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1APPRAISING PERFORMANCE AND STRATEGYMBA600 Week 4

The document outlines the learning objectives and content for Week 4 of an MBA course, focusing on appraising performance and strategy through financial stability and management practices. Key concepts include financial ratio analysis, cash conversion cycles, and the impact of competition on a firm's ability to attract investment. Students are encouraged to apply their knowledge in real-world contexts and engage in workshops for comparative analysis and problem-solving.

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1 APPRAISING PERFORMANCE AND STRATEGY MBA600 Week 4 2 COMMONWEALTH OF AUSTRALIA COPYRIGHT REGULATIONS 1969 WARNING THIS MATERIAL HAS BEEN REPRODUCED AND COMMUNICATED TO YOU BY OR ON BEHALF OF KAPLAN BUSINESS SCHOOL PURSUANT TO PART VB OF THE COPYRIGHT ACT 1968 (THE ACT). THE MATERIAL IN THIS COMMUNICATION MAY BE SUBJECT TO COPYRIGHT UNDER THE ACT. ANY FURTHER REPRODUCTION OR COMMUNICATION OF THIS MATERIAL BY YOU MAY BE THE SUBJECT OF COPYRIGHT PROTECTION UNDER THE ACT. DO NOT REMOVE THIS NOTICE. 2
3 WEEK 4 FOCUSES ON THE THIRD LEARNING OBJECTIVE 3. Discuss and translate theory, skills and knowledge into effective management practice. Other learning objectives Critically assess a diverse range of theories accumulated throughout the Masters’ qualification and the connections that exist between each one. Acquire advanced knowledge and apply it in real workplace contexts to improve performance and competitive advantage. Undertake independent research to solve complex business problems. 4 QUICK REVIEW OF KEY CONCEPTS What we learned in Week 3 5 WHAT WE LEARNED LAST
WEEK Contingency Theory Strategic fit the consistency of strategy with the firm’s internal environment and industry external environment Fit is a concept in Contingency Theory There is no single best way of structuring or managing a firm 6 WHAT WE LEARNED LAST WEEK Competition strategy and Porter’s Five Forces framework 7 WHAT WE LEARNED LAST WEEK Positioning of Competition Strategy
8 WHAT WE WILL LEARN THIS WEEK Strategy planning processes related to resources Capabilities have been discussed in previous weeks Capital management Financial stability Cash flow 9 APPRAISING FINANCIAL STABILITY Appraising the Effectiveness of current strategy 10 RECALL THE FINANCIAL STATEMENTS
BALANCE SHEET ($ in millions) ASSETS 2017 2018 LIABILITIES 2017 2018 Current Assets $761m $707m Current Liabilities $486m $455m Fixed Assets $1,118m $1,035 Long-term Liabilities $588m $562m Total Equity $805m $725m Total Assets $1,879 $1,742 Total Liabilities and Equity $1,879m $1,742m
INCOME STATEMENT ($ in millions) 2017 2018 REVENUE $2,262 $1,810 Cost of goods sold $1,655 $1,324 Selling, general and administrative expenses $327 $262 Depreciation $90 $72 OPERATING INCOME $190 $152 Other income $29 $45 EBIT $219 $197 Interest $49 $44 Taxes $84 $67 NET INCOME $86 $86 Remember: Total Assets = Total Liabilities + Equity 11 APPRAISING PERFORMANCE STRATEGY
PLANNING PROCESS FINANCIAL RATIO ANALYSIS MEASURE DESCRIPTION INTERPRETATION Return on Sales After-tax Profit ÷ Total Sales Percentage of profits earned per dollar of sales revenue Return on Assets After-tax Profit ÷ Total Assets Percentage of profits earned per dollar of assets Return on Equity After-tax Profit ÷ Total Equity Percentage of profits earned per dollar of shareholders’ equity Gross Profit Margin (Total Sales – Cost of Goods) ÷ Total Sales Percentages of sales dollars retained as operating profit Net Profit Margin (Total Sales – Total Expenses) ÷ Total Sales Percentages of sales dollars retained as profit (earnings) Current Ratio Current Assets ÷ Current
Liabilities Liquidity 12 APPRAISING PERFORMANCE STRATEGY PLANNING PROCESS FINANCIAL RATIO ANALYSIS MEASURE DESCRIPTION INTERPRETATION Debt to Total Assets Total Debt ÷ Total Assets Proportion of assets that are financed by debt Debt to Total Equity Total Debt ÷ Total Equity Amount of debt financing as a proportion of total equity Earnings per Share (After-tax Profit – Preferred Share Dividends) ÷ Common Shares Outstanding Profit available for distribution to shareholders Price/Earnings Ratio
Market Price per Share ÷ (After-tax Earnings per Share Indicates anticipated earnings as a multiple of the stock price Cash Flow per Share (After-tax Profit + Depreciation) ÷ Common Shares Outstanding Liquidity to fund operations 13 WORKSHOP TIME How does the financial stability of a firm compare with its competition? 14 CAPABLE MANAGEMENT OF A FIRM’S FINANCES WORKSHOP Perform a financial ratio analysis of the competing
firms you selected in Week 2 (30 minutes) Do a comparative financial analysis across competitors and years Assess the business risks discovered by your analysis Use your choices of Porter’s 5 Forces, SWOT and PESTLE frameworks 15 DIAGNOSING PERFORMANCE The ability of a firm to convert its resources to cash relative to its competitors 16 CURRENT ASSETS Listed on the Income Statement The assets held for sale within the year LONG-TERM ASSETS Listed on the Balance Sheet The assets that fund the business from year to year
CURRENT LIABILITIES Listed on the Income Statement The funds owed within the year EQUITY The funds owned by investors in the business LONG-TERM DEBT Listed on the Balance Sheet The debts the fund the business from year to year WORKING CAPITAL CURRENT ASSETS LONG- TERM ASSETS EQUITY CURRENT LIABILITIES LONG- TERM DEBT WORKING CAPITAL Cash available to pay expenses when due Current Assets - Current
Labilities = Working Capital CASH FROM WORKING CAPITAL 17 CASH FROM WORKING CAPITAL Remember Working capital equals current assets minus current liabilities Important question How quickly can working capital be converted to cash? Resource threat Most companies go bankrupt because they run out of cash; they cannot pay bills or access more money 18 STATEMENT OF CASH FLOWS Sources of cash Increase in net working capital A decrease in liabilities or an increase in assets Net income after tax
The disposal or revaluation of fixed assets (plant, property, equipment) Proceeds of loans obtained Proceeds of shares that were issued Repayments received on loans previously granted by the company Uses of cash Decrease in net working capital Losses to be met by the company The purchase of fixed assets/investments The full or partial payment of loans Granting of loans Liability for taxes Dividends paid or proposed https://corporatefinanceinstitute.com/resources/knowledge/acco unting/sources-and-uses-of-funds-statement/ Reports the cash inflow and cash outflow over an accounting period, normally a month or a year 19
CASH CONVERSION CYCLE THE DAYS REQUIRED TO CONVERT WORKING CAPITAL INTO CASH Days Sales in Inventory: the days taken to sell all inventory during a year DSI = 365 ÷ (Cost of Sales ÷ Inventory) Days Sales Outstanding: the days required to collect customer payments after a sale on credit DSO = 365 ÷ (Net Sales ÷ Accounts Receivable) Days Payables Outstanding: the days taken to pay supplier invoices DPO = 365 ÷ (Cost of Sales ÷ Accounts Payable) Cash Conversion Cycle = DSP + DSI - DPO Working capital cash comes from inventories plus receivables minus payables 20 RISK OF FINANCIAL
STRESS AND BUSINESS BANKRUPTCY Altman’s Z score Indicates the overall financial health of a firm in a single measure Altman’s Z score = 1.20 x (Working Capital ÷ Total Assets) + 1.40 x (Retained Earnings ÷ Total Assets) + 3.33 x (Earnings Before Interest and Tax ÷ Total Assets) + 0.60 x (Market Value of Equity ÷ Book Value of Debt) + 0.99 x (Sales ÷ Total Assets) Scores below 1.8 = likelihood of bankruptcy Scores above 3.0 = unlikely to go bankrupt 21 WORKSHOP TIME Positive cash flow is required to fund business growth 22 WORKSHOP
You have three objectives in your competitor assessment (30 minutes) 1. Determine the priorities for resource investment Use the Statement of Cash Flows (in a firm’s annual report); or apply the ‘sources and uses’ table on the previous slide 2. Calculate the Cash Conversion Cycle 3. Summarise the resource base of your firm What is the ability of your firm to fund business growth relative to its competitors? RESOURCE BASE AND GROWTH POTENTIAL HOW ‘COMPETITIVE’ IS THE COMPETITION STRATEGY? 23 INDUSTRY ANALYSIS A firm’s ability to fund business growth via equity and debt, relative to its
competitors 24 CAPITAL STRUCTURE OF A FIRM What is best? FUNDING TO GROW MORE PROFITS THAN COMPETITORS One of the most important choices as to the funding operational activities and business growth The ‘best’ mix of capital depends on the industry The cost of debt is less expensive than equity because it has less risk Excessive debt increases interest payments, he volatility of profits and bankruptcy risk ‘Companies with consistent cash flows can tolerate a much larger debt load and will have a much higher percentage of debt in their optimal capital structure. Conversely, a company with volatile cash flow will have little debt and a large amount of equity.’ (Investopedia) 25 TYPES OF RISK
BUSINESS risk is a deviation from plan, positive or negative A negative deviation is a threat A positive deviation is an opportunity SYSTEMATIC risk affects numerous assets or firms to varying degrees For example, business cycles and inflation UNSYSTEMATIC risk affecting a specific group of assets For example, legislation and ‘acts of god’ 26 INVESTMENT ATTRACTIVENESS CAN A FIRM ATTRACT EQUITY? ATTRACTING EQUITY INVESTORS A helpful website is Yahoo Finance! https://au.finance.yahoo.com/ provides free data and charting for global stock exchanges (like the ASX below) Examine the attractiveness of investment Price-Earnings (P:E) ratio Return on Investment (ROI) Earnings per Share (EPS)
Bond Yield 27 WORKSHOP TIME The attractiveness of a firm to investors (equity and bonds) 28 COMPETITION FOR INVESTMENT EQUITY AND BONDS WORKSHOP Use Yahoo Finance! and other investor websites to investigate the ability to attract investment in your firm and its competitors (30 minutes) Compare investment attractiveness relative to: Price-Earnings (P:E) ratio Return on Investment (ROI) Earnings per Share (EPS) Bond yield (if available) 29
S e e k h e l p w h e n y o u n e e d i t ! Thank you Appraising Performance and StrategyCOMMONWEALTH OF AUSTRALIA�Copyright Regulations 1969��WARNING�This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (the Act).��The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act.��Do not remove this notice. Week 4 focuses on the Third learning objectiveQuick review of key conceptsWhat we learned last weekWhat we learned last weekWhat we learned last weekWhat we will learn this weekAppraising Financial Stability��Appraising the Effectiveness of current strategy�Recall the Financial StatementsAppraising performance��strategy planning processAppraising performance��strategy planning processWorkshop timeCapable Management of a Firm’s FinancesDia gnosing performance�� The ability of a firm to convert its resources to cash relative to its competitors�Cash from Working CapitalCash from Working CapitalStatement of Cash FlowsCash Conversion Cycle��The days required to convert Working Capital into cash�Risk of financial stress and business bankruptcyWorkshop timeResource Base and Growth Potential��How ‘competitive’ is the Competition Strategy? Industry analysis��A firm’s ability to fund business growth via equity and debt, relative to its competitorsFunding to Grow more profits than CompetitorsTYPES OF RISKInvestment attractiveness��Can a firm Attract equity?Workshop timeCompetition for investment�Equity and BondsSlide Number 29
1 STRATEGY CONCEPTS MBA600 Week one Strategy theories Competitive advantage Strategic complexity Dynamic Capabilities Industry Change Sustainable Performance 2 COMMONWEALTH OF AUSTRALIA COPYRIGHT REGULATIONS 1969 WARNING THIS MATERIAL HAS BEEN REPRODUCED AND COMMUNICATED TO YOU BY OR ON BEHALF OF
KAPLAN BUSINESS SCHOOL PURSUANT TO PART VB OF THE COPYRIGHT ACT 1968 (THE ACT). THE MATERIAL IN THIS COMMUNICATION MAY BE SUBJECT TO COPYRIGHT UNDER THE ACT. ANY FURTHER REPRODUCTION OR COMMUNICATION OF THIS MATERIAL BY YOU MAY BE THE SUBJECT OF COPYRIGHT PROTECTION UNDER THE ACT. DO NOT REMOVE THIS NOTICE. 2 3 WHAT WE WILL DISCUSS IN THIS LECTURE MBA600 subject learning outcomes What you can expect to do? What are your study resources? Academic Success Centre, Library What are your assignments? Identifying strategy problems Focus on changing the performance of a firm Brainstorm your recollection Recall the theories learned in the MBA that identify distinctive capabilities
1 Introductionto MBA600 2 Introduction to Strategy 4 MBA600 SUBJECT LEARNING OUTCOMES 5 WHAT YOU WILL LEARN Critically assess a diverse range of theories accumulated throughout the Masters’ qualification and the connections that exist between each one. Acquire advanced knowledge and apply it in real workplace contexts to improve performance and competitive advantage. Undertake independent research to solve complex business problems. Discuss and translate theory, skills and knowledge into effective management practice. 6
LEARNING OUTCOME 1: CRITICALLY ASSESS A DIVERSE RANGE OF THEORIES Sources of Competitive Advantage Low cost or differentiation Competitive rivalry Porter’s 5 Forces SWOT and PESTLE Market and industry risk Resource-based View VRIN model of assets Distinctive Capabilities Business Model Canvas Performance of Strategy Balanced Scorecard 7 LEARNING OUTCOME 2: APPLY KNOWLEDGE IN WORKPLACE
CONTEXTS Industry Research Opportunities to change industry profitability Competitive Differentiation Sources of competitive advantage Financial Performance Analysis Commercial feasibility of change Leadership and Resource Endowments Distinctive Capabilities 8 LEARNING OUTCOME 3: SOLVE COMPLEX BUSINESS PROBLEMS Apply MBA subjects and specialisations to research key strategy problems in a company of your choice Australian and New Zealand Standard Industrial Classification codes Search Wikipedia for Australian and New Zealand Standard Industry Classification codes 9
LEARNING OUTCOME 4: PLAN TO IMPLEMENT STRATEGY IN MANAGEMENT PRACTICE Porter’s Five Forces Model SWOT and PESTLE Resource-based View McKinsey 7S Model Business Model Canvas Balanced Scorecard 10 YOUR STUDY RESOURCES Resources for your independent study 11 ACADEMIC SUCCESS CENTRE
RESOURCES FOR INDEPENDENT STUDY 12 ADDITIONAL RESOURCES RESOURCES FOR INDEPENDENT STUDY Company financial statements News releases (peer-reviewed) White papers and research articles (peer-reviewed) Government publications Official company websites, marketing and blogs Sources that are not peer-reviewed (check with your lecturer before citing) 13 YOUR
ASSIGNMENTS Video, report, reflection 14 ASSIGNMENTS 1. Recorded video and slides Due in Week 4 Assume the role of organisational consultant 2. Individual report Due in Week 9 Conduct desktop research regarding organisational strategy 3. Reflective essay Due in Week 13 Consider learnings from the MBA program You need to begin your research now. 15 RESEARCHING PROBLEMS IN CORPORATE STRATEGY INTRODUCTION TO STRATEGY
16 HOW DO FIRMS CREATE COMPETITIVE ADVANTAGE? DEFINITIONS ‘When two or more firms compete within the same market, on firm possesses a competitive advantage over its rivals with it earns (or has the potential to earn) a persistently higher rate of profit.’ (Grant, 2016, p. 169) The key research question What mix of capabilities and resources does a firm possess that would create profits above the industry average? Capability means a firm’s capacity to successfully perform a unique business activity Resources mean the factors of production Land: natural resources Labour: human resources, knowledge, automation Capital: finance, access to funding RESULTS ARE HIGHER RATES OF PROFIT 17
STRATEGY PLANNING PROCESS The strategy problem requires research about creating competitive advantage Research the strategy problem Appraise performance Diagnose performance Resource and capability analysis Industry analysis Formulate strategy Implement structure Internal to the firm External to the firm Operational within the firm 18 Strategy as Direction • Vision: what do we want to become?
