School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|

Business Policy
Lecture 4

OLA MATTISSON
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
2
2 Swedish minutes
RBV perspective - resources and capabilities
RBV for competitive advantage
Positioning for competitive advantage
Organization
Strategy in single-business firms
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
3
Resource Based View
Two assumptions:
Resource heterogeniety
Resources and capabilities are
heterogeously distributed across
competing firms
Resource immobility
Resources and capabilities are stable
over time and difficult to move/transfer
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
4
Resorces & capabilities (Grant)
Tangible resources
financial, physical

Intangible resources
Technology, reputation, culture
Human resources
Know-how, capacity for communication,
collaboration, motivation


Create organizational capabilities
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
5
Links between resources, capabilities
and competitive advantage
Organizational capabilities
Industry key
success factors
Strategy
Competitive advantage
Resources
Tangible Intangible Human
Financial Technology SkillsKnow-how
(cash, borrow) Reputation Communication/
Physical (brands) Colloboration
(plant, land) Culture Motivation
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
6
Value chain
Primary
activities
Secondary
(support)
activities
Value creation
Marketin
g & sales
Service
Firm infrastructure
Human resource development
Research and development
Inbound
logistics
Production Outbound
logistics
Procurement
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
7
Firm specific assets
It must be built, because it cannot be bought
Hamel and Prahalahad use the term core
competence to describe central strategic
capabilities
Make a disproportionate contribution to end
customer value
Basis for entering new markets
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
8
Capabilities
They are collective learning in the
organization, especially how to coordinate
diverse production skills and integrate
multiple streams of technology

Oragnizational routines
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
9
Profit-earning potential (Grant)
1. Extent of competitive advantage
Scarcity
Relevance

2. Sustainability
Durability
Transferability
replicability

3. Appropriability
Property rights
Relative bargining power
Embeddedness
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
Appraising resources and capabilities
Relative
strength
Strategic
importance
Key Weaknesses
Superfluous strengths Key strengths
Zone of irrelevance
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
Competitive advantage from

External sources
Changing demand
Changing prices
Technological change

Internal sources
Internal changes
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
12
Positioning for competitive advantage
Two sources of competitive advantages
Low cost
Cost advantage
Differentiation
Customer value

Position gap
Difference in profitability between actual firm and industry average
Steaming from costs and customer value

Competitive scope
Firm s choice of markets (products/services, distribution,
geograpy
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
13
Porters generic strategies
Porter: Cost leadership and differentiation is mutually
excluding
Stuck in the middle
Scope and competitive advantage
Source of competitive advantage
Competitive scope
Industry-wide
Single segment
Cost
leadership
Differentiation
Focus
Differentiation Low cost
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
14
Drivers of cost advantage
Economies of scale
Economies of learning
Production techniques
Product design
Input costs
Residual efficiency
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
15
Disaggregate the firm into separate activities
Establish the relative importance in total costs of the
product
Compare costs by activity
Identify cost drivers
Identify linkages
Identify opportunities to reduce costs
Value chain to analyze costs
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
16
The value chain in cost advantage
analysis
Figure 7:8 in Grant
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
17
Differentiation strategy
Potential to differentiation from physical characteristics
Complex products/services
Differentiation goes beyond physical characteristics
Relationships firm-customer

Tangible differentiation
Size, shape, colour, weight, design etc
Performance such as reliability, consistency, durability, safety

Intangible differentiation
Experience, exclusivity, image, status, etc.
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
18
Drivers of uniqueness
Analyzing customers needs analyze firm
ability to offer differentiated features

Drivers of uniqueness
Product features and performance
Complementary services
Intensity in marketing
Technology in design and production
Input quality control
Procedures control for delivery, quality etc.
Skill and experience
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
19
Value chain in differentiation analysis
Construct value chain for the firm and the
customer
Identify drivers of uniqueness in each activity
Select the most promising differentiation
variables for the firm
Potential vs competitors
Linkages among activities
Potential for sustainability
Locate linkages between the value chain of
the firm and of the buyer
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
20
The value chain in differentiation
analysis
Figure 7:11 in Grant

School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
21
The match of internal and external
conditions
Consider industry cycle; emergent, mature or declining
Fragmented industries
Both low-cost and differentiation possible?
Seek unique position
Stability and consistency
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
22
Organization
Specialization vs coordination and cooperation
Hierarchy for coordination and control
Alternative forms
Functional structure
Divisional structure
Matrix structure
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|
Read also
Porter HBR article J an 2008

The five competitive forces that shape strategy
23
School of Economics and Management | Ola Mattisson | FEKH11 Business Policy|