Strategic Advantage Profile

STRATEGIC ADVANTAGE PROFILE.

Every firm has strategic advantages and disadvantages. For example, large firms have financial strength but they tend to move slowly, compared to smaller firms, and often cannot react to changes quickly. No firm is equally strong in all its functions. In other words, every firm has strengths as well as weaknesses Strategists must be aware of the strategic advantages or strengths of the firm to be able to choose the best opportunity for the firm. On the other hand they must regularly analyse their strategic disadvantages or weaknesses in order to face environmental threats effectively. In this session, we shall examine the strategic advantage factors that management analyses and diagnoses to determine the internal strengths and weaknesses with which it must face the opportunities and threats from the environment. In the discussion of these factors, it is not possible to consider in detail, subject matter which are covered by courses on Marketing, Human Resources, Finance Management etc. Only a listing of these factors will be presented. Students should refer to books and courses that they have attended for details. The order of discussion does not indicate importance of the subjects. It is just a convenient ordering of line and staff factors. These factors will be covered under the following broad headings: 

1 Marketing and Distribution

2 R & D and Engineering

3 Production and Operations Management.

4 Corporate Resources and Personnel

5 Finance and Accounting

Examples: The Strategist should look to see if the firm is stronger in these factors than its competitors. When a firm is strong in the market, it has a strategic advantage in launching new products or services and increasing market share of present products and services.

Strategic Advantage Factors: Marketing and Distribution

1. Competitive structure and market share: To what extent has the firm established a strong mark share in the total market or its key sub markets?

2. Efficient and effective market research system.

3. The product-service mix: quality of products and services.

4. Product-service line: completeness of product-service line and product-service mix; phase of life-cycle the main products and services are in.

5. Strong new-product and new-service leadership.

6Patent protection  (or equivalent legal protection for services).

7. Positive feelings about the firm and its products and services on the part of the ultimate consumer.

8. Efficient and effective packaging of products (or the equivalent for services).

9. Effective pricing strategy for products and services.

10. Efficient and effective sales force: close ties with key customers. How vulnerable are we in terms of concentrating on sales to a few customers?

11. Effective advertising: Has it established the company's product or brand image to develop loyal customers?

12. Efficient and effective marketing promotion activities other than advertising.

13. Efficient and effective service after purchase.

14. Efficient and effective channels of distribution andgeographic coverage, including internal efforts

.

R & D (Research and Development) and Engineering function can be a strategic advantage for two reasons:

 1. It can lead to new or improved products for marketing 2. It can lead to the development of improved manufacturing or material processes to gain cost advantages through efficiency.

 Strategic Advantage Factors: R&D and Engineering

 1. Basic research capabilities within the firm2. Development capability for product engineering3. Excellence in product design4. Excellence in process design and improvements5. Superior packaging developments being created6. Improvements in the use of old or new materials7. Ability to meet design goals and customer requirements8. Well-equipped laboratories and testing facilities9. Trained and experienced technicians and scientists10. Work environment suited to creativity and innovation11. Managers who can explain goals to researchers and research results to higher managers12. Ability of unit to perform effective technological forecasting.

Organizational Capability Profile with TOWS matrix

ORGANISATINAL CAPABILITY PROFILE (OCP):

ORGANISATINAL CAPABILITY PROFILE (OCP)

CAPABILITIES:

CAPABILITIES “ In order to take full advantage of its assets the organization needs to develop skills, as experience suggests that with similar assets two different firms may add value of different amount for themselves. This difference can only be explained by the differences these organizations carry their capabilities in utilizing these assets.”

EXAMPLE:

EXAMPLE “In a sector like management education, in a typical segment you will find institutions more or less with similar resources and infrastructure, however, the quality of their output in terms of new professionals for business may be starkly different for different institutions. This is greatly reflected in the type of Organizations that pick them up for employment and the kind of job responsibilities they are offered. This difference in output can be explained on account of the skills which these institutions carry with themselves. This position has been found true in case of many Indian companies as well as the multinational corporations.”

FUNCTIONAL CAPABILITY FACTORS:

FUNCTIONAL CAPABILITY FACTORS 1. FINANCIAL CAPABILITY FACTOR Sources of fund Usage of fund Management of fund

FUNCTIONAL CAPABILITY FACTORS:

FUNCTIONAL CAPABILITY FACTORS 2. MARKETING CAPABILITY FACTOR Product-Related Price – Related Promotion-Related Integrative and Systematic

FUNCTIONAL CAPABILITY FACTORS:

FUNCTIONAL CAPABILITY FACTORS 3. OPERATIONS CAPABILITY FACTORS Production System Operations and Control System R & D System

FUNCTIONAL CAPABILITY FACTORS:

FUNCTIONAL CAPABILITY FACTORS 4. PERSONNEL CAPABILITY FACTORS Personnel System Organizational and employee characteristics Industrial Relations

FUNCTIONAL CAPABILITY FACTORS:

FUNCTIONAL CAPABILITY FACTORS 5.INFORMATION MANAGEMENT CAPABILITY FACTORS Acquisition and retention of information Processing and synthesis of information Retrieval and usage of information Transmission and dissemination of information Integrative, systematic and supportive

FUNCTIONAL CAPABILITY FACTORS:

FUNCTIONAL CAPABILITY FACTORS 6. GENERAL MANAGEMENT CAPABILITY FACTORS General management system External Relations Organizational Climate

THE ASSESMENT OF OCP:

STEPS IN THE ASSESMENT OF OCP Assign values to the different capability factors ranging from -5 to +5 Asses relative strength and weakness Identify the gaps that need to be filled Determine the relative priorities Identify the competitors, vulnerability to outside influences, factors supporting threats etc. Here BCG Could be used or a TOWS Matrix ( Maxi-max , Mini-Min, Maxi – min , Mini-max )

Example of a TOWS Matrix for Whirlpool – Europe

Growth Strategy of Tesla

https://hbr.org/video/5718782723001/whiteboard-session-how-traditional-business-metrics-are-ou
tdated

video on Marketing Myopia.

https://hbr.org/2004/07/marketing-myopia

check this concise video on Marketing Myopia.

Marketing Myopia- HBR

Marketing Myopia

At some point in its development, every industry can be considered a growth industry, based on the apparent superiority of its product. But in case after case, industries have fallen under the shadow of mismanagement. What usually gets emphasized is selling, not marketing. This is a mistake, since selling focuses on the needs of the seller, while marketing concentrates on the needs of the buyer.

In this widely quoted and anthologized article, first published in 1960, Theodore Levitt argues that “the history of every dead and dying ‘growth’ industry shows a self-deceiving cycle of bountiful expansion and undetected decay.” But, as he illustrates, memories are short.

The railroads serve as an example of an industry whose failure to grow is due to a limited market view. Those behind the railroads are in trouble not because the need for passenger transportation has declined or even because that need has been filled by cars, airplanes, and other modes of transport. Rather, the industry is failing because those behind it assumed they were in the railroad business rather than the transportation business. They were railroad oriented instead of transportation oriented, product oriented instead of customer oriented.

For companies to ensure continued evolution, they must define their industries broadly to take advantage of growth opportunities. They must ascertain and act on their customers’ needs and desires, not bank on the presumed longevity of their products. In short, the best way for a firm to be lucky is to make its own luck.

An organization must learn to think of itself not as producing goods or services but as doing the things that will make people want to do business with it. And in every case, the chief executive is responsible for creating an environment that reflects this mission.

A MUST READ ON STRATEGIC INTENT

https://hbr.org/2005/07/strategic-intent

The link will take you to this HBR article with is an award winning article on Strategic Intent by

Gary Hamel and 

C.K. Prahalad

Difference between CSFs and KPIs

The Difference between Critical Success Factors and Key Performance Indicators

What actions are critical to the success of your business and which effects are the most important?

If you’ve ever seen the acronym KPI or CSF in a business context, you’ve seen a shorthand to those two questions above. KPI stands for Key Performance Indicators, whereas CSF stands for Critical Success Factors. Some people use them interchangeably or confuse them, but they’re two totally different concepts.

The easiest way to understand them singly and in contrast is by understanding that CSFs are the cause of your success, whereas KPIs are the effects of your actions. Thus, there’s a tight relationship between them: if you’ve properly identified your CSFs and have been executing on them AND you’ve properly identified what your KPIs are, you should be meeting – or getting close to meeting – your KPIs.

If we drop the lingo, basically, we’re asking “what must we do to be successful?” (CSFs) and “what indicates that we’re winning?” (click to tweet – thanks!) (And, if we’re Charlie Sheen, “how can we tell if we’re bi-winning?” Alas, there’s only one Charlie Sheen. Duh!)

The use of KPIs can be strict or loose. Using them strictly means that you set a baseline, i.e. “$10k sales of this product line in a month is our baseline KPI;” in this use, if you get $10k sales in that product line, you’re meeting your KPIs. Using them loosely means that you’ll be watching data trends to determine whether you’re performing better, i.e. “we’ll be watching the sales data from this product line over this month since it’s a clear indicator of our performance.” Both ways of using KPIs have their uses; the more uncertain you are of the relationship between your CSFs and business momentum, the looser you’ll want to use KPIs.

The key part of KPIs is that they help you limit the amount of data you have to make sense of. The actions you take in your business often have many different effects, but not all effects are equal. For instance, gross revenue is almost always a KPI for every business, regardless of what stage of business they’re in, because one of the evergreen goals of a business is to generate profit. Because different actions and decisions may cause a drop in profit, sometimes profit isn’t the right metric to track because it will lead myopic decisions. In general, what we pay attention to grows, and KPIs help us pay attention.

These acronyms formalize and test our intuition, as well as getting us to really analyze the causes and effects of our business momentum. For example, many business bloggers posit an increase of traffic as a KPI and thus endeavor to do the things that increase traffic (informally making those activities CSFs), only to find out that an increase in traffic doesn’t actually affect their COV matrix( Cash flow , Opportunities and Visibility ). Brick-and-mortar business owners posit more people in the store as a KPI, only to find out that people aren’t actually buying anything while they’re in there and they need to rethink their sales process. I could go on, but you get where this is going.

So, over to you:

·        For this month, what are your goals as far as COV( Cash flow , Opportunities and Visibility ).  goes?

·        What are the KPIs that relate to those goals?

·        What CSFs will get you there?

·        Bonus: review some of your past activities that you thought were CSFs. If you did them, did you see a positive correlation between those CSFs, your KPIs, and your COV goals?