines, and procedures
 Intangible

9
The firm as a bundle of resources

Management
Labor

Plan
t
Land and
Equ
ipm
ent

Inputs Organizational Outputs


Architecture
Pr

rty
oc

e
op
es

r
s

lP
Kn

a
tu
wo

c
lle
le
dg

te
In
e
VRIO Framework
VRIO Framework
The Value Chain

13
Primary activities

 Research and development


 Design of products and production processes
 Superior product design increases a product’s functionality and add value
 Production
 Creation process of a good or service
 Helps lower cost structure and leads to differentiation

14
Primary activities

 Marketing and sales


 Brand positioning and advertising - Increase customers’ perceived value of
a product
 Marketing and sales - Help create value by discovering customers’ needs
 Customer service
 Provide after-sales service and support
 Create superior utility by solving customer problems and supporting
customers after a purchase

15
Support activities

 Provide inputs that allow the primary activities to take place


 Materials management
 Controls the transmission of physical materials through the value chain
 Lowers cost and creates more profit
 Human resources
 Ensures value creation by making sure that the company has the right combination of
skilled people

16
Support Activities

 Information systems
 Electronic systems to improve efficiency and effectiveness of a company’s value
creation activities
 Company infrastructure
 Companywide context within which all the other value creation activities occur
Organizational structure, control system and company culture

17
18

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