MGMT30013 Exam Revision

Q: What is competitive advantage and why is it important?

• Competitive advantage is a reason why customers, employees, investors, or stakeholders choose a firm over rivals.

• Leads to superior organisational performance such as profit, growth, longevity, ROIC, or societal impact.

• A competitive advantage must create value that competitors struggle to match. In the craft beer industry, advantage comes from differentiation rather than scale because breweries cannot compete with Big Beer on cost.

Q: What are the four types of customer value and how can a craft brewery create each? (FECE)

• Functional: Unique beer styles, superior taste, quality ingredients.

• Economic: Better value for money than imported craft beer.

• Convenience: Easy online ordering, taproom location, wide distribution.

• Emotional: Community identity, sustainability mission, authentic brand story.

Exam tip: Advantage comes from delivering value customers care about.

Q: What is meant by "firm agency"?

Firms make strategic and operational choices that influence performance.

• Strategic choices: What value to offer, target customers, positioning.

• Operational choices: How activities are performed, whether to make (in-house) or buy

Exam tip: Always explain what the firm can do rather than treating the environment as destiny.

Q: What is STEEP'D and why is it useful?

STEEP'D analyses macro-environmental forces:

• Sociocultural

• Technological

• Economic

• Environmental

• Politico-Legal

• Demographic

It helps identify opportunities and threats affecting all firms within an industry.

Example: Growth of health-conscious consumers creates opportunities for non-alcoholic craft beer.

Q: What does Porter's Five Forces explain? (RTBSS)

A: It explains why some industries are more profitable than others by analysing:

1. Rivalry

2. Threat of new entrants

3. Buyer power

4. Supplier power

5. Substitutes

High competitive pressure generally reduces profitability.

Q: Why is the Australian craft beer industry structurally difficult?

• High rivalry (high, consolidation, competition for tap lines, shelf space, distribution channels)

• High buyer power (Untappd, retailers greater bargaining power over pricing, shelf space, and contract terms for smaller breweries)

• High substitutes (wine, spirits, hard seltzers, and low/zero-alcohol beverages that compete for the same discretionary spending)

• Moderate supplier power (Most ingredients are widely available, but some premium hops and specialised ingredients may only be sourced from a limited number of suppliers)

• Moderate threat of entrants (Brewing equipment can be accessed through gypsy or contract brewing, but establishing brand recognition and distribution networks is difficult)

Conclusion: Industry profitability is challenging, so breweries need strong differentiation.

Q: What is the difference between resources and capabilities?

Resources = what the firm HAS

• Brand

• Equipment

• Financial capital

• Supplier relationships

Capabilities = what the firm DOES

• Brewing expertise

• Marketing processes

• Quality control

• Supply chain management

Competitive advantage comes from combining resources and capabilities effectively.

Q: What does VRIO stand for?

A strategic management tool that businesses use to evaluate their internal resources and capabilities

• Valuable: Build a strong local and sustainable brand identity that creates emotional value and appeals to environmentally conscious consumers.

• Rare: Develop unique brewing recipes, a distinctive brand story, or strong community connections that competitors do not possess.

• Inimitable: Create reputation, heritage, customer loyalty, and authentic local relationships that are difficult for rivals to replicate.

• Organised: Support these resources through effective marketing, distribution, customer engagement, and operational systems.

A resource must satisfy all four criteria to generate sustained competitive advantage.

Q: What outcomes arise from VRIO analysis?

VRIO Result	Outcome
Not Valuable	Competitive Disadvantage
Valuable Only	Competitive Parity
Valuable + Rare	Temporary Advantage
Valuable + Rare + Inimitable + Organised	Sustained Advantage

Q: What does the H in VRIOH represent?

A: Have – Does the firm actually possess the resource?

If not:

• Build it internally (e.g. training in barrel-ageing techniques)

• Acquire it (e.g. acquire hop farm)

• Partner to access it (e.g. partner with distributor)

Example: A brewery lacking distribution expertise could partner with a distributor.

Q: What is the value chain and why is it useful?

