chapter 4 mgmt 425

Company Situation Analysis

The process of assessing a firm’s internal and external environment to determine strategic actions.

Key Questions in Situation Analysis

Evaluate strategy effectiveness, resources and capabilities, cost competitiveness, strength versus rivals, and strategic issues.

SWOT Analysis

A tool that identifies a company’s internal Strengths and Weaknesses and external Opportunities and Threats.

Resource Strength

An asset or capability that enhances a company’s competitiveness, like skills, physical assets, or alliances.

Resource Weakness

A deficiency or shortcoming that puts a company at a disadvantage relative to competitors.

Opportunity

A chance to grow or profit based on external conditions that match the firm’s strengths.

Threat

External developments that may harm a company’s performance or competitive position.

Competence

A learned proficiency in performing internal activities.

Core Competence

An activity central to a firm’s strategy and competitiveness that it performs proficiently.

Distinctive Competence

A core competence a company performs better than rivals, giving it a strong competitive advantage.

Resource-Based Strategy

A strategy focused on leveraging valuable company resources and capabilities to gain competitive advantage.

VRIN Test

A framework for evaluating a resource’s competitive power: Valuable, Rare, Inimitable, and Non-substitutable.

Value Chain

All internal activities involved in designing, producing, marketing, and delivering a product or service.

Primary Activities

Value chain activities that directly add value for the customer, like production, marketing, and delivery.

Support Activities

Activities that assist primary functions, such as HR, tech development, and general admin.

Value Chain Analysis

The assessment of individual activities in the value chain to find cost advantages or disadvantages.

Activity-Based Costing

A costing method that assigns costs to specific activities, revealing true costs of value chain tasks.

Benchmarking

A tool that compares a company’s activities and performance to industry best practices to improve efficiency.

Best Practices

Methods of performing activities that deliver superior results compared to other approaches.

Cost Competitiveness

A company’s ability to manage value chain activities to maintain lower costs than competitors.

Forward Channel Allies

Entities like distributors and retailers that add value to a company’s product and affect total cost and buyer satisfaction.

Options to Correct Cost Disadvantages

Include outsourcing, technology investments, simplifying design, or renegotiating supplier contracts.

Strategic Issues

Important problems or opportunities that demand focused managerial action to maintain or improve competitive position.

Competitive Strength Assessment

A tool to measure how a firm compares to rivals across key success factors using a scoring system.

Worry List

A list of strategic issues that need urgent attention, formed after analyzing a company's internal and external position.

Competitive Advantage

An edge over rivals achieved by performing value chain activities more efficiently or more uniquely.

Cost-Based Competitive Advantage

Outperforming rivals by operating with a lower cost structure across the value chain.

Capability-Based Competitive Advantage

Outperforming rivals by having superior skills, know-how, or execution in value-creating activities.