• Mission: what do we want to achieve? Plans • Development guidelines • Capital expenditure priorities • Growth (organic, M&A, alliances) CREATING FUTURE ADVANTAGES RESEARCH THE STRATEGY PROBLEM STEP 1: STRATEGY PLANNING PROCESS Strategy as Positioning • Where is the firm competing? Geographical scope • Product market scope • Vertical (supply chain) scope • Horizonal scope (acquisition) • Virtual (online) scope CREATING CURRENT ADVANTAGES 19 Diagnosing performance Using financial and strategy analyses to
identify the sources of performance, satisfactory and unsatisfactory Appraising performance Measuring the effectiveness of strategy in terms of financial analysis. STRATEGY FIT STEPS 2-5: STRATEGY PLANNING PROCESS Analysing the fit between strategy and the firm’s industry environment Industry analysis Analysing the fit between strategy and the firm’s performance, to envision strategy options
Resources and capabilities analysis 20 STRATEGY PLANNING PROCESS DETERMINE STRATEGY SOLUTION Define competitive advantage • based on strategic options from analyses of the external opportunities and threats; and internal resources and capabilities FORMULATE STRATEGY Establish organisation structure • Set reporting lines and management systems for tracking intended strategy (plans) vs. realised strategy (actuals) IMPLEMENT STRUCTURE 21
SUMMARY OF THE STRATEGY PLANNING PROCESS 22 ANOTHER WAY TO THINK ABOUT THE STRATEGY PLANNING PROCESS The strategy problem requires research about creating competitive advantage 23 WORKSHOP TIME Apply what you learned strategy, resources and capabilities in the MBA!
24 5-MINUTE FORMAL PRESENTATION WORKSHOP Present why the resources and capabilities create differences among competing firms (60 minutes excluding presentations) Refer to the next 2 slides as memory joggers Form groups of 2-3 people who are interested in the same theories and practices (e.g. leadership; culture; HR, finance; any specialisation) Summarise an overview, strengths and weaknesses of the selected theories and practices in a 5-minute formal presentation to the class 25 RECALL WHAT YOU LEARNED IN THE MBA (excluding electives and specialisations) CORE SUBJECT QUICK SUMMARY MBA401 People, Culture and Contemporary Leadership key concepts in managing the human resources MBA402 Governance, Ethics and Sustainability the role of the board in the assessment of strategy and risk
MBA403 Financial and Economic Interpretation and Communication assessing the liquidity, performance, and financial position of a company MBA404 Consumer Behaviour and Marketing Psychology how consumer behaviour is linked to business strategy for market share MBA501 Dynamic Strategy and Disruptive Innovation developing corporate strategy; creating value through innovation; and applying dynamic capabilities MBA502 Emotional Intelligence, Cultural Intelligence, and Diversity appraising cultural differences are within the organisation 26 MEMORY JOGGER Some of what you learned the MBA Course Competitive advantage Leadership styles (directing, consulting, participating, delegating) Corporate social responsibility
SWOT and PESTLE Finance and Economics Employee engagement and culture Governance and agency Resource-based View Leadership types (transformational, transactional, servant) HR change management Porter’s Five Forces Balanced Scorecard McKinsey 7S Framework BCG Portfolio Matrix 27 WHAT TO PREPARE FOR NEXT WEEK Choose a company that you want to research Be prepared to evaluate internal capabilities with the Resource - based View
28 S e e k h e l p w h e n yo u n e e d i t ! Thank you Strategy�conceptsCOMMONWEALTH OF AUSTRALIA�Copyright Regulations 1969��WARNING�This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (the Act).��The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act.��Do not remove this notice. What we will discuss in this lectureMBA600 Subject Learning OutcomesWhat you will learnLearning outcome 1: Critically assess a diverse range of theories�Learning outcome 2: Apply knowledge in workplace contextsLearning outcome 3: solve complex business problemsLearning outcome 4: �Plan to implement strategy in management practiceYour Study�ResourcesAcademic Success CentreAdditional resourcesYour assignmentsAssignmentsResearching Problems in Corporate strategyHow do firms create competitive advantage?Strategy planning processresearch the strategy problem��Step 1: strategy planning processStrategy Fit�Steps 2-5: strategy planning processStrategy planning process�Determine strategy solutionSUMMARY OF THE �Strategy planning processAnother way to think about the Strategy planning processWorkshop time5-MINUTE FORMAL PRESENTATIONRecall what you learned in the MBA�(excluding electives and specialisations)memory jogger�Some of what you learned the MBA CourseWhat to prepare for next weekSlide Number 28
1 COMPETITION STRATEGY MBA600 Week 3 2 COMMONWEALTH OF AUSTRALIA COPYRIGHT REGULATIONS 1969 WARNING THIS MATERIAL HAS BEEN REPRODUCED AND COMMUNICATED TO YOU BY OR ON BEHALF OF KAPLAN BUSINESS SCHOOL PURSUANT TO PART VB OF THE COPYRIGHT ACT 1968 (THE ACT). THE MATERIAL IN THIS COMMUNICATION MAY BE SUBJECT TO COPYRIGHT UNDER THE ACT. ANY FURTHER REPRODUCTION OR COMMUNICATION OF THIS MATERIAL BY YOU MAY BE THE SUBJECT OF COPYRIGHT PROTECTION UNDER THE ACT. DO NOT REMOVE THIS NOTICE. 2
3 WEEK 3 FOCUSES ON ALL FOUR LEARNING OBJECTIVES Critically assess a diverse range of theories accumulated throughout the Masters’ qualification and the connections that exist between each one. Undertake independent research to solve complex business problems. Discuss and translate theory, skills and knowledge into effective management practice Acquire advanced knowledge and apply it in real workplace contexts to improve performance and competitive advantage. . 4 QUICK REVIEW OF KEY CONCEPTS What we learned in Week 2 5 WHAT WE LEARNED LAST
WEEK Resource-based View and the VRIO Framework A firm’s internal resources may provide a competitive advantage if they create causal ambiguity by four means VRIO relates to creating a competitive advantage based on asset specificity, which competitors cannot easily imitate 6 WHAT WE LEARNED LAST WEEK Dynamic Capabilities as a source of internal competitive advantage 7 WHAT WE LEARNED LAST WEEK Isolating Mechanisms The barriers that prevent a competitor from eroding the superior profitability of a firm
Mechanisms to develop inimitable resources and capabilities Social complexity via organisation culture and reputation History via lengthy lead times to develop capabilities Causal ambiguity via tacit knowledge, social complexity and resource specificity (history) Low transferability via high transaction costs and inability to replicate skills in a rival firm 8 WHAT WE LEARNED LAST WEEK Bases of Competitive Advantage Grant, Figure 7.5 Sources of Competitive Advantage, p. 178 9 WHAT WE WILL LEARN THIS WEEK Competition Strategy
Product Market Strategy PROFITABILITY Product Life Cycle Stages 10 THINKING UNDERPINS STRATEGY Key concepts 11 STRUCTURE FOLLOWS STRATEGY FIRM goals, values resources, capabilities structure, systems INDUSTRY ENVIRONMENT competitors customers suppliers
STRATEGY corporate strategy, competitive strategy 12 'STRUCTURE FOLLOWS STRATEGY' Thesis based on case studies in the 1920’s in the USA Four sequential stages acquisition of resources (employees, raw materials, marketing and distribution channels) establishment of functional structures to increase efficiency adoption of growth and diversification strategy organisation structure to gather and allocate resources (Alfred Chandler) 13 IMPORTANT TERMS TO KNOW Strategic fit the consistency of strategy with the firm’s internal environment and industry external environment Fit is a concept in Contingency Theory There is no single best way of structuring or managing a firm
14 IMPORTANT TERMS TO KNOW CORPORATE STATEGY Choice of industries and markets in which the firm competes (or wants to compete) COMPETITION STRATEGY Choice of how the firm defines its competitive advantage within a specific industry or market 15 COMPETITION STRATEGY Porter’s Five Forces model 16 RECALL FROM WEEK 1 THE DEFINITION OF COMPETITIVE ADVANTAGE ‘When two or more firms compete within the same market, on firm possesses a competitive advantage over its rivals with it earns (or has the potential to earn) a persistently higher rate of profit.’ (Grant, 2016, p. 169) The key research question we explored since Week 1 What mix of capabilities and resources does a firm possess that
would create profits above the industry average? Competition strategy is introduced in this lecture Porter’s 5 Forces sheds light on the industry contest for profitability 17 COMPETITION STRATEGY Porter’s Five Forces of Competition 18 PORTER’S FIVE FORCES OF COMPETITION Threat of new entrants Ease of entry in an industry Threat is high when Low amount of capital is required to enter a market Existing firms cannot easily retaliate Existing firms lack isolating mechanisms (patents, brand reputation, etc)
No government regulation Customer switching costs are low Low customer loyalty Products are nearly identical Economies of scale are easily achieved POTENTIAL ENTRANTS https://www.strategicmanagementinsight.com/tools/porters-five- forces.html 19 PORTER’S FIVE FORCES OF COMPETITION Bargaining power Allows suppliers to control prices Strong bargaining power when Few suppliers, many buyers Large suppliers threaten forward integration Few substitute raw materials exist Suppliers hold scarce
resources Materials switching costs are high SUPPLIER POWER https://www.strategicmanagementinsight.com/tools/porters-five- forces.html 20 PORTER’S FIVE FORCES OF COMPETITION Threats of Substitutes Strong when buyers can find Substitute products or service with attractive prices or better quality Low cost of switching to substitute products or services SUBSTITUTES https://www.strategicmanagementinsight.com/tools/porters-five- forces.html
21 PORTER’S FIVE FORCES OF COMPETITION Bargaining power Allows buyers to demand a lower price or higher quality Strong bargaining power when Buying in large quantities or controlling access points to end consumers Few buyers exist Switching costs to other suppliers are low Buyers threaten backward integration Many substitutes exist Buyers are price sensitive BUYER POWER https://www.strategicmanagementinsight.com/tools/porters-five- forces.html 22 PORTER’S FIVE FORCES OF
COMPETITION Competition intensity Major determinant of industry profitability as firms content for market share Rivalry is intense when There are many competitors High costs of leaving the industry Industry growth is slow or negative Undifferentiated and substitutable products or services Competitors are of equal size Customer loyalty is low RIVALRY AMONG EXISTING COMPETITORS https://www.strategicmanagementinsight.com/tools/porters-five- forces.html 23 POSITIONING COMPETITION STRATEGY
Can a firm make superior profits in an industry? 24 POSITIONING COMPETITION STRATEGY Strategy problem Step 1 in the strategy planning process Product Marketing plans for brand positioning, messaging, competitive differentiation, and sales enablement Product market scope Product scope means the number of different lines (items) the firm offers for sale Market scope means the estimated value of products and services in a specific market or area 25 POSITIONING COMPETITION STRATEGY Strategy problem Step 1 in the strategy planning process Vertical scope Each party in the supply chain provides different product-specific or market- specific goods and/or services
Horizontal scope Firms acquire others to increase size, diversify products or services, achieve economies of scale, reduce competition, attract new customers Virtual scope Digital marketing: advertising, email, social media, blogs, other formats 26 WORKSHOP TIME Use the SWOT technique to assess the competition strategy position for the competitors you researched in Week 2 27 POSITIONING COMPETITION STRATEGY WORKSHOP Assess a likely competition strategy for the 2 top competitors you selected in Week 2 (30 minutes)
Do a SWOT analysis (on the next slide) of the attributes outlined in Porter’s Five Forces model 28 ASSESSING THE POSITIONING OF COMPETITION STRATEGY Strategy Position, Mission, Vision SWOT analysis STRENGTHS of the Mission WEAKNESSES of the Mission OPPORTUNITIES in the Vision THREATS in the Vision 29 PRODUCT MARKETING STRATEGY Exploring: brand positioning, messaging, competitive differentiation, and sales enablement
30 Describes the customers, how products fit into existing markets, and how to earn profits Describes the tangible, intangible and symbolic attributes designed to satisfy customers’ needs and wants Aligns with a firm’s competitive advantage and competition strategy PRODUCT STRATEGY 31 PRODUCT LIFE CYCLE STAGES Development Stage Introduction Stage Growth Stage Maturity Stage Decline Stage D ol la rs Time Industry Sales Industry Profits
32 PRODUCT LIFE CYCLE STAGES The product life cycle is a useful tool for addressing product strategy over time Limitations of the product life cycle Most new products never get past development The length of each stage depends on the actions of other firms The product life cycle forces managers to consider the future of their industry and their brand 33 PRODUCT LIFE CYCLE STAGES INTRODUCTION GROWTH MATURITY DECLINE Overall Marketing Goals Stimulate product awareness and trial Grow market share with new customers
Maximise profit by defending market share or taking it from competitors Reduce expenses to maximise profit Product Strategy Limited models and features; frequent product changes Introduce new models and features; continuous innovation Full model line; add supplementary products to reposition brand Eliminate unprofitable products and brands Pricing Strategy Higher price to recover investment Drop prices to match or beat competition Drop prices to match or beat competition Prices stabilise at a lower level Distribution Strategy Gradual product rollout Intensify efforts to expand market reach Extensive product availability Maintain brand loyal customers;
phase out unprofitable channels Promotion Strategy Build awareness to encourage trials Aggressive brand advertising, selling to encourage product switching Emphasise brand position and switching; reposition brand Minimise or eliminate promotion costs Source: adapted from William M. Pride and O. C. Ferrell, Marketing 2010 Edition. (Mason, OH: Cengage Learning, 2010), pp. 290-295 34 PRODUCT OR SERVICE BRAND Involves selecting the right combination of name, symbol, term, or design that identifies a product Brands have two parts: Brand name – words, letters, and numbers that can be spoken Brand mark – symbols, figures, or a design Critical to product identification and positioning in the minds of consumers An isolating mechanism
35 WORKSHOP TIME Use the product life cycle to discern how rival firms may react and retaliate to competitive threats 36 POSITIONING COMPETITION STRATEGY WORKSHOP Assess how rival firms may react and retaliate to market threats in the competing firms you chose in Week 2 (45 minutes) Use the Product Life Cycle to determine the industry stage and likely reactions to marketing threats from competitors Refer to Porter’s Five Forces of Competition for additional justification 37 S e e k h e l p w h e n yo u n e e d i t !
