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 o ...

1. 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

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

3. 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

4. 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

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
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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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)

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

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
‘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

30. 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?

31. • 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

32. 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

33. 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

34. 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!

35. 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

36. 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

37. 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

38. 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

39. 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

40. 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

41. 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

42. 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

43. 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

44. 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

45. 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

46. 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)

47. 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

48. 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

49. 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

50. 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

51. 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

52. 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)

53. 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

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 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

56. 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;

57. 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

58. 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 !

59. 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

60. 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

61. 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

62. 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

63. 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

64. 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

65. 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

66. 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

67. 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.

68. 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

69. 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-

70. 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

71. 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

72. 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

73. 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

74. 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

75. 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

76. 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

77. 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

78. 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,

79. 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

80. 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,

81. 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

82. 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

83. 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

84. 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

85. 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:

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.

87. 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.

88. 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)

89. 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

90. 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

91. 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.

92. 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,

93. 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

94. 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.

95. 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

96. 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

97. 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.

98. 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