LNChap004 - Chapter 4 Lecture Note Analyzing a Company's...

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Chapter 4 Lecture Note Analyzing a Company’s Resources and Competitive Position Chapter Summary Chapter Four discusses the techniques of evaluating a company’s internal circumstances – its resource capabilities, relative cost position, and competitive strength versus rivals. The analytical spotlight will be trained on five questions: (1) How well is the company’s present strategy working? (2) What are the company’s resource strengths and weaknesses and its external opportunities and threats? (3) Are the company’s prices and costs competitive? (4) Is the company competitively stronger or weaker than key rivals? (5) What strategic issues and problems merit front-burner managerial attention? In probing for answers to these questions, four analytical tools – SWOT analysis, value chain analysis, benchmarking, and competitive strength assessment will be used. All four are valuable techniques for revealing a company’s competitiveness and for helping company managers match their strategy to the company’s own particular circumstances. Lecture Outline I. Question 1: How Well is the Company’s Present Strategy Working? 1. In evaluating how well a company’s present strategy is working, a manager has to start with what the strategy is. 2. Figure 4.1, Identifying the Components of a Single-Business Company’s Strategy , shows the key components of a single-business company’s strategy. 3. The first thing to pin down is the company’s competitive approach. 4. Another strategy-defining consideration is the firm’s competitive scope within the industry 5. Another good indication of the company’s strategy is whether the company has made moves recently to improve its competitive position and performance. 6. While there is merit in evaluating the strategy from a qualitative standpoint (its completeness, internal consistency, rationale, and relevance), the best quantitative evidence of how well a company’s strategy is working comes from its results. 7. The two best empirical indicators are: a. Whether the company is achieving its stated financial and strategic objectives b. Whether the company is an above-average industry performer 8. Other indicators of how well a company’s strategy is working include: a. Whether the firm’s sales are growing faster, slower, or about the same pace as the market as a whole
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b. Whether the company is acquiring new customers at an attractive rate as well as retaining existing customers c. Whether the firm’s profit margins are increasing or decreasing and how well its margins compare to rival firms’ margins d. Trends in the firm’s net profits and returns on investment and how these compare to the same trends for other companies in the industry e. Whether the company’s overall financial strength and credit rating are improving or on the decline f. Whether the company can demonstrate continuous improvement in such internal performance measures as days of inventory, employee productivity, unit costs, defect rate, scrap rate,
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This note was uploaded on 04/22/2008 for the course ECON 315 taught by Professor Aliemami during the Spring '08 term at Oregon.

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LNChap004 - Chapter 4 Lecture Note Analyzing a Company's...

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