Thank you Competition StrategyCOMMONWEALTH OF AUSTRALIA�Copyright Regulations 1969��WARNING�This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (the Act).��The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act.��Do not remove this notice. Week 3 focuses on all four learning objectivesQuick review of key conceptsWhat we learned last weekWhat we learned last weekWhat we learned last weekWhat we learned last weekWhat we will learn this weekThinking underpins strategyStructure follows strategy'Structure follows Strategy'Important Terms to knowImportant Terms to KnowCompetition StrategyRecall from Week 1 the definition of�competitive advantageCompetition StrategyPorter’s Five Forces of CompetitionPorter’s Five Forces of CompetitionPorter’s Five Forces of CompetitionPorter’s Five Forces of CompetitionPorter’s Five Forces of CompetitionPositioning Competition StrategyPositioning COMPETITION strategyPositioning COMPETITION strategyWorkshop timePositioning Competition StrategyASSESSING THE Positioning of COMPETITION strategyProduct Marketing StrategyProduct StrategyProduct Life Cycle StagesProduct Life Cycle StagesProduct Life Cycle StagesProduct or Service BrandWorkshop timePositioning Competition StrategySlide Number 37 1 INTERNAL SOURCES OF
COMPETITIVE ADVANTAGE MBA600 Week 2 2 COMMONWEALTH OF AUSTRALIA COPYRIGHT REGULATIONS 1969 WARNING THIS MATERIAL HAS BEEN REPRODUCED AND COMMUNICATED TO YOU BY OR ON BEHALF OF KAPLAN BUSINESS SCHOOL PURSUANT TO PART VB OF THE COPYRIGHT ACT 1968 (THE ACT). THE MATERIAL IN THIS COMMUNICATION MAY BE SUBJECT TO COPYRIGHT UNDER THE ACT. ANY FURTHER REPRODUCTION OR COMMUNICATION OF THIS MATERIAL BY YOU MAY BE THE SUBJECT OF COPYRIGHT PROTECTION UNDER THE ACT. DO NOT REMOVE THIS NOTICE. 2 3 WEEK 2 FOCUSES ON TWO LEARNING OBJECTIVES
Critically assess a diverse range of theories accumulated throughout the Masters’ qualification and the connections that exist between each one. Undertake independent research to solve complex business problems. Other learning objectives Acquire advanced knowledge and apply it in real workplace contexts to improve performance and competitive advantage. Discuss and translate theory, skills and knowledge into effective management practice. 4 QUICK REVIEW OF KEY CONCEPTS What we learned in Week 1 5 WE LEARNED FROM LAST WEEK Definition of competitive advantage ‘When two or more firms compete within the same
market, one firm possesses a competitive advantage overs its rivals when it earns (or has the potential to earn) a persistently higher rate of profit.’ (Grant, 2016, p. 169) 6 DEVELOPING DYNAMIC CAPABILITIES FOR CORPORATE AGILITY Developing dynamic capabilities for Corporate Agility TRANSFORMING Renewing process and maintaining relevance to consumers (streamlining, improving, changing an organisation’s practices SEIZING Ability to benefit
from opportunities by designing innovative business models; and securing access to capital and resources SENSING Assessment of opportunities and customer needs the exist outside the organisation https://cmr.berkeley.edu/blog/2016/8/dynamic-capabilities/ WE LEARNED FROM LAST WEEK https://cmr.berkeley.edu/blog/2016/8/dynamic-capabilities/ 7 Strategy planning process Internal to the firm External to the firm Operational within the firm WE LEARNED FROM LAST WEEK
8 WHAT WE WILL LEARN THIS WEEK Internal Competitive Advantage and Dynamic Capabilities Strategy planning process, step 1 9 INTERNAL COMPETITIVE ADVANTAGE The focus of Week Two 10 SOURCES OF COMPETITIVE ADVANTAGE Unique product and premium price Differentiation Advantage Similar product at lower cost
Cost Advantage Resources and Capabilities Grant, Figure 7.5 Sources of Competitive Advantage, p. 178 11 STRATEGIES FOR A COST ADVANTAGE Economies of scale From technology inputs From large output From specialisation Economies of learning Experience curve, or ‘learning by doing’ Process technology and process design Increase productivity Product design Reduce operating costs via standardisation Capacity utilisation Keeping machines running
Lower input costs Geographical location Ownership of sources of supply Bargaining power Residual efficiency Reduction in overhead costs The objective is to ‘beat’ the competition with existing products and services 12 STRATEGIES FOR A DIFFERENTIATION ADVANTAGE Differences in quality Differences in function features or design Differences in availability Timing and location Sales promotion activities Customer loyalty or ignorance The objective is to develop products, services, and reputation
that are unique in the minds of consumers 13 INTERNAL COMPETITIVE ADVANTAGE AND DYNAMIC CAPABILITIES Dynamic capabilities underpins competitive advantage Core competencies are transformed from short-term competitive positions to longer-term competitive advantages A ‘competitive asset’ refers to inimitable resources and capabilities What matters is corporate agility Recognising and shaping opportunities and threats Realising benefits of opportunities Maintaining competitiveness of a firm’s tangible and intangible assets Teece, D. J., Pisano, G., & Shuen, A. (1998). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509-533.
14 DEVELOPING DYNAMIC CAPABILITIES FOR CORPORATE AGILITY SEIZING TRANSFORMINGSENSING Renewing process and maintaining relevance to consumers (streamlining, improving, changing an organisation’s practices Ability to benefit from opportunities by designing innovative business models; and securing access to capital and resources Assessment of opportunities and customer needs the exist outside the organisation
https://cmr.berkeley.edu/blog/2016/8/dynamic-capabilities/ https://cmr.berkeley.edu/blog/2016/8/dynamic-capabilities/ 15 Resource matching Able to anticipate changes in the external environment Speed (pace) Some firms are faster and more effective at exploiting change Transforming processes Some firms have greater creative and innovative capability RESOURCE-BASED VIEW OF COMPETITIVE ADVANTAGE Dynamic Capabilities Sensing external opportunities Changing customer demand Changing prices of inputs Technological change Seizing internal capabilities Innovative business models Securing access to capital Forming strategic alliances Read this! https://www.mckinsey.com/business- functions/operations/our-insights/matching-the-right-projects-
with-the-right-resources Creative destructionEntrepreneurship https://www.mckinsey.com/business-functions/operations/our- insights/matching-the-right-projects-with-the-right-resources 16 WHAT COMPETITIVE ASSETS COULD BECOME DYNAMIC CAPABILITIES? The McKinsey 7S Model 17 MCKINSEY 7S MODEL OF STRATEGIC INTERNAL ASSETS ‘The McKinsey 7S Model is a framework for organizational effectiveness that postulates that seven internal factors of an organization must be aligned and reinforced in order to be successful.' https://www.mckinsey.com/business-functions/strategy-and- corporate-finance/our-insights/enduring-ideas-the-7-s- framework https://www.investopedia.com/terms/m/mckinsey-7s-model.asp
SHARED VALUES SKILLSSTRATEGY SYSTEMSSTAFF STYLE STRUCTURE 18 MCKINSEY 7S MODEL OF STRATEGIC INTERNAL ASSETS The leadership approach to managing the firm; and how well leaders influence performance, productivity and organisational culture. Style The talents and capabilities of human resources (staff and managers), which allow a firm to accomplish its work and goals Skills The daily procedures (routines), workflow, and decisions that comprise the standard operations in the firm. Systems Shared Values
The shared standards and norms that everyone in the firm believes is acceptable behaviour within the workplace https://www.investopedia.com/terms/m/mckinsey-7s-model.asp 19 MCKINSEY 7S MODEL OF STRATEGIC INTERNAL ASSETS https://www.investopedia.com/terms/m/mckinsey-7s-model.asp The corporate hierarchy, management reporting lines, number of business units that effect operations and collaboration. Structure What motivates employees, where do there motivations reside, are they trained and prepared to accomplish tasks and goals, how large is the workforce. Staff The plan used in the firm to remain competitive in its industry and market. The plan specifies goals and objectives. Strategy 20 WORKSHOP TIME In Week 1, you recalled the resources and capabilities
that create differences among competing firms 21 EVALUATE YOUR LIST OF DYNAMIC CAPABILITIES WORKSHOP You have two objectives to accomplish the evaluation task (15 minutes) 1. Classify your list of capabilities from Week 1 according to the McKinsey 7S model Carefully distinguish resources from capabilities 2. Justify why each capability meets the criteria of a dynamic capability Explain how the capability meets the criteria of sensing, seizing, transforming 22 IS A DYNAMIC CAPABILITY A COMPETITIVE ASSET? The Resource-based View and VRIO framework
23 IS A DYNAMIC CAPABILITY A COMPETITIVE ASSET? Resource-based View and the VRIO Framework A firm’s internal resources may provide a competitive advantage if they create causal ambiguity by four means VRIO relates to creating a competitive advantage based on asset specificity, which competitors cannot easily imitate Is control of the resource or capability in the hands of relatively few competitors? Can the firm cope with external competitor rivalry? RARE Can a firm gain or exploit opportunities or mitigate risk with the resources? Is the resource (product, service, process) valuable to customers? VALUABLE INIMITABLE Is the resource difficult to
substitute or replicate? Do significant cost disadvantages exist for duplicating or developing the resource? ORGANISATION Does the firm possess the people, processes, systems to exploit the resource or capability? Can the firm cope with the internal pace of change? https://www.business-to-you.com/vrio-from-firm-resources-to- competitive-advantage 24 RESOURCE- BASED VIEW AND THE VRIO FRAMEWORK Valuable Resources and Capabilities Strategies for improving efficiency and effectiveness by exploiting opportunities and mitigating threats Objective is to change industry profitability
Criteria to assess value: Can a firm gain or exploit opportunities or mitigate risk with the resources? Is the resource (product, service, process) valuable to customers? https://www.business-to-you.com/vrio-from-firm-resources-to- competitive-advantage 25 RESOURCE- BASED VIEW AND THE VRIO FRAMEWORK Rare Resources and Capabilities Inability of a firm to exploit resources in the same way as its competitors Mechanisms include patents, copyrights, legal protections, scarcity Criteria to assess rarity: Is control of the resource or capability in the hands of relatively few competitors? Can the firm cope with external competitor rivalry? https://www.business-to-you.com/vrio-from-firm-resources-to- competitive-advantage
26 RESOURCE- BASED VIEW AND THE VRIO FRAMEWORK Inimitable Resources and Capabilities Mechanisms include unique history (path dependency), causal ambiguity, social complexity (network, relationships, culture, reputation) Criteria to assess inimitability: Is the resource difficult to substitute or replicate? Do significant cost disadvantages exist for duplicating or developing the resource? https://www.business-to-you.com/vrio-from-firm-resources-to- competitive-advantage 27 RESOURCE- BASED VIEW AND THE VRIO FRAMEWORK Organisation Resources and Capabilities
Capability to gather and coordinate resources Mechanisms include innovation, capital budgeting and project management Criteria to assess organisation: Does the firm possess the people, processes, systems to exploit the resource or capability? Can the firm cope with the internal pace of change? https://www.business-to-you.com/vrio-from-firm-resources-to- competitive-advantage 28 RESOURCE- BASED VIEW AND THE VRIO FRAMEWORK Valuable Strategies for improving efficiency and effectiveness by exploiting opportunities and mitigating threats Objective is to change industry profitability Rare Firm’s inability to exploit resources the same way Patents, copyrights, legal protections, scarcity Inimitable Copying reduced by unique history, causal ambiguity, social complexity (network, relationships, culture,
reputation) Organisation Capability to gather and coordinate resources Innovation, capital budgeting and project management https://www.business-to-you.com/vrio-from-firm-resources-to- competitive-advantage 29 WORKSHOP TIME Are the dynamic capabilities in your list strategically valuable? 30 DETERMINE STRATEGIC VALUE WORKSHOP Appraise if your list of dynamic capabilities can be imitated by competitors in the medium term, 1 to 3 years (15 minutes) Use the VRIO framework to determine competitiveness Valuable Rare
Inimitable Organisation 31 ISOLATING MECHANISMS Responses to prevent rivals from copying resources and capabilities, which would erode a firm’s competitive advantage 32 ISOLATING MECHANISMS DEFINITION Isolating mechanisms are the barriers that prevent a competitor from eroding the superior profitability of a firm The objective is to prevent competitive imitation Hence, the link with VRIO and the Resource-based View Inimitability is the objective of isolating mechanisms Copying is the most direct form of competition from rivals Examples: patents, copyrights, talent management,
