Evaluating a Company’s

Resource, Capabilities and

Competitiveness.

(Apple Inc. Case)

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Evaluating a firm’s internal situation1 How well is the firm’s present strategy working ?

2 What are the firm’s competitively important resources and capabilities?

3Is the firm able to take advantage of market opportunities and overcome external threats to its external well-being?

4Are the firm’s prices and costs competitive with those of key rivals, and does it have an appealing customer value proposition?

5 Is the firm competitively stronger or weaker than key rivals?

6 What strategic issues and problems merit front-burner managerial attention?

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1 How well is the firm’s present strategy working ?

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Question 1: How well is the present strategy working?

The best way to start evaluating of how well company’s present strategy is working is with a clear view of what the strategy entails.

2 Steps best indicators :

-The company is achieving its stated financial and

strategic objectives

- The company is an above-average industry performerOther indicators :

-Growth in firm’s sales and market share

-Acquisition and retention of customers

-Increasing profit margins, net profits and ROI

-Growing financial strength and credit rating

-Positively viewed by shareholders and customers

-Leadership in factors relevant to market\industry

success

-Continuing improvement in operating performance

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Question 1: How well is the present strategy working?

4.1Identifying the Components of a Single-Business Company’s Strategy

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2Do the company’s resources and capabilities have sufficient competitive power to give it a sustainable advantage over competitors?

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QUESTION 2: Do the company’s resources and capabilities have sufficient competitive power to give it a sustainable advantage over competitors?

Company Resources

Tangible Resources

Physical resources

Financial resources

Technological assets

Organizational resources

Intangible Resources

Human assets and intellectual capital

Brands

External relationships

Company culture and incentive system

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How do we know that the company has a competitive power of resources and capabilities

4 TestsIs the resource (or capability) competitively

valuable?

Is the resource rare—is it something rivals lack?

Is the resource hard to copy?

Can the resource be overcome by different types of resources and capabilities—are there good

substitutes available for the resource?

QUESTION 2: Do the company’s resources and capabilities have sufficient competitive power to give it a sustainable advantage over competitors?

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3 Is the company able to seize market opportunities and overcome external threats?

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QUESTION 3: Is the company able to seize market opportunities and nullify external threats ?Using SWOT Analysis, which will involves

Drawing conclusions from the SWOT listings about the firm’s overall situation

Translating these conclusions into strategic actions by the firm that:

• Match its strategy to its internal strengths and to market opportunities• Correct important weaknesses, and defend it against external threats.

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QUESTION 3: Is the company able to seize market opportunities and overcome external threats ?

4.2 The Steps Involved in SWOT Analysis: Identify the Four Components of SWOT, Draw Conclusions, Translate Implications into Strategic Actions

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4 Are the company’s prices, costs and value proposition competitive ?

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QUESTION 4: Are the company’s prices, costs and value proposition competitive ?

• Signs of A Firm’s Competitive Strength:

– Its prices and costs are in line with rivals.

– Its customer-value proposition is competitive and cost effective.

– Its bundled capabilities are yielding a sustainable competitive advantage.

4.3 A Representative Company Value Chain

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Benchmarking and Value Chain Activities

• Benchmarking:– Involves improving a firm’s internal activities based on learning other

companies’ “best practices.”– Assesses whether the cost competitiveness and effectiveness of a firm’s

value chain activities are in line with its competitors’ activities.

• Sources of Benchmarking Information– Reports, trade groups, analysts and customers– Visits to benchmark companies– Data from consulting firms

QUESTION 4: Are the company’s prices, costs and value proposition competitive ?

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5 On an overall basis, is the company competitively stronger or weaker than key rivals?

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QUESTION 5: On an overall basis, is the company competitively stronger or weaker than key rivals?

• Competitive Advantage Indicators:– Ability to effectively and efficiently bundle resources and capabilities.

– Achieving a high rank on each key success factor.

– Having a net competitive advantage over its rivals.

The Competitive Strength Assessment ProcessThe Competitive Strength Assessment Process

Make a list of the industry’s key success factors and measures of competitive strength or weakness (6 to 10 measures usually suffice).Assign a weight to each competitive strength measure based on its perceived importance.

Rate the firm and its rivals on each competitive strength measure and multiply by each measure by its corresponding weight.

Step 1

Step 2

Step 3

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4.4 A Representative Weighted Competitive Strength Assessment

QUESTION 5: On an overall basis, is the company competitively stronger or weaker than key rivals?

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Strategic Implications of Competitive Strength Assessment

• The higher a firm’s overall weighted strength rating, the stronger its overall competitiveness versus rivals.

• The rating score indicates the total net competitive advantage for a firm relative to other firms.

• Firms with high competitive strength scores are targets for benchmarking.

• The ratings show how a company compares against rivals, factor by factor (or capability by capability).

• Strength scores can be useful in deciding what strategic moves to make.

QUESTION 5: On an overall basis, is the company competitively stronger or weaker than key rivals?

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6 What strategic issuesand problems merit front-burnermanagerial attention ?

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QUESTION 6: What strategic issues and problems merit front-burner managerial attention ?

Identifying Strategic Issues : How to stave off market challenges from new foreign competitors. How to combat the price discounting of rivals. How to reduce high costs and pave the way for price reductions. How to sustain growth in light of slowing buyer demand. Whether to expand the firm’s product line. Whether to correct the firm’s competitive deficiencies by acquiring a

rival company with the missing strengths.