A: The value chain identifies activities where competitive advantage can emerge:

• Inbound logistics

• Operations

• Outbound logistics

• Marketing & sales

• Service

Exam tip: Use the value chain to locate potential VRIO resources.

Q: What are the four stages of the Industry Lifecycle? (EGMD)

A:

1. Embryonic

2. Growth

3. Maturity

4. Decline

Each stage requires different strategies.

Craft beer is currently in the maturity stage due to consolidation and market saturation → Declining sales and high costs are forcing small craft breweries to merge, sell out, or close as the overcrowded market shrinks

Q: What is disruption?

A: Disruption occurs when a new technology initially serves niche markets but eventually improves enough to challenge incumbents (large corporations)

Why incumbents fail:

• Focus on current customers

• Ignore small markets

• Prioritise sustaining innovations

Q: Apply Christensen's theory to craft beer.

Smaller firms can challenge established market leaders by initially targeting overlooked customer segments with products that differ from mainstream offerings.

• Craft breweries enter by targeting niche consumers ignored by large brewers

• Offer unique, premium, small-batch beers (IPAs, sours, stouts)

• Start small → incumbents initially ignore them

• Grow as demand for variety and authenticity increases

• Improve quality + scale → gain market share

• Large brewers respond via acquisitions + craft-style products

• Disruption is partial due to big brewers’ scale advantages

• Industry now in maturity stage with consolidation

• Big Beer responded through acquisitions (4 Pines, Pirate Life).

Classic example of late defensive adoption.

Q: What are the three innovation types? PPN

Process Innovation:

Same product, lower cost.
Example: automated packaging.

Product/Service Innovation:

New product for existing customers.
Example: seasonal IPA.

New Market Innovation:

New products for new customers.
Example: zero-alcohol range.

Q: What is the Buyer Utility Map? PUMD

Evaluates whether innovation creates value across the customer experience:

1. Purchase: higher convenience + accessibility (no alcohol restrictions, broader customer base)

2. Use: reduced risk (no intoxication/hangovers) + social inclusion, but depends on taste quality

3. Maintenance: easier integration into daily life (work/social settings, no alcohol concerns)

4. Disposal: mostly neutral, but eco packaging can add value

5. Key value drivers: accessibility, risk reduction, inclusivity

6. Main success factor: must match taste + authenticity of craft beer

7. Overall: strong potential to expand market via health-conscious consumer trends

Good innovations create value across multiple stages.

Q: What innovation challenge do craft breweries face?

Balancing:

• Constant innovation to attract customers
  vs

• Operational efficiency and brand consistency

Too much innovation can increase costs and confuse customers.

Distinguish between purpose, mission, vision, and values.

• Purpose = Why we exist.

• Mission = What we strive to achieve.

• Vision = Future aspiration.

• Values = How we behave.

How can purpose become a VRIO resource?

Purpose can:

• Attract customers

• Attract employees

• Differentiate the firm

• Build loyalty

However, it must be:

• Authentic

• Rare

• Embedded in operations

Purpose that exists only as marketing is unlikely to create advantage.

Q: What is the Make vs Buy decision?

Deciding whether to perform activities internally or outsource them.

MAKE if:
Internal cost + administration cost < market price + transaction costs

BUY if:
Market price + transaction costs < internal costs

Factors to consider:

1. Cost – Is it cheaper to do in-house or outsource? (Include hidden costs.)

• Payroll processing, label design can outsource

2. Asset Specificity – Does it require specialised equipment, knowledge, or processes unique to the brewery?

• if activity is specialised = in-house (e.g. brewing recipes)

3. Impact on Quality – Does it directly affect the customer experience, product quality, or brand reputation?

• if directly affects = in-house, brewery keeps full control (e.g. quality control, brewing operations)

4. Competitive Advantage – Could doing it in-house build a valuable capability that rivals cannot easily copy?

• e.g. Taproom experience and new product development

Diversification - moving beyond one industry

Diversification can create competitive advantage when new products or services complement existing capabilities and generate economies of scope.