leadership and culture, history, decision-making, economies of scale 33 ISOLATING MECHANISMS SOCIAL COMPLEXITY Inimitability may arise from social complexity Organisational culture, reputation among customers and suppliers, trustworthiness 34 ISOLATING MECHANISMS HISTORY Inimitability may arise from history ‘Luck’ or being ‘in the right place at the right time’ Capabilities may take a long time to develop, making short-term development costly for competitors 35 ISOLATING MECHANISMS
CAUSAL AMBIGUITY Inimitability may arise from causal ambiguity Situations when the causes of a firm’s competitive advantage are not apparent to competitors Causally ambiguous management skills are based on tacit knowledge, social complexity, and resource specificity (history) 36 ISOLATING MECHANISMS LOW TRANSFERABILITY Inimitability may arise from low transferability Acquiring resources and capabilities may have high transaction costs (e.g. search, purchase, implementation) Some skills cannot be bought, sold or exchanged For example, teamwork and decision-making skills may be difficult to replicate in a rival firm 37 WORKSHOP TIME It is easy to identify what a rival does differently; harder to identify the critical differences that create competitive advantage
What competitive advantages differentiate rival firms in your industry? 38 INDEPENDENT RESEARCH WORKSHOP You have two objectives to accomplish in the research task (60 minutes) 1. Research competitors in your chosen industry Select the 2 top competitors: the biggest (market share); the boldest (aggressive marketer) Download Financial Statements and other research articles 2. Assess the internal competitive advantages Determine their competitive advantage: low-cost or differentiation Apply your work done in this lecture and identify key (1 or 2) that enable internal competitive advantages What key isolating mechanisms are evident in the Financial Statements 39
S e e k h e l p w h e n yo u n e e d i t ! Thank you Internal Sources of COMPETITIVE ADVANTAGECOMMONWEALTH OF AUSTRALIA�Copyright Regulations 1969��WARNING�This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (the Act).��The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act.��Do not remove this notice. Week 2 focuses on two learning objectivesQuick review of key conceptsWe learned from last weekDeveloping dynamic capabilities for Corporate AgilityWe learned from last weekWhat we will learn this weekInternal Competitive AdvantageSources of Competitive AdvantageStrategies for a Cost AdvantageStrategies for a Differentiation AdvantageInternal Competitive Advantage��and� �Dynamic CapabilitiesDeveloping dynamic capabilities for Corporate AgilityResource-based View of Competitive AdvantageWhat Competitive Assets could Become�dynamic Capabilities? McKinsey 7S Model�of Strategic Internal AssetsMcKinsey 7S Model of Strategic Internal AssetsMcKinsey 7S Model of Strategic Internal AssetsWorkshop timeEvaluate your list of Dynamic CapabilitiesIs a Dynamic Capability�a Competitive Asset?Is a Dynamic Capability�a Competitive Asset?Resource-based View and the VRIO FrameworkResource-based View and the VRIO FrameworkResource-based View and the VRIO FrameworkResource-based View and the VRIO FrameworkResource-based View and the VRIO FrameworkWorkshop timeDetermine Strategic ValueIsolating MechanismsIsolating mechanismsIsolating mechanismsIsolating mechanismsIsolating mechanismsIsolating mechanismsWorkshop timeIndependent ResearchSlide Number
39 Assessment Information COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969 This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (‘Act’). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Kaplan Business School is a part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 098 181 947 is a registered higher education provider CRICOS Provider Code 02426B. Assessment Information Subject Code: Subject Name: Assessment Title: Weighting: Total Marks: Due Date:
MBA600 Capstone: Strategy Assessment 1 – Recorded Video and Slides 25% 100 Week 5, Monday at 11.55pm . Assessment Description Students are to pick a real organisation of their choice that is either privately or publicly owned. It should be of interest or relevance to their industry sector, job role and/or MBA specialisation. Note, the organisation you pick should also be used in Assessment 2. Assuming the role of an organisational consultant, students are to apply their strategic thinking skills by researching the organisation and analysing the factors that clearly identify and explain its competitive advantage. Findings should be presented in a video which provides an overview in a form and tone that is presentable to the organisations executive team. It should be 15 minutes long and contain 10 to 15 slides that assist the executive to understand the findings presented.
Areas covered should include: • Introduction. • A brief overview of the organisation. • An analysis of the external and internal environment using appropriate theories and frameworks. • Clear articulation of the competitive advantage identified. • A diagnosis of the strengths, weaknesses, sources and future sustainability of the competitive advantage outlined. • A conclusion that identifies strategic opportunities and risks. Students are encouraged to use a wide variety of information sources that include, where possible, primary research such as interviews with staff or executive members within their chosen organisation. Students are encouraged to explore and utilise features of webinar technologies and to include a wide range of multimedia and/or interactive content that is in appropriate for a presentation to an executive. Students will be provided with guidance on the LMS on how to submit their webinar through Vimeo.
COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969 This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (‘Act’). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Kaplan Business School is a part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 098 181 947 is a registered higher education provider CRICOS Provider Code 02426B. Criteria F (Fail) 0%-49% P (Pass) 50%-64% CR (Credit) 65%-74% D (Distinction) 75% - 84% HD (High Distinction)
85%-100% Mark Assessment Content (Subject Specific) OUT OF 80 MARKS Introduction Provides poor context and does not link to the assessment in a clear and coherent way. May be missing entirely. Provides satisfactory context but links to the assessment in only a partially clear and coherent way. Provides reasonable context and links to the assessment in a fairly clear and coherent way. Provides solid context and links to the assessment in a clear and coherent way. Provides excellent context and links to the assessment in an extremely clear and coherent way. /10 Organisation Overview Overview is poorly presented, not thorough and identifies an
unsatisfactory amount of the pertinent issues. Overview is satisfactorily presented, not very thorough and only identifies a few of the pertinent issues. Overview is well presented, reasonably thorough and identifies some of the pertinent issues. Overview is very well presented, very thorough and identifies most of the pertinent issues. Overview is excellently presented, extremely thorough and identifies all the pertinent issues. /10 Analysis of External and Internal Environment Poor evaluation of environment that superficially describes and poorly identifies context. Answer is not substantiated by strategy frameworks. Satisfactory evaluation of environment that describes and
identifies context. Answer has limited substantiation using strategy frameworks. Good evaluation of environment that partially analyses and partially identifies context. Answer is partially substantiated by strategy frameworks. Very good evaluation of environment that fully analyses and clearly identifies context. Answer is predominantly substantiated by strategy frameworks. Excellent evaluation of environment that logically analyses and thoroughly identifies context. Answer is fully substantiated by strategy frameworks. /15 Outline of Competitive Advantage Competitive advantage is discussed using no or minimal key theories to frame an answer that is incoherent and does not link to the explanation of current sources.
Competitive advantage is discussed using a small number of key theories to frame an answer in a relatively coherent way that partially links to the explanation of current sources. Competitive advantage is discussed using some key theories to frame an answer in a reasonably clear way that links reasonably well to the explanation of current sources. Competitive advantage is discussed using most key theories to frame an answer in a coherent way that links clearly to the explanation of current sources. Competitive advantage is discussed using all key theories to frame an answer in an extremely coherent way that links seamlessly to the explanation of current sources. /25 Conclusion with Strengths, Weakness and Sustainability Strengths, weaknesses and sustainability poorly evaluated,
poorly analysed, and poorly applied with respect to the organisation in question. It has little or no theory and research. Strengths, weaknesses and sustainability reasonably well evaluated, reasonably well analysed, and reasonably well applied with respect to the organisation in question. It is inconsistently substantiated by theory and research. Strengths, weaknesses and sustainability well evaluated, well analysed, and well applied with respect to the organisation in question. It is partially substantiated by theory and research. Strengths, weaknesses and sustainability very well evaluated, very well analysed, and very well applied with respect to the organisation in question. It is mainly substantiated by theory and research. Strengths, weaknesses and sustainability excellently evaluated, skilfully analysed, and thoughtfully applied with respect to the organisation in
question. It is fully substantiated by theory and research. /20 Structure Format and Presentation (Consistent across all courses) OUT OF 20 MARKS Answer clearly and logically presented. Answer presented is not clear and logical. Answer presented is somewhat clear and logical. Answer presented is very clear and logical. Answer presented is substantially clear and logical. Answer presented is exceptionally clear and logical. /4 Appropriate theory and research used to answer question posed. Answer unsatisfactorily incorporates, integrates and applies theory and research.
Answer satisfactorily incorporates but only minimally integrates and applies theory and research. Answer solidly incorporates, integrates and applies theory and research. Answer predominantly incorporates, integrates and applies theory and research. Answer skilfully incorporates, integrates and applies theory and research. /4 Correct academic writing style used, including correct spelling, grammar and punctuation. Slides inadequate standard with substantial errors. Slides reasonable standard but with quite a few errors. Slides a good standard with some errors. Slides a high standard with minimal errors. Slides an impeccable standard
with errors that are only negligible. /4 Format of answer/wordcount consistent with question requirements and KBS guidelines. Format of answer/wordcount poorly follows the question requirement and KBS guidelines. Format of answer/wordcount partially follows the question requirement and KBS guidelines. Format of answer/wordcount solidly follows the question requirement and KBS guidelines. Format of answer/wordcount substantially follows the question requirement and KBS guidelines. Format of answer/wordcount almost faultlessly follows the question requirement and KBS guidelines. /4
COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969 This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (‘Act’). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Kaplan Business School is a part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 098 181 947 is a registered higher education provider CRICOS Provider Code 02426B. In-text referencing and reference list follows Harvard style and consistent with KBS guidelines. Frequent errors and/or inconsistent application of Harvard referencing conventions. Some errors and/or inconsistent application of Harvard referencing conventions.
Occasional errors and/or inconsistent application of Harvard referencing conventions. Minimal errors and/or inconsistent application of Harvard referencing conventions. Negligible errors and/or inconsistent application of Harvard referencing conventions. /4 Comments: /80 /20 /100

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1APPRAISING PERFORMANCE AND STRATEGYMBA600 Week 4

  • 1.
    1 APPRAISING PERFORMANCE AND STRATEGY MBA600 Week4 2 COMMONWEALTH OF AUSTRALIA COPYRIGHT REGULATIONS 1969 WARNING THIS MATERIAL HAS BEEN REPRODUCED AND COMMUNICATED TO YOU BY OR ON BEHALF OF KAPLAN BUSINESS SCHOOL PURSUANT TO PART VB OF THE COPYRIGHT ACT 1968 (THE ACT). THE MATERIAL IN THIS COMMUNICATION MAY BE SUBJECT TO COPYRIGHT UNDER THE ACT. ANY FURTHER REPRODUCTION OR COMMUNICATION OF THIS MATERIAL BY YOU MAY BE THE SUBJECT OF COPYRIGHT PROTECTION UNDER THE ACT. DO NOT REMOVE THIS NOTICE. 2
  • 2.
