2eIM-LN-Chapter4 - Section 6 C hapter Lecture Notes for...

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357 Section 6 Lecture Notes for Chapter 4 Chapter 4 Internal Situation Analysis: Evaluate a Company’s Resources, Cost Position and Competitive Strength Chapter Summary Chapter Four discusses the techniques of evaluating a company’s internal situation, including its collection of valuable resources and capabilities, its relative cost position, and its competitive strength versus its rivals. The analytical spotlight will be trained on fi ve questions: (1) How well is the company’s present strategy working? (2) What are the company’s competitively important resources and capabilities? (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? The answers to these fi ve questions complete management’s understanding of “Where are we now?” and position the company for a good strategy situation fi t required of the “Three Tests of a Winning Strategy.” Lecture Outline I. Question 1: How Well is the Company’s Present Strategy Working? 1. The two best empirical indicators are: a. whether the company is achieving its stated fi nancial and strategic objectives b. whether the company is an above-average industry performer 2. Other indicators of how well a company’s strategy is working include: Trends in the company’s sales and earnings growth. Trends in the company’s stock price. The company’s overall fi nancial strength. The company’s customer retention rate. The rate at which new customers are acquired. Changes in the company’s image and reputation with customers. Evidence of improvement in internal processes such as defect rate, order fulfi llment, delivery times, days of inventory, and employee productivity. 3. The stronger a company’s current overall performance, the less likely the need for radical changes in strategy. The weaker a company’s fi nancial performance and market standing, the more its current strategy must be questioned. Weak performance is almost always a sign of weak strategy, weak execution, or both. 357
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Section 6 Instructor’s Manual for Essentials of Strategic Management 358 II. Question 2: What are the Company’s Competitively Important Resources and Capabilities ? 1. A company’s competitive approach requires a tight fi t with a company’s internal situation and is strengthened when it exploits resources that are competitively valuable, rare, hard to copy, and not easily trumped by rivals’ equivalent substitute resources. Many companies pursue resource-based strategies that attempt to exploit company resources in a manner that offers value to customers in ways rivals are unable to match. A.
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2eIM-LN-Chapter4 - Section 6 C hapter Lecture Notes for...

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