Advantages:

• Economies of Scope: Share facilities, equipment, brand, and customer base across multiple offerings.

• Multiple Revenue Streams: Expand into cider, kombucha, or low/zero-alcohol beverages to increase sales and reduce reliance on beer.

• Customer Expansion: Broader product offerings can attract new customers and increase access to restaurants, events, and retail channels.

Disadvantages:

• Capability Gap: New industries (e.g., restaurants, accommodation, events) require additional expertise, staff, and resources.

• Loss of Strategic Focus: Management attention may be diverted away from core brewing operations.

• Lack of Synergies: Unrelated diversification makes it difficult to leverage existing brewing expertise, supplier relationships, and customer loyalty.

Key Judgement: Diversification creates value when it is related diversification that leverages existing resources and capabilities. It becomes value-destroying when firms enter industries with limited strategic fit and weak synergies.**

What is the Strategy Funnel? - for new strategic opportunities (e.g. expanding to new market)

1. Identify opportunity

2. STEEP'D

3. Five Forces

4. VRIO

5. Purpose fit

6. Decide

Proceed, adapt, or abandon.

This is one of the best frameworks for broad strategy questions.

Q: How can people become a source of competitive advantage?

• People are valuable resources because organisations rely on them for every activity.

• Use VRIO to assess both the employee and their role:

  • Valuable: Skills, knowledge, innovation, customer service.

  • Rare: Unique talent and diverse perspectives.

  • Inimitable: Culture, teamwork, and relationships are difficult to copy (causal ambiguity).

  • Organised: Strong HRM systems recruit, develop, and retain talent.

• HRM is a strategic capability because changing competitive environments require new skills.

• In craft beer, diversity and inclusion can be a competitive advantage by attracting rare talent, improving innovation, and appealing to consumers seeking ethical brands.

Key Judgement: People can be a source of competitive advantage, but only if the firm has strong HRM capabilities to attract, develop, and retain them.

Memory Phrase: "People create value; HRM sustains the advantage."

Q: How can finance and partnerships contribute to competitive advantage?

• Firms need finance for start-up costs (equipment, inputs, wages) and expansion (growth, technology, economies of scale). The key advantage is not money itself, but the ability to attract finance at low cost without losing control. Different sources (loans, investors, crowdfunding) involve trade-offs between risk, returns, control, and repayment obligations.

• Partnerships allow firms to access resources and capabilities they lack through suppliers, distributors, retailers, rivals, and complementary businesses. Strong partnerships can provide exclusive inputs, innovation opportunities, market access, and knowledge sharing that are difficult for competitors to replicate.

• Valuation is important for investments, acquisitions, resource allocation, and business exits. Common methods include Public Comps, Transaction Comps, DCF, and Sum-of-the-Parts. Firms must understand their value and avoid overpaying for acquisitions, as poor valuation decisions can destroy competitive advantage.

Q: How can supply chain management become a VRIO capability?

Supply chain management can be defined as the path through which inputs / raw materials are sourced, transformed, and delivered to an end customer.

• Valuable: Ensures reliable distribution to bottle shops, pubs, and taprooms, making products easily accessible and reducing lost sales.

• Rare: Long-term relationships with specialised suppliers (e.g., premium Tasmanian hops) can improve product quality and consistency.

• Inimitable: Technology and equipment can be copied, but strong supplier relationships, quality-control systems, and organisational routines built over time are harder to replicate.

• Organised: The brewery must support the capability through employee training, equipment maintenance, forecasting, and quality management systems.

Bullwhip Effect

Small changes in customer demand become amplified upstream, causing overproduction and inefficiency.

• Perishability: Craft beer has a short shelf life, so overproduction leads to waste or quality loss, especially for fresh styles like IPAs.

• Inflexible production: Brewing takes time, so output cannot be quickly adjusted when demand changes, causing delays in response.

• Demand volatility: Sales can shift quickly due to trends, reviews, or competitors, and these small changes get amplified through the supply chain.

• Limited distributor control: Small breweries often lack real-time sales data and influence over distributors, increasing uncertainty and forecasting errors.