    3 WEEK 4 FOCUSESON THE THIRD LEARNING OBJECTIVE 3. Discuss and translate theory, skills and knowledge into effective management practice. Other learning objectives Critically assess a diverse range of theories accumulated throughout the Masters’ qualification and the connections that exist between each one. Acquire advanced knowledge and apply it in real workplace contexts to improve performance and competitive advantage. Undertake independent research to solve complex business problems. 4 QUICK REVIEW OF KEY CONCEPTS What we learned in Week 3 5 WHAT WE LEARNED LAST
  • 3.
    WEEK Contingency Theory Strategic fit theconsistency of strategy with the firm’s internal environment and industry external environment Fit is a concept in Contingency Theory There is no single best way of structuring or managing a firm 6 WHAT WE LEARNED LAST WEEK Competition strategy and Porter’s Five Forces framework 7 WHAT WE LEARNED LAST WEEK Positioning of Competition Strategy
  • 4.
    8 WHAT WE WILL LEARNTHIS WEEK Strategy planning processes related to resources Capabilities have been discussed in previous weeks Capital management Financial stability Cash flow 9 APPRAISING FINANCIAL STABILITY Appraising the Effectiveness of current strategy 10 RECALL THE FINANCIAL STATEMENTS
  • 5.
    BALANCE SHEET ($in millions) ASSETS 2017 2018 LIABILITIES 2017 2018 Current Assets $761m $707m Current Liabilities $486m $455m Fixed Assets $1,118m $1,035 Long-term Liabilities $588m $562m Total Equity $805m $725m Total Assets $1,879 $1,742 Total Liabilities and Equity $1,879m $1,742m
  • 6.
    INCOME STATEMENT ($in millions) 2017 2018 REVENUE $2,262 $1,810 Cost of goods sold $1,655 $1,324 Selling, general and administrative expenses $327 $262 Depreciation $90 $72 OPERATING INCOME $190 $152 Other income $29 $45 EBIT $219 $197 Interest $49 $44 Taxes $84 $67 NET INCOME $86 $86 Remember: Total Assets = Total Liabilities + Equity 11 APPRAISING PERFORMANCE STRATEGY
  • 7.
    PLANNING PROCESS FINANCIAL RATIO ANALYSIS MEASUREDESCRIPTION INTERPRETATION Return on Sales After-tax Profit ÷ Total Sales Percentage of profits earned per dollar of sales revenue Return on Assets After-tax Profit ÷ Total Assets Percentage of profits earned per dollar of assets Return on Equity After-tax Profit ÷ Total Equity Percentage of profits earned per dollar of shareholders’ equity Gross Profit Margin (Total Sales – Cost of Goods) ÷ Total Sales Percentages of sales dollars retained as operating profit Net Profit Margin (Total Sales – Total Expenses) ÷ Total Sales Percentages of sales dollars retained as profit (earnings) Current Ratio Current Assets ÷ Current
  • 8.
    Liabilities Liquidity 12 APPRAISING PERFORMANCE STRATEGY PLANNING PROCESS FINANCIAL RATIO ANALYSIS MEASUREDESCRIPTION INTERPRETATION Debt to Total Assets Total Debt ÷ Total Assets Proportion of assets that are financed by debt Debt to Total Equity Total Debt ÷ Total Equity Amount of debt financing as a proportion of total equity Earnings per Share (After-tax Profit – Preferred Share Dividends) ÷ Common Shares Outstanding Profit available for distribution to shareholders Price/Earnings Ratio
  • 9.
    Market Price perShare ÷ (After-tax Earnings per Share Indicates anticipated earnings as a multiple of the stock price Cash Flow per Share (After-tax Profit + Depreciation) ÷ Common Shares Outstanding Liquidity to fund operations 13 WORKSHOP TIME How does the financial stability of a firm compare with its competition? 14 CAPABLE MANAGEMENT OF A FIRM’S FINANCES WORKSHOP Perform a financial ratio analysis of the competing
  • 10.
    firms you selectedin Week 2 (30 minutes) Do a comparative financial analysis across competitors and years Assess the business risks discovered by your analysis Use your choices of Porter’s 5 Forces, SWOT and PESTLE frameworks 15 DIAGNOSING PERFORMANCE The ability of a firm to convert its resources to cash relative to its competitors 16 CURRENT ASSETS Listed on the Income Statement The assets held for sale within the year LONG-TERM ASSETS Listed on the Balance Sheet The assets that fund the business from year to year
  • 11.
    CURRENT LIABILITIES Listed onthe Income Statement The funds owed within the year EQUITY The funds owned by investors in the business LONG-TERM DEBT Listed on the Balance Sheet The debts the fund the business from year to year WORKING CAPITAL CURRENT ASSETS LONG- TERM ASSETS EQUITY CURRENT LIABILITIES LONG- TERM DEBT WORKING CAPITAL Cash available to pay expenses when due Current Assets - Current
  • 12.
    Labilities = WorkingCapital CASH FROM WORKING CAPITAL 17 CASH FROM WORKING CAPITAL Remember Working capital equals current assets minus current liabilities Important question How quickly can working capital be converted to cash? Resource threat Most companies go bankrupt because they run out of cash; they cannot pay bills or access more money 18 STATEMENT OF CASH FLOWS Sources of cash Increase in net working capital A decrease in liabilities or an increase in assets Net income after tax
  • 13.
    The disposal orrevaluation of fixed assets (plant, property, equipment) Proceeds of loans obtained Proceeds of shares that were issued Repayments received on loans previously granted by the company Uses of cash Decrease in net working capital Losses to be met by the company The purchase of fixed assets/investments The full or partial payment of loans Granting of loans Liability for taxes Dividends paid or proposed https://corporatefinanceinstitute.com/resources/knowledge/acco unting/sources-and-uses-of-funds-statement/ Reports the cash inflow and cash outflow over an accounting period, normally a month or a year 19
  • 14.
    CASH CONVERSION CYCLE THE DAYS REQUIREDTO CONVERT WORKING CAPITAL INTO CASH Days Sales in Inventory: the days taken to sell all inventory during a year DSI = 365 ÷ (Cost of Sales ÷ Inventory) Days Sales Outstanding: the days required to collect customer payments after a sale on credit DSO = 365 ÷ (Net Sales ÷ Accounts Receivable) Days Payables Outstanding: the days taken to pay supplier invoices DPO = 365 ÷ (Cost of Sales ÷ Accounts Payable) Cash Conversion Cycle = DSP + DSI - DPO Working capital cash comes from inventories plus receivables minus payables 20 RISK OF FINANCIAL
  • 15.
    STRESS AND BUSINESS BANKRUPTCY Altman’s Zscore Indicates the overall financial health of a firm in a single measure Altman’s Z score = 1.20 x (Working Capital ÷ Total Assets) + 1.40 x (Retained Earnings ÷ Total Assets) + 3.33 x (Earnings Before Interest and Tax ÷ Total Assets) + 0.60 x (Market Value of Equity ÷ Book Value of Debt) + 0.99 x (Sales ÷ Total Assets) Scores below 1.8 = likelihood of bankruptcy Scores above 3.0 = unlikely to go bankrupt 21 WORKSHOP TIME Positive cash flow is required to fund business growth 22 WORKSHOP
  • 16.
    You have threeobjectives in your competitor assessment (30 minutes) 1. Determine the priorities for resource investment Use the Statement of Cash Flows (in a firm’s annual report); or apply the ‘sources and uses’ table on the previous slide 2. Calculate the Cash Conversion Cycle 3. Summarise the resource base of your firm What is the ability of your firm to fund business growth relative to its competitors? RESOURCE BASE AND GROWTH POTENTIAL HOW ‘COMPETITIVE’ IS THE COMPETITION STRATEGY? 23 INDUSTRY ANALYSIS A firm’s ability to fund business growth via equity and debt, relative to its
  • 17.
    competitors 24 CAPITAL STRUCTURE OF AFIRM What is best? FUNDING TO GROW MORE PROFITS THAN COMPETITORS One of the most important choices as to the funding operational activities and business growth The ‘best’ mix of capital depends on the industry The cost of debt is less expensive than equity because it has less risk Excessive debt increases interest payments, he volatility of profits and bankruptcy risk ‘Companies with consistent cash flows can tolerate a much larger debt load and will have a much higher percentage of debt in their optimal capital structure. Conversely, a company with volatile cash flow will have little debt and a large amount of equity.’ (Investopedia) 25 TYPES OF RISK
  • 18.
    BUSINESS risk isa deviation from plan, positive or negative A negative deviation is a threat A positive deviation is an opportunity SYSTEMATIC risk affects numerous assets or firms to varying degrees For example, business cycles and inflation UNSYSTEMATIC risk affecting a specific group of assets For example, legislation and ‘acts of god’ 26 INVESTMENT ATTRACTIVENESS CAN A FIRM ATTRACT EQUITY? ATTRACTING EQUITY INVESTORS A helpful website is Yahoo Finance! https://au.finance.yahoo.com/ provides free data and charting for global stock exchanges (like the ASX below) Examine the attractiveness of investment Price-Earnings (P:E) ratio Return on Investment (ROI) Earnings per Share (EPS)
  • 19.
    Bond Yield 27 WORKSHOP TIME Theattractiveness of a firm to investors (equity and bonds) 28 COMPETITION FOR INVESTMENT EQUITY AND BONDS WORKSHOP Use Yahoo Finance! and other investor websites to investigate the ability to attract investment in your firm and its competitors (30 minutes) Compare investment attractiveness relative to: Price-Earnings (P:E) ratio Return on Investment (ROI) Earnings per Share (EPS) Bond yield (if available) 29
  • 20.
    S e ek h e l p w h e n y o u n e e d i t ! Thank you Appraising Performance and StrategyCOMMONWEALTH OF AUSTRALIA�Copyright Regulations 1969��WARNING�This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (the Act).��The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act.��Do not remove this notice. Week 4 focuses on the Third learning objectiveQuick review of key conceptsWhat we learned last weekWhat we learned last weekWhat we learned last weekWhat we will learn this weekAppraising Financial Stability��Appraising the Effectiveness of current strategy�Recall the Financial StatementsAppraising performance��strategy planning processAppraising performance��strategy planning processWorkshop timeCapable Management of a Firm’s FinancesDia gnosing performance�� The ability of a firm to convert its resources to cash relative to its competitors�Cash from Working CapitalCash from Working CapitalStatement of Cash FlowsCash Conversion Cycle��The days required to convert Working Capital into cash�Risk of financial stress and business bankruptcyWorkshop timeResource Base and Growth Potential��How ‘competitive’ is the Competition Strategy? Industry analysis��A firm’s ability to fund business growth via equity and debt, relative to its competitorsFunding to Grow more profits than CompetitorsTYPES OF RISKInvestment attractiveness��Can a firm Attract equity?Workshop timeCompetition for investment�Equity and BondsSlide Number 29
  • 21.
    1 STRATEGY CONCEPTS MBA600 Week one Strategy theories Competitive advantage Strategic complexity Dynamic Capabilities Industry Change Sustainable Performance 2 COMMONWEALTH OFAUSTRALIA COPYRIGHT REGULATIONS 1969 WARNING THIS MATERIAL HAS BEEN REPRODUCED AND COMMUNICATED TO YOU BY OR ON BEHALF OF
  • 22.
    KAPLAN BUSINESS SCHOOLPURSUANT TO PART VB OF THE COPYRIGHT ACT 1968 (THE ACT). THE MATERIAL IN THIS COMMUNICATION MAY BE SUBJECT TO COPYRIGHT UNDER THE ACT. ANY FURTHER REPRODUCTION OR COMMUNICATION OF THIS MATERIAL BY YOU MAY BE THE SUBJECT OF COPYRIGHT PROTECTION UNDER THE ACT. DO NOT REMOVE THIS NOTICE. 2 3 WHAT WE WILL DISCUSS IN THIS LECTURE MBA600 subject learning outcomes What you can expect to do? What are your study resources? Academic Success Centre, Library What are your assignments? Identifying strategy problems Focus on changing the performance of a firm Brainstorm your recollection Recall the theories learned in the MBA that identify distinctive capabilities
  • 23.
    1 Introductionto MBA6002 Introduction to Strategy 4 MBA600 SUBJECT LEARNING OUTCOMES 5 WHAT YOU WILL LEARN Critically assess a diverse range of theories accumulated throughout the Masters’ qualification and the connections that exist between each one. Acquire advanced knowledge and apply it in real workplace contexts to improve performance and competitive advantage. Undertake independent research to solve complex business problems. Discuss and translate theory, skills and knowledge into effective management practice. 6
  • 24.
    LEARNING OUTCOME 1: CRITICALLY ASSESSA DIVERSE RANGE OF THEORIES Sources of Competitive Advantage Low cost or differentiation Competitive rivalry Porter’s 5 Forces SWOT and PESTLE Market and industry risk Resource-based View VRIN model of assets Distinctive Capabilities Business Model Canvas Performance of Strategy Balanced Scorecard 7 LEARNING OUTCOME 2: APPLY KNOWLEDGE IN WORKPLACE
  • 25.