Whether to expand into foreign markets rapidly or cautiously.

Whether to reposition the company and move to a different strategic group.

What to do about growing buyer interest in substitute products.

What to do to combat the aging demographics of the firm’s customer base.

Worry List

Apple Inc. Case 2010

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Apple Inc.Vision “To be the most admired company in the

world and the most loveable brand people ever use”“Every person around the global should taste at least 1 apple product”

Mission “Apple’s business strategy leverage its ability,

through the design and development of its owb

operating system, hardware, and many software

applicatons and technologies, to bring to its

customers around the world compelling new products

and solutions with ease of use, seamless integration,

and innovative industrial design”

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Apple Inc.Goals Objectives Strategies

Take market share from competitors, such as Dell and Hewlett - Packard

Attain double digit growth in terms of unit shipments through 2010 and then high single digit growth through 2012

Introduce innovetive products at competitive prices to the market to convince investor s and consumers that apple offers a unique product over the competition

Synchronize the digital electronics and computer market

Resolve Mobi le Me Web application failures to 0% by 2009

Ease of compatibility between the iPod, iPhone, and iTunes via the App Store

Achieve superior technological innovation

Maintain funds allocated to the R&D budget while establishing a $0 long-term liability balance

Pour large amount of operating budget into research & development. Closely guard secret behind company’s technology.

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Apple Inc.

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Apple Inc.Question 1: How well is the present strategy working?

Strategies (stated)

Introduce innovative products at competitive prices to the market to convince investor s and consumers that apple offers a unique product over the competitionEase of compatibility between the iPod, iPhone, and iTunes via the App Store

Pour large amount of operating budget into research & development. Closely guard secret behind company’s technology.

Apple launched one innovative product, named iPad which by that time it has no competitor (since Samsung still developing its G-Tab).

In 2010, App Store became more utilized since the iPad and iPhone 4 has been launched.

The R&D budget is increasing every year. But, compared with to total operating expense, the percentage of R&D budget for 2010 is the same with 2009, which is 24%. Though the amount is increase by $449.

Strategies

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Apple Inc.Question 2: Do the company’s resources and capabilities have sufficient competitive power to give it a sustainable advantage over competitors?

4 TestsIs the resource (or capability) competitively

valuable?

Is the resource rare—is it something rivals lack?

Though the Mac failed in the PC industry, Apple’s has its breakthrough by launching the

iPad and iPhone 4 and became the #1 in its industry.

In the 2010, we could say that Apple resources, whether tangible (technology) and intangible

(human & brand image) are rare.

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Apple Inc.Question 2: Do the company’s resources and capabilities have sufficient competitive power to give it a sustainable advantage over competitors?

4 Tests

It’s not impossible for competitors to imitate the tangible resource, but the intangible

resource (human & brand image0 would be difficult and need some time to be imitated.

In time, there would be possibility for technology and human resource (labor) to be overcome. But, brand image required a long

process and time to be substitute.

Is the resource hard to copy?

Can the resource be overcome by different types of resources and capabilities—are there good

substitutes available for the resource?

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Apple Inc.Question 3: Is the company able to seize market opportunities and overcome external threats ?

SWOT ANALYSIS

INTERNAL

STRENGTHS WEAKNESS

-Revolutionary differentiated product-Charismasic visionary CEO-High loyalty customer-Patents-Fast Innovation Pace

-Some Product Failure-Low Market Share (MAC)-Content Provider Relations-Centralized decision

EXTERNAL

OPPORTUNITIES THREATS

-I Tunes-Tablet-Features and apps limitation

-Imitators-Rapid Technology Changes-Free Content Availability-Highly Competitive marketNew Entrants

In 2010, the revolutionary differentiated product became the most attractive variable for the company. While some product failure became the most unattractive variable.

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Apple Inc.Question 4: Are the company’s prices, costs and value proposition competitive ?

Supply chain

management

Operations

Distribution

Marketing &

SalesService

Procurement

Technology Development & R&D

HRM

General Administration

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Primary Activities How Does Apple Inc. Create Value For Customer

Supply chain management

Apple outsource high quality inventory from Japan and Taiwan

Operation Using R&D , strategic alliance

Distribution Shipment in large lot to minimize cost and assure quick delivery

Marketing & Sales Focusing on premium price and international market to boost the sales

Service Emphasize on customer feedback to improve quality

Supportive activities

Procurement Outsource material from Taiwan and Japan

Technology development

Large emphasize on quality than to quantity

HRM Good management with emphasize on quality work

General administration

Effective planning with ability to coordinate and integrate activities across the system

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Question 5: On an overall basis, is the company competitively stronger or weaker than key rivals?Apple Inc.

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Question 6: What strategic issues and problems merit front-burner managerial attention ?Apple Inc.

Strategic Issues for Apple’s Future

How to maintain its growthApple needs to maintain its growth in the siege of competitors

How to stave off new competitor?

iPad successes will become a magnet for other company to build similar gadget

What Apple should do about the other product line, such as iMac & iPod ?

Don’t be lulled by the growth of iPad &

How to maintain Apple resources?

What to do with the product failure issue ?