Management
MGMT 4890-01 Business Policy and Strategy Week 3
1
Strategy
Last Week – External Environment
Porter’s Five Forces / SWOT
Internal Environment
2
Analysis
Formulation
Implementation
Value Chain
3
INCO Terms
4
INCO Terms Definitions
5
The Value Chain in Service Organizations
6
Resource Based View
Types of Firm Resources
Tangible resources
Physical assets: plant & facilities, location, machinery & equipment
Financial assets: cash & cash equivalents, borrowing capacity, capacity to raise equity
Technological resources: trade secrets, patents, copyrights, trademarks, innovative production processes
Organizational resources: effective planning processes & control systems
Resource Based View
Types of Firm Resources
Intangible resources are difficult for competitors to imitate
Human resources: trust, experience & capabilities of employees; managerial skills & effectiveness of work teams
Innovation resources: technical & scientific expertise & ideas; innovation capabilities
Reputation resources: brand names, reputation for fairness with suppliers; reputation for reliability & product quality with customers
Resource Based View
Types of Firm Resources
Organizational capabilities
Capacity to combine tangible & intangible resources
Outstanding customer service
Excellent product development capabilities
Superb innovation processes & flexibility in manufacturing processes
Ability to hire, motivate, & retain human capital
Balanced Scorecard
Four key perspectives:
How do customers see us? (customer perspective)
What must we excel at? (internal perspective)
Can we continue to improve and create value? (innovation & learning perspective)
How do we look to shareholders? (financial perspective)
Balanced Scorecard
Best in Class Companies Source: Competitive Strategy Analysis, Grant, 2013
| Function | Capability |
| Corporate | Financial Control |
| Corporate | 2. Strategic Innovation |
| R&D | 3. Research Capability |
| R&D | 4. New Product Development |
| Operations | 5. Continuous Improvement |
| Marketing | 6. Responding to Customer Requirements |
| Distribution | 7. Fast Order Processing |
| Service | 8. Customer Service |
Exxon
Merck
Apple
Toyota
L’Oreal
Dell
Caterpillar
12
Completion of Strategy Analysis
Intellectual Assets
13
Industry Environment
Suppliers
Competitors
Customers
Demographics / Sociocultural
Economics / Technology
Legal / Political
Ratio of Market Value to Book Value
The market value = equal to the value of a share of its common stock times the number of shares outstanding.
The book value of the firm is primarily a measure of the value of its tangible assets
14
Intellectual Property
Patents – Exclusive to a new and useful product, process, substance or design. In US is valid for 17 years (14 for design).
Copyrights – Exclusive production, publication, or sales rights to the creation of artistic, literary, dramatic, or musical works.
Trademarks – Words, symbols, or other marks used to distinguish the goods or services supplied by the firm. In the US and UK trademarks are registered with the Patent Office.
Trade Secrets – Offer a modest degree of protection for recipes, formulae, industrial processes, customer lists, and other knowledge, acquired in the course of business.
Protection of Intellectual Assets
Intellectual property rights = intangible property owned by a firm in the forms of patents, copyrights, trademarks, or trade secrets
Intellectual property rights are more difficult to define and protect than property rights for physical assets.
Effectiveness of Different Mechanisms for Protecting Product Innovations
| Secrecy % | Patents% | Lead Time% | |
| Food | 59 | 18 | 53 |
| Drugs | 54 | 50 | 50 |
| Medical Equip | 51 | 55 | 58 |
| Telecom | 47 | 21 | 46 |
Note; % of companies reporting that the mechanism was effecting in protection
Source: Cohen, Nelson, Ross Why firm Patent or Not
Effectiveness of Different Mechanisms for Protecting Process Innovations
| Secrecy % | Patents% | Lead Time% | |
| Food | 56 | 16 | 42 |
| Drugs | 68 | 36 | 36 |
| Medical Equip | 49 | 34 | 45 |
| Telecom | 35 | 15 | 43 |
Note; % of companies reporting that the mechanism was effecting in protection
Source: Cohen, Nelson, Ross Why firm Patent or Not
Conclusion – Creating Value with Intellectual Assets
Human capital: does the organization effectively attract, develop, and retain talent? Does the organization value diversity?
Social capital: does the organization have positive personal and professional relationships among employees?
Technology: does the organization effectively use technology to transfer best practices across the organization, codify knowledge, and develop dynamic capabilities for competitive advantage?