    CONTEXTS Industry Research Opportunities tochange industry profitability Competitive Differentiation Sources of competitive advantage Financial Performance Analysis Commercial feasibility of change Leadership and Resource Endowments Distinctive Capabilities 8 LEARNING OUTCOME 3: SOLVE COMPLEX BUSINESS PROBLEMS Apply MBA subjects and specialisations to research key strategy problems in a company of your choice Australian and New Zealand Standard Industrial Classification codes Search Wikipedia for Australian and New Zealand Standard Industry Classification codes 9
  • 26.
    LEARNING OUTCOME 4: PLAN TOIMPLEMENT STRATEGY IN MANAGEMENT PRACTICE Porter’s Five Forces Model SWOT and PESTLE Resource-based View McKinsey 7S Model Business Model Canvas Balanced Scorecard 10 YOUR STUDY RESOURCES Resources for your independent study 11 ACADEMIC SUCCESS CENTRE
  • 27.
    RESOURCES FOR INDEPENDENT STUDY 12 ADDITIONAL RESOURCES RESOURCES FOR INDEPENDENT STUDY Company financialstatements News releases (peer-reviewed) White papers and research articles (peer-reviewed) Government publications Official company websites, marketing and blogs Sources that are not peer-reviewed (check with your lecturer before citing) 13 YOUR
  • 28.
    ASSIGNMENTS Video, report, reflection 14 ASSIGNMENTS 1.Recorded video and slides Due in Week 4 Assume the role of organisational consultant 2. Individual report Due in Week 9 Conduct desktop research regarding organisational strategy 3. Reflective essay Due in Week 13 Consider learnings from the MBA program You need to begin your research now. 15 RESEARCHING PROBLEMS IN CORPORATE STRATEGY INTRODUCTION TO STRATEGY
  • 29.
    16 HOW DO FIRMS CREATE COMPETITIVE ADVANTAGE? DEFINITIONS ‘Whentwo or more firms compete within the same market, on firm possesses a competitive advantage over its rivals with it earns (or has the potential to earn) a persistently higher rate of profit.’ (Grant, 2016, p. 169) The key research question What mix of capabilities and resources does a firm possess that would create profits above the industry average? Capability means a firm’s capacity to successfully perform a unique business activity Resources mean the factors of production Land: natural resources Labour: human resources, knowledge, automation Capital: finance, access to funding RESULTS ARE HIGHER RATES OF PROFIT 17
  • 30.
    STRATEGY PLANNING PROCESS Thestrategy problem requires research about creating competitive advantage Research the strategy problem Appraise performance Diagnose performance Resource and capability analysis Industry analysis Formulate strategy Implement structure Internal to the firm External to the firm Operational within the firm 18 Strategy as Direction • Vision: what do we want to become?
  • 31.
    • Mission: whatdo we want to achieve? Plans • Development guidelines • Capital expenditure priorities • Growth (organic, M&A, alliances) CREATING FUTURE ADVANTAGES RESEARCH THE STRATEGY PROBLEM STEP 1: STRATEGY PLANNING PROCESS Strategy as Positioning • Where is the firm competing? Geographical scope • Product market scope • Vertical (supply chain) scope • Horizonal scope (acquisition) • Virtual (online) scope CREATING CURRENT ADVANTAGES 19 Diagnosing performance Using financial and strategy analyses to
  • 32.
    identify the sourcesof performance, satisfactory and unsatisfactory Appraising performance Measuring the effectiveness of strategy in terms of financial analysis. STRATEGY FIT STEPS 2-5: STRATEGY PLANNING PROCESS Analysing the fit between strategy and the firm’s industry environment Industry analysis Analysing the fit between strategy and the firm’s performance, to envision strategy options
  • 33.
    Resources and capabilities analysis 20 STRATEGYPLANNING PROCESS DETERMINE STRATEGY SOLUTION Define competitive advantage • based on strategic options from analyses of the external opportunities and threats; and internal resources and capabilities FORMULATE STRATEGY Establish organisation structure • Set reporting lines and management systems for tracking intended strategy (plans) vs. realised strategy (actuals) IMPLEMENT STRUCTURE 21
  • 34.
    SUMMARY OF THE STRATEGY PLANNING PROCESS 22 ANOTHER WAYTO THINK ABOUT THE STRATEGY PLANNING PROCESS The strategy problem requires research about creating competitive advantage 23 WORKSHOP TIME Apply what you learned strategy, resources and capabilities in the MBA!
  • 35.
    24 5-MINUTE FORMAL PRESENTATION WORKSHOP Present why theresources and capabilities create differences among competing firms (60 minutes excluding presentations) Refer to the next 2 slides as memory joggers Form groups of 2-3 people who are interested in the same theories and practices (e.g. leadership; culture; HR, finance; any specialisation) Summarise an overview, strengths and weaknesses of the selected theories and practices in a 5-minute formal presentation to the class 25 RECALL WHAT YOU LEARNED IN THE MBA (excluding electives and specialisations) CORE SUBJECT QUICK SUMMARY MBA401 People, Culture and Contemporary Leadership key concepts in managing the human resources MBA402 Governance, Ethics and Sustainability the role of the board in the assessment of strategy and risk
  • 36.
    MBA403 Financial andEconomic Interpretation and Communication assessing the liquidity, performance, and financial position of a company MBA404 Consumer Behaviour and Marketing Psychology how consumer behaviour is linked to business strategy for market share MBA501 Dynamic Strategy and Disruptive Innovation developing corporate strategy; creating value through innovation; and applying dynamic capabilities MBA502 Emotional Intelligence, Cultural Intelligence, and Diversity appraising cultural differences are within the organisation 26 MEMORY JOGGER Some of what you learned the MBA Course Competitive advantage Leadership styles (directing, consulting, participating, delegating) Corporate social responsibility
  • 37.
    SWOT and PESTLE Financeand Economics Employee engagement and culture Governance and agency Resource-based View Leadership types (transformational, transactional, servant) HR change management Porter’s Five Forces Balanced Scorecard McKinsey 7S Framework BCG Portfolio Matrix 27 WHAT TO PREPARE FOR NEXT WEEK Choose a company that you want to research Be prepared to evaluate internal capabilities with the Resource - based View
  • 38.
    28 S e ek h e l p w h e n yo u n e e d i t ! Thank you Strategy�conceptsCOMMONWEALTH OF AUSTRALIA�Copyright Regulations 1969��WARNING�This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (the Act).��The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act.��Do not remove this notice. What we will discuss in this lectureMBA600 Subject Learning OutcomesWhat you will learnLearning outcome 1: Critically assess a diverse range of theories�Learning outcome 2: Apply knowledge in workplace contextsLearning outcome 3: solve complex business problemsLearning outcome 4: �Plan to implement strategy in management practiceYour Study�ResourcesAcademic Success CentreAdditional resourcesYour assignmentsAssignmentsResearching Problems in Corporate strategyHow do firms create competitive advantage?Strategy planning processresearch the strategy problem��Step 1: strategy planning processStrategy Fit�Steps 2-5: strategy planning processStrategy planning process�Determine strategy solutionSUMMARY OF THE �Strategy planning processAnother way to think about the Strategy planning processWorkshop time5-MINUTE FORMAL PRESENTATIONRecall what you learned in the MBA�(excluding electives and specialisations)memory jogger�Some of what you learned the MBA CourseWhat to prepare for next weekSlide Number 28
  • 39.
    1 COMPETITION STRATEGY MBA600 Week 3 2 COMMONWEALTHOF AUSTRALIA COPYRIGHT REGULATIONS 1969 WARNING THIS MATERIAL HAS BEEN REPRODUCED AND COMMUNICATED TO YOU BY OR ON BEHALF OF KAPLAN BUSINESS SCHOOL PURSUANT TO PART VB OF THE COPYRIGHT ACT 1968 (THE ACT). THE MATERIAL IN THIS COMMUNICATION MAY BE SUBJECT TO COPYRIGHT UNDER THE ACT. ANY FURTHER REPRODUCTION OR COMMUNICATION OF THIS MATERIAL BY YOU MAY BE THE SUBJECT OF COPYRIGHT PROTECTION UNDER THE ACT. DO NOT REMOVE THIS NOTICE. 2
  • 40.
    3 WEEK 3 FOCUSESON ALL FOUR LEARNING OBJECTIVES Critically assess a diverse range of theories accumulated throughout the Masters’ qualification and the connections that exist between each one. Undertake independent research to solve complex business problems. Discuss and translate theory, skills and knowledge into effective management practice Acquire advanced knowledge and apply it in real workplace contexts to improve performance and competitive advantage. . 4 QUICK REVIEW OF KEY CONCEPTS What we learned in Week 2 5 WHAT WE LEARNED LAST
  • 41.
    WEEK Resource-based View andthe VRIO Framework A firm’s internal resources may provide a competitive advantage if they create causal ambiguity by four means VRIO relates to creating a competitive advantage based on asset specificity, which competitors cannot easily imitate 6 WHAT WE LEARNED LAST WEEK Dynamic Capabilities as a source of internal competitive advantage 7 WHAT WE LEARNED LAST WEEK Isolating Mechanisms The barriers that prevent a competitor from eroding the superior profitability of a firm
  • 42.
    Mechanisms to developinimitable resources and capabilities Social complexity via organisation culture and reputation History via lengthy lead times to develop capabilities Causal ambiguity via tacit knowledge, social complexity and resource specificity (history) Low transferability via high transaction costs and inability to replicate skills in a rival firm 8 WHAT WE LEARNED LAST WEEK Bases of Competitive Advantage Grant, Figure 7.5 Sources of Competitive Advantage, p. 178 9 WHAT WE WILL LEARN THIS WEEK Competition Strategy
  • 43.
    Product Market Strategy PROFITABILITY ProductLife Cycle Stages 10 THINKING UNDERPINS STRATEGY Key concepts 11 STRUCTURE FOLLOWS STRATEGY FIRM goals, values resources, capabilities structure, systems INDUSTRY ENVIRONMENT competitors customers suppliers
  • 44.
    STRATEGY corporate strategy, competitive strategy 12 'STRUCTUREFOLLOWS STRATEGY' Thesis based on case studies in the 1920’s in the USA Four sequential stages acquisition of resources (employees, raw materials, marketing and distribution channels) establishment of functional structures to increase efficiency adoption of growth and diversification strategy organisation structure to gather and allocate resources (Alfred Chandler) 13 IMPORTANT TERMS TO KNOW Strategic fit the consistency of strategy with the firm’s internal environment and industry external environment Fit is a concept in Contingency Theory There is no single best way of structuring or managing a firm
  • 45.
    14 IMPORTANT TERMS TOKNOW CORPORATE STATEGY Choice of industries and markets in which the firm competes (or wants to compete) COMPETITION STRATEGY Choice of how the firm defines its competitive advantage within a specific industry or market 15 COMPETITION STRATEGY Porter’s Five Forces model 16 RECALL FROM WEEK 1 THE DEFINITION OF COMPETITIVE ADVANTAGE ‘When two or more firms compete within the same market, on firm possesses a competitive advantage over its rivals with it earns (or has the potential to earn) a persistently higher rate of profit.’ (Grant, 2016, p. 169) The key research question we explored since Week 1 What mix of capabilities and resources does a firm possess that
  • 46.
    would create profitsabove the industry average? Competition strategy is introduced in this lecture Porter’s 5 Forces sheds light on the industry contest for profitability 17 COMPETITION STRATEGY Porter’s Five Forces of Competition 18 PORTER’S FIVE FORCES OF COMPETITION Threat of new entrants Ease of entry in an industry Threat is high when Low amount of capital is required to enter a market Existing firms cannot easily retaliate Existing firms lack isolating mechanisms (patents, brand reputation, etc)
  • 47.
    No government regulation Customerswitching costs are low Low customer loyalty Products are nearly identical Economies of scale are easily achieved POTENTIAL ENTRANTS https://www.strategicmanagementinsight.com/tools/porters-five- forces.html 19 PORTER’S FIVE FORCES OF COMPETITION Bargaining power Allows suppliers to control prices Strong bargaining power when Few suppliers, many buyers Large suppliers threaten forward integration Few substitute raw materials exist Suppliers hold scarce
  • 48.
    resources Materials switching costs arehigh SUPPLIER POWER https://www.strategicmanagementinsight.com/tools/porters-five- forces.html 20 PORTER’S FIVE FORCES OF COMPETITION Threats of Substitutes Strong when buyers can find Substitute products or service with attractive prices or better quality Low cost of switching to substitute products or services SUBSTITUTES https://www.strategicmanagementinsight.com/tools/porters-five- forces.html
  • 49.
    21 PORTER’S FIVE FORCES OF COMPETITION Bargainingpower Allows buyers to demand a lower price or higher quality Strong bargaining power when Buying in large quantities or controlling access points to end consumers Few buyers exist Switching costs to other suppliers are low Buyers threaten backward integration Many substitutes exist Buyers are price sensitive BUYER POWER https://www.strategicmanagementinsight.com/tools/porters-five- forces.html 22 PORTER’S FIVE FORCES OF
  • 50.
    COMPETITION Competition intensity Major determinantof industry profitability as firms content for market share Rivalry is intense when There are many competitors High costs of leaving the industry Industry growth is slow or negative Undifferentiated and substitutable products or services Competitors are of equal size Customer loyalty is low RIVALRY AMONG EXISTING COMPETITORS https://www.strategicmanagementinsight.com/tools/porters-five- forces.html 23 POSITIONING COMPETITION STRATEGY
  • 51.
