Chapter 4 Assignment 1) Four test that should be used to measure the competitive power of a company’s resource strengths are: • Is the resource really competitively valuable? All companies possess a collection of resources and competencies; some have the potential to contribute to a competitive advantage, while others may not. • Is the resource strength rate, is it something rivals lack? Companies have to guard against prideful believe that their core competencies are distinctive competencies or that their brand name is more powerful than the brand names of rivals. Is the resource strength hard to copy? The more difficult and the more expensive it is to imitate a company’s’ resource strength, the greater its potential competitive value. Resources tend to be difficult to copy, when they are unique, when they must be built over time, and when they carry big capital requirements. • Can the resource strength be trumped by substitute resource strengths and competitive capabilities? Resources that are competitively valuable, rare, and costly to imitate, lose their ability to offer competitive advantage if rivals possess equivalent substitute resources. ) Rather than try to match the resources and capabilities possessed by a rival company, a company may develop entirely different resources and capabilities that substitute for the strengths of the rival. 3) Representative value chain for a Car Industry [pic] Supplier- related Design (High Value Added) – After researching consumer wants and needs, automakers begin designing models which are tailored to the public demand. Raw Materials (Low Value Added) – These include rubber, glass, steel, plastic, and aluminum.
Over the past few years, the cost of raw materials has increased significantly, mostly due to the price increase of oil and natural rubber. Also, companies are now using aluminum and plastic in place of steel whenever possible in order to lessen the weight of the automobiles, which in turn improves fuel efficiency. Company’s Own Parts (Medium Value Added) – Tires, windshields, and air bags are examples of parts. While the automobile industry as a whole has become more consolidated, the U. S. uto parts sector remains highly fragmented. It includes four primary sub-categories: original equipment manufacturers (Delphi and General Electric), replacement parts manufacturing (Cooper Tire and Rubber and Federal-Mogul), replacement parts distribution (NAPA), and rubber fabricating (Goodyear and Cooper). Assembly (Medium Value Added)- Due to the combination of rising raw materials’ costs and consumers’ eternal search for the lowest price, companies are looking for ways to cut costs out of the manufacturing process.
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Recent trends to reduce costs include using fewer parts in each vehicle component, minimizing industrial waste and pollution, and having parts delivered to assembly plants on a just-in-time basis. Forward Channel Marketing (High Value