    Can a firmmake superior profits in an industry? 24 POSITIONING COMPETITION STRATEGY Strategy problem Step 1 in the strategy planning process Product Marketing plans for brand positioning, messaging, competitive differentiation, and sales enablement Product market scope Product scope means the number of different lines (items) the firm offers for sale Market scope means the estimated value of products and services in a specific market or area 25 POSITIONING COMPETITION STRATEGY Strategy problem Step 1 in the strategy planning process Vertical scope Each party in the supply chain provides different product-specific or market- specific goods and/or services
  • 52.
    Horizontal scope Firms acquireothers to increase size, diversify products or services, achieve economies of scale, reduce competition, attract new customers Virtual scope Digital marketing: advertising, email, social media, blogs, other formats 26 WORKSHOP TIME Use the SWOT technique to assess the competition strategy position for the competitors you researched in Week 2 27 POSITIONING COMPETITION STRATEGY WORKSHOP Assess a likely competition strategy for the 2 top competitors you selected in Week 2 (30 minutes)
  • 53.
    Do a SWOTanalysis (on the next slide) of the attributes outlined in Porter’s Five Forces model 28 ASSESSING THE POSITIONING OF COMPETITION STRATEGY Strategy Position, Mission, Vision SWOT analysis STRENGTHS of the Mission WEAKNESSES of the Mission OPPORTUNITIES in the Vision THREATS in the Vision 29 PRODUCT MARKETING STRATEGY Exploring: brand positioning, messaging, competitive differentiation, and sales enablement
  • 54.
    30 Describes the customers,how products fit into existing markets, and how to earn profits Describes the tangible, intangible and symbolic attributes designed to satisfy customers’ needs and wants Aligns with a firm’s competitive advantage and competition strategy PRODUCT STRATEGY 31 PRODUCT LIFE CYCLE STAGES Development Stage Introduction Stage Growth Stage Maturity Stage Decline Stage D ol la rs Time Industry Sales Industry Profits
  • 55.
    32 PRODUCT LIFE CYCLESTAGES The product life cycle is a useful tool for addressing product strategy over time Limitations of the product life cycle Most new products never get past development The length of each stage depends on the actions of other firms The product life cycle forces managers to consider the future of their industry and their brand 33 PRODUCT LIFE CYCLE STAGES INTRODUCTION GROWTH MATURITY DECLINE Overall Marketing Goals Stimulate product awareness and trial Grow market share with new customers
  • 56.
    Maximise profit bydefending market share or taking it from competitors Reduce expenses to maximise profit Product Strategy Limited models and features; frequent product changes Introduce new models and features; continuous innovation Full model line; add supplementary products to reposition brand Eliminate unprofitable products and brands Pricing Strategy Higher price to recover investment Drop prices to match or beat competition Drop prices to match or beat competition Prices stabilise at a lower level Distribution Strategy Gradual product rollout Intensify efforts to expand market reach Extensive product availability Maintain brand loyal customers;
  • 57.
    phase out unprofitablechannels Promotion Strategy Build awareness to encourage trials Aggressive brand advertising, selling to encourage product switching Emphasise brand position and switching; reposition brand Minimise or eliminate promotion costs Source: adapted from William M. Pride and O. C. Ferrell, Marketing 2010 Edition. (Mason, OH: Cengage Learning, 2010), pp. 290-295 34 PRODUCT OR SERVICE BRAND Involves selecting the right combination of name, symbol, term, or design that identifies a product Brands have two parts: Brand name – words, letters, and numbers that can be spoken Brand mark – symbols, figures, or a design Critical to product identification and positioning in the minds of consumers An isolating mechanism
  • 58.
    35 WORKSHOP TIME Use theproduct life cycle to discern how rival firms may react and retaliate to competitive threats 36 POSITIONING COMPETITION STRATEGY WORKSHOP Assess how rival firms may react and retaliate to market threats in the competing firms you chose in Week 2 (45 minutes) Use the Product Life Cycle to determine the industry stage and likely reactions to marketing threats from competitors Refer to Porter’s Five Forces of Competition for additional justification 37 S e e k h e l p w h e n yo u n e e d i t !
  • 59.
    Thank you Competition StrategyCOMMONWEALTHOF AUSTRALIA�Copyright Regulations 1969��WARNING�This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (the Act).��The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act.��Do not remove this notice. Week 3 focuses on all four learning objectivesQuick review of key conceptsWhat we learned last weekWhat we learned last weekWhat we learned last weekWhat we learned last weekWhat we will learn this weekThinking underpins strategyStructure follows strategy'Structure follows Strategy'Important Terms to knowImportant Terms to KnowCompetition StrategyRecall from Week 1 the definition of�competitive advantageCompetition StrategyPorter’s Five Forces of CompetitionPorter’s Five Forces of CompetitionPorter’s Five Forces of CompetitionPorter’s Five Forces of CompetitionPorter’s Five Forces of CompetitionPositioning Competition StrategyPositioning COMPETITION strategyPositioning COMPETITION strategyWorkshop timePositioning Competition StrategyASSESSING THE Positioning of COMPETITION strategyProduct Marketing StrategyProduct StrategyProduct Life Cycle StagesProduct Life Cycle StagesProduct Life Cycle StagesProduct or Service BrandWorkshop timePositioning Competition StrategySlide Number 37 1 INTERNAL SOURCES OF
  • 60.
    COMPETITIVE ADVANTAGE MBA600 Week 2 2 COMMONWEALTHOF AUSTRALIA COPYRIGHT REGULATIONS 1969 WARNING THIS MATERIAL HAS BEEN REPRODUCED AND COMMUNICATED TO YOU BY OR ON BEHALF OF KAPLAN BUSINESS SCHOOL PURSUANT TO PART VB OF THE COPYRIGHT ACT 1968 (THE ACT). THE MATERIAL IN THIS COMMUNICATION MAY BE SUBJECT TO COPYRIGHT UNDER THE ACT. ANY FURTHER REPRODUCTION OR COMMUNICATION OF THIS MATERIAL BY YOU MAY BE THE SUBJECT OF COPYRIGHT PROTECTION UNDER THE ACT. DO NOT REMOVE THIS NOTICE. 2 3 WEEK 2 FOCUSES ON TWO LEARNING OBJECTIVES
  • 61.
    Critically assess adiverse range of theories accumulated throughout the Masters’ qualification and the connections that exist between each one. Undertake independent research to solve complex business problems. Other learning objectives Acquire advanced knowledge and apply it in real workplace contexts to improve performance and competitive advantage. Discuss and translate theory, skills and knowledge into effective management practice. 4 QUICK REVIEW OF KEY CONCEPTS What we learned in Week 1 5 WE LEARNED FROM LAST WEEK Definition of competitive advantage ‘When two or more firms compete within the same
  • 62.
    market, one firmpossesses a competitive advantage overs its rivals when it earns (or has the potential to earn) a persistently higher rate of profit.’ (Grant, 2016, p. 169) 6 DEVELOPING DYNAMIC CAPABILITIES FOR CORPORATE AGILITY Developing dynamic capabilities for Corporate Agility TRANSFORMING Renewing process and maintaining relevance to consumers (streamlining, improving, changing an organisation’s practices SEIZING Ability to benefit
  • 63.
    from opportunities by designing innovativebusiness models; and securing access to capital and resources SENSING Assessment of opportunities and customer needs the exist outside the organisation https://cmr.berkeley.edu/blog/2016/8/dynamic-capabilities/ WE LEARNED FROM LAST WEEK https://cmr.berkeley.edu/blog/2016/8/dynamic-capabilities/ 7 Strategy planning process Internal to the firm External to the firm Operational within the firm WE LEARNED FROM LAST WEEK
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    8 WHAT WE WILL LEARNTHIS WEEK Internal Competitive Advantage and Dynamic Capabilities Strategy planning process, step 1 9 INTERNAL COMPETITIVE ADVANTAGE The focus of Week Two 10 SOURCES OF COMPETITIVE ADVANTAGE Unique product and premium price Differentiation Advantage Similar product at lower cost
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    Cost Advantage Resources and Capabilities Grant, Figure7.5 Sources of Competitive Advantage, p. 178 11 STRATEGIES FOR A COST ADVANTAGE Economies of scale From technology inputs From large output From specialisation Economies of learning Experience curve, or ‘learning by doing’ Process technology and process design Increase productivity Product design Reduce operating costs via standardisation Capacity utilisation Keeping machines running
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    Lower input costs Geographicallocation Ownership of sources of supply Bargaining power Residual efficiency Reduction in overhead costs The objective is to ‘beat’ the competition with existing products and services 12 STRATEGIES FOR A DIFFERENTIATION ADVANTAGE Differences in quality Differences in function features or design Differences in availability Timing and location Sales promotion activities Customer loyalty or ignorance The objective is to develop products, services, and reputation
  • 67.
    that are uniquein the minds of consumers 13 INTERNAL COMPETITIVE ADVANTAGE AND DYNAMIC CAPABILITIES Dynamic capabilities underpins competitive advantage Core competencies are transformed from short-term competitive positions to longer-term competitive advantages A ‘competitive asset’ refers to inimitable resources and capabilities What matters is corporate agility Recognising and shaping opportunities and threats Realising benefits of opportunities Maintaining competitiveness of a firm’s tangible and intangible assets Teece, D. J., Pisano, G., & Shuen, A. (1998). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509-533.
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    14 DEVELOPING DYNAMIC CAPABILITIESFOR CORPORATE AGILITY SEIZING TRANSFORMINGSENSING Renewing process and maintaining relevance to consumers (streamlining, improving, changing an organisation’s practices Ability to benefit from opportunities by designing innovative business models; and securing access to capital and resources Assessment of opportunities and customer needs the exist outside the organisation
  • 69.
    https://cmr.berkeley.edu/blog/2016/8/dynamic-capabilities/ https://cmr.berkeley.edu/blog/2016/8/dynamic-capabilities/ 15 Resource matching Able toanticipate changes in the external environment Speed (pace) Some firms are faster and more effective at exploiting change Transforming processes Some firms have greater creative and innovative capability RESOURCE-BASED VIEW OF COMPETITIVE ADVANTAGE Dynamic Capabilities Sensing external opportunities Changing customer demand Changing prices of inputs Technological change Seizing internal capabilities Innovative business models Securing access to capital Forming strategic alliances Read this! https://www.mckinsey.com/business- functions/operations/our-insights/matching-the-right-projects-
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    with-the-right-resources Creative destructionEntrepreneurship https://www.mckinsey.com/business-functions/operations/our- insights/matching-the-right-projects-with-the-right-resources 16 WHAT COMPETITIVEASSETS COULD BECOME DYNAMIC CAPABILITIES? The McKinsey 7S Model 17 MCKINSEY 7S MODEL OF STRATEGIC INTERNAL ASSETS ‘The McKinsey 7S Model is a framework for organizational effectiveness that postulates that seven internal factors of an organization must be aligned and reinforced in order to be successful.' https://www.mckinsey.com/business-functions/strategy-and- corporate-finance/our-insights/enduring-ideas-the-7-s- framework https://www.investopedia.com/terms/m/mckinsey-7s-model.asp
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    SHARED VALUES SKILLSSTRATEGY SYSTEMSSTAFF STYLE STRUCTURE 18 MCKINSEY 7S MODELOF STRATEGIC INTERNAL ASSETS The leadership approach to managing the firm; and how well leaders influence performance, productivity and organisational culture. Style The talents and capabilities of human resources (staff and managers), which allow a firm to accomplish its work and goals Skills The daily procedures (routines), workflow, and decisions that comprise the standard operations in the firm. Systems Shared Values
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    The shared standardsand norms that everyone in the firm believes is acceptable behaviour within the workplace https://www.investopedia.com/terms/m/mckinsey-7s-model.asp 19 MCKINSEY 7S MODEL OF STRATEGIC INTERNAL ASSETS https://www.investopedia.com/terms/m/mckinsey-7s-model.asp The corporate hierarchy, management reporting lines, number of business units that effect operations and collaboration. Structure What motivates employees, where do there motivations reside, are they trained and prepared to accomplish tasks and goals, how large is the workforce. Staff The plan used in the firm to remain competitive in its industry and market. The plan specifies goals and objectives. Strategy 20 WORKSHOP TIME In Week 1, you recalled the resources and capabilities
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    that create differencesamong competing firms 21 EVALUATE YOUR LIST OF DYNAMIC CAPABILITIES WORKSHOP You have two objectives to accomplish the evaluation task (15 minutes) 1. Classify your list of capabilities from Week 1 according to the McKinsey 7S model Carefully distinguish resources from capabilities 2. Justify why each capability meets the criteria of a dynamic capability Explain how the capability meets the criteria of sensing, seizing, transforming 22 IS A DYNAMIC CAPABILITY A COMPETITIVE ASSET? The Resource-based View and VRIO framework
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    23 IS A DYNAMIC CAPABILITY ACOMPETITIVE ASSET? Resource-based View and the VRIO Framework A firm’s internal resources may provide a competitive advantage if they create causal ambiguity by four means VRIO relates to creating a competitive advantage based on asset specificity, which competitors cannot easily imitate Is control of the resource or capability in the hands of relatively few competitors? Can the firm cope with external competitor rivalry? RARE Can a firm gain or exploit opportunities or mitigate risk with the resources? Is the resource (product, service, process) valuable to customers? VALUABLE INIMITABLE Is the resource difficult to
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    substitute or replicate? Dosignificant cost disadvantages exist for duplicating or developing the resource? ORGANISATION Does the firm possess the people, processes, systems to exploit the resource or capability? Can the firm cope with the internal pace of change? https://www.business-to-you.com/vrio-from-firm-resources-to- competitive-advantage 24 RESOURCE- BASED VIEW AND THE VRIO FRAMEWORK Valuable Resources and Capabilities Strategies for improving efficiency and effectiveness by exploiting opportunities and mitigating threats Objective is to change industry profitability
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    Criteria to assessvalue: Can a firm gain or exploit opportunities or mitigate risk with the resources? Is the resource (product, service, process) valuable to customers? https://www.business-to-you.com/vrio-from-firm-resources-to- competitive-advantage 25 RESOURCE- BASED VIEW AND THE VRIO FRAMEWORK Rare Resources and Capabilities Inability of a firm to exploit resources in the same way as its competitors Mechanisms include patents, copyrights, legal protections, scarcity Criteria to assess rarity: Is control of the resource or capability in the hands of relatively few competitors? Can the firm cope with external competitor rivalry? https://www.business-to-you.com/vrio-from-firm-resources-to- competitive-advantage
  • 77.
    26 RESOURCE- BASED VIEW AND THEVRIO FRAMEWORK Inimitable Resources and Capabilities Mechanisms include unique history (path dependency), causal ambiguity, social complexity (network, relationships, culture, reputation) Criteria to assess inimitability: Is the resource difficult to substitute or replicate? Do significant cost disadvantages exist for duplicating or developing the resource? https://www.business-to-you.com/vrio-from-firm-resources-to- competitive-advantage 27 RESOURCE- BASED VIEW AND THE VRIO FRAMEWORK Organisation Resources and Capabilities
  • 78.
    Capability to gatherand coordinate resources Mechanisms include innovation, capital budgeting and project management Criteria to assess organisation: Does the firm possess the people, processes, systems to exploit the resource or capability? Can the firm cope with the internal pace of change? https://www.business-to-you.com/vrio-from-firm-resources-to- competitive-advantage 28 RESOURCE- BASED VIEW AND THE VRIO FRAMEWORK Valuable Strategies for improving efficiency and effectiveness by exploiting opportunities and mitigating threats Objective is to change industry profitability Rare Firm’s inability to exploit resources the same way Patents, copyrights, legal protections, scarcity Inimitable Copying reduced by unique history, causal ambiguity, social complexity (network, relationships, culture,
  • 79.
    reputation) Organisation Capability to gatherand coordinate resources Innovation, capital budgeting and project management https://www.business-to-you.com/vrio-from-firm-resources-to- competitive-advantage 29 WORKSHOP TIME Are the dynamic capabilities in your list strategically valuable? 30 DETERMINE STRATEGIC VALUE WORKSHOP Appraise if your list of dynamic capabilities can be imitated by competitors in the medium term, 1 to 3 years (15 minutes) Use the VRIO framework to determine competitiveness Valuable Rare
  • 80.
    Inimitable Organisation 31 ISOLATING MECHANISMS Responses to preventrivals from copying resources and capabilities, which would erode a firm’s competitive advantage 32 ISOLATING MECHANISMS DEFINITION Isolating mechanisms are the barriers that prevent a competitor from eroding the superior profitability of a firm The objective is to prevent competitive imitation Hence, the link with VRIO and the Resource-based View Inimitability is the objective of isolating mechanisms Copying is the most direct form of competition from rivals Examples: patents, copyrights, talent management,
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    leadership and culture,history, decision-making, economies of scale 33 ISOLATING MECHANISMS SOCIAL COMPLEXITY Inimitability may arise from social complexity Organisational culture, reputation among customers and suppliers, trustworthiness 34 ISOLATING MECHANISMS HISTORY Inimitability may arise from history ‘Luck’ or being ‘in the right place at the right time’ Capabilities may take a long time to develop, making short-term development costly for competitors 35 ISOLATING MECHANISMS
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    CAUSAL AMBIGUITY Inimitability mayarise from causal ambiguity Situations when the causes of a firm’s competitive advantage are not apparent to competitors Causally ambiguous management skills are based on tacit knowledge, social complexity, and resource specificity (history) 36 ISOLATING MECHANISMS LOW TRANSFERABILITY Inimitability may arise from low transferability Acquiring resources and capabilities may have high transaction costs (e.g. search, purchase, implementation) Some skills cannot be bought, sold or exchanged For example, teamwork and decision-making skills may be difficult to replicate in a rival firm 37 WORKSHOP TIME It is easy to identify what a rival does differently; harder to identify the critical differences that create competitive advantage
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    What competitive advantagesdifferentiate rival firms in your industry? 38 INDEPENDENT RESEARCH WORKSHOP You have two objectives to accomplish in the research task (60 minutes) 1. Research competitors in your chosen industry Select the 2 top competitors: the biggest (market share); the boldest (aggressive marketer) Download Financial Statements and other research articles 2. Assess the internal competitive advantages Determine their competitive advantage: low-cost or differentiation Apply your work done in this lecture and identify key (1 or 2) that enable internal competitive advantages What key isolating mechanisms are evident in the Financial Statements 39
  • 84.
    S e ek h e l p w h e n yo u n e e d i t ! Thank you Internal Sources of COMPETITIVE ADVANTAGECOMMONWEALTH OF AUSTRALIA�Copyright Regulations 1969��WARNING�This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (the Act).��The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act.��Do not remove this notice. Week 2 focuses on two learning objectivesQuick review of key conceptsWe learned from last weekDeveloping dynamic capabilities for Corporate AgilityWe learned from last weekWhat we will learn this weekInternal Competitive AdvantageSources of Competitive AdvantageStrategies for a Cost AdvantageStrategies for a Differentiation AdvantageInternal Competitive Advantage��and� �Dynamic CapabilitiesDeveloping dynamic capabilities for Corporate AgilityResource-based View of Competitive AdvantageWhat Competitive Assets could Become�dynamic Capabilities? McKinsey 7S Model�of Strategic Internal AssetsMcKinsey 7S Model of Strategic Internal AssetsMcKinsey 7S Model of Strategic Internal AssetsWorkshop timeEvaluate your list of Dynamic CapabilitiesIs a Dynamic Capability�a Competitive Asset?Is a Dynamic Capability�a Competitive Asset?Resource-based View and the VRIO FrameworkResource-based View and the VRIO FrameworkResource-based View and the VRIO FrameworkResource-based View and the VRIO FrameworkResource-based View and the VRIO FrameworkWorkshop timeDetermine Strategic ValueIsolating MechanismsIsolating mechanismsIsolating mechanismsIsolating mechanismsIsolating mechanismsIsolating mechanismsWorkshop timeIndependent ResearchSlide Number
  • 85.
    39 Assessment Information COMMONWEALTH OFAUSTRALIA Copyright Regulations 1969 This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (‘Act’). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Kaplan Business School is a part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 098 181 947 is a registered higher education provider CRICOS Provider Code 02426B. Assessment Information Subject Code: Subject Name: Assessment Title: Weighting: Total Marks: Due Date:
  • 86.
    MBA600 Capstone: Strategy Assessment 1– Recorded Video and Slides 25% 100 Week 5, Monday at 11.55pm . Assessment Description Students are to pick a real organisation of their choice that is either privately or publicly owned. It should be of interest or relevance to their industry sector, job role and/or MBA specialisation. Note, the organisation you pick should also be used in Assessment 2. Assuming the role of an organisational consultant, students are to apply their strategic thinking skills by researching the organisation and analysing the factors that clearly identify and explain its competitive advantage. Findings should be presented in a video which provides an overview in a form and tone that is presentable to the organisations executive team. It should be 15 minutes long and contain 10 to 15 slides that assist the executive to understand the findings presented.
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    Areas covered shouldinclude: • Introduction. • A brief overview of the organisation. • An analysis of the external and internal environment using appropriate theories and frameworks. • Clear articulation of the competitive advantage identified. • A diagnosis of the strengths, weaknesses, sources and future sustainability of the competitive advantage outlined. • A conclusion that identifies strategic opportunities and risks. Students are encouraged to use a wide variety of information sources that include, where possible, primary research such as interviews with staff or executive members within their chosen organisation. Students are encouraged to explore and utilise features of webinar technologies and to include a wide range of multimedia and/or interactive content that is in appropriate for a presentation to an executive. Students will be provided with guidance on the LMS on how to submit their webinar through Vimeo.
  • 88.
    COMMONWEALTH OF AUSTRALIACopyright Regulations 1969 This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (‘Act’). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Kaplan Business School is a part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 098 181 947 is a registered higher education provider CRICOS Provider Code 02426B. Criteria F (Fail) 0%-49% P (Pass) 50%-64% CR (Credit) 65%-74% D (Distinction) 75% - 84% HD (High Distinction)
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    85%-100% Mark Assessment Content (SubjectSpecific) OUT OF 80 MARKS Introduction Provides poor context and does not link to the assessment in a clear and coherent way. May be missing entirely. Provides satisfactory context but links to the assessment in only a partially clear and coherent way. Provides reasonable context and links to the assessment in a fairly clear and coherent way. Provides solid context and links to the assessment in a clear and coherent way. Provides excellent context and links to the assessment in an extremely clear and coherent way. /10 Organisation Overview Overview is poorly presented, not thorough and identifies an
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    unsatisfactory amount ofthe pertinent issues. Overview is satisfactorily presented, not very thorough and only identifies a few of the pertinent issues. Overview is well presented, reasonably thorough and identifies some of the pertinent issues. Overview is very well presented, very thorough and identifies most of the pertinent issues. Overview is excellently presented, extremely thorough and identifies all the pertinent issues. /10 Analysis of External and Internal Environment Poor evaluation of environment that superficially describes and poorly identifies context. Answer is not substantiated by strategy frameworks. Satisfactory evaluation of environment that describes and
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    identifies context. Answerhas limited substantiation using strategy frameworks. Good evaluation of environment that partially analyses and partially identifies context. Answer is partially substantiated by strategy frameworks. Very good evaluation of environment that fully analyses and clearly identifies context. Answer is predominantly substantiated by strategy frameworks. Excellent evaluation of environment that logically analyses and thoroughly identifies context. Answer is fully substantiated by strategy frameworks. /15 Outline of Competitive Advantage Competitive advantage is discussed using no or minimal key theories to frame an answer that is incoherent and does not link to the explanation of current sources.
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    Competitive advantage is discussedusing a small number of key theories to frame an answer in a relatively coherent way that partially links to the explanation of current sources. Competitive advantage is discussed using some key theories to frame an answer in a reasonably clear way that links reasonably well to the explanation of current sources. Competitive advantage is discussed using most key theories to frame an answer in a coherent way that links clearly to the explanation of current sources. Competitive advantage is discussed using all key theories to frame an answer in an extremely coherent way that links seamlessly to the explanation of current sources. /25 Conclusion with Strengths, Weakness and Sustainability Strengths, weaknesses and sustainability poorly evaluated,
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    poorly analysed, andpoorly applied with respect to the organisation in question. It has little or no theory and research. Strengths, weaknesses and sustainability reasonably well evaluated, reasonably well analysed, and reasonably well applied with respect to the organisation in question. It is inconsistently substantiated by theory and research. Strengths, weaknesses and sustainability well evaluated, well analysed, and well applied with respect to the organisation in question. It is partially substantiated by theory and research. Strengths, weaknesses and sustainability very well evaluated, very well analysed, and very well applied with respect to the organisation in question. It is mainly substantiated by theory and research. Strengths, weaknesses and sustainability excellently evaluated, skilfully analysed, and thoughtfully applied with respect to the organisation in
  • 94.
    question. It isfully substantiated by theory and research. /20 Structure Format and Presentation (Consistent across all courses) OUT OF 20 MARKS Answer clearly and logically presented. Answer presented is not clear and logical. Answer presented is somewhat clear and logical. Answer presented is very clear and logical. Answer presented is substantially clear and logical. Answer presented is exceptionally clear and logical. /4 Appropriate theory and research used to answer question posed. Answer unsatisfactorily incorporates, integrates and applies theory and research.
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    Answer satisfactorily incorporates butonly minimally integrates and applies theory and research. Answer solidly incorporates, integrates and applies theory and research. Answer predominantly incorporates, integrates and applies theory and research. Answer skilfully incorporates, integrates and applies theory and research. /4 Correct academic writing style used, including correct spelling, grammar and punctuation. Slides inadequate standard with substantial errors. Slides reasonable standard but with quite a few errors. Slides a good standard with some errors. Slides a high standard with minimal errors. Slides an impeccable standard
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    with errors thatare only negligible. /4 Format of answer/wordcount consistent with question requirements and KBS guidelines. Format of answer/wordcount poorly follows the question requirement and KBS guidelines. Format of answer/wordcount partially follows the question requirement and KBS guidelines. Format of answer/wordcount solidly follows the question requirement and KBS guidelines. Format of answer/wordcount substantially follows the question requirement and KBS guidelines. Format of answer/wordcount almost faultlessly follows the question requirement and KBS guidelines. /4
  • 97.
    COMMONWEALTH OF AUSTRALIACopyright Regulations 1969 This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (‘Act’). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Kaplan Business School is a part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 098 181 947 is a registered higher education provider CRICOS Provider Code 02426B. In-text referencing and reference list follows Harvard style and consistent with KBS guidelines. Frequent errors and/or inconsistent application of Harvard referencing conventions. Some errors and/or inconsistent application of Harvard referencing conventions.
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    Occasional errors and/or inconsistentapplication of Harvard referencing conventions. Minimal errors and/or inconsistent application of Harvard referencing conventions. Negligible errors and/or inconsistent application of Harvard referencing conventions. /4 Comments: /80 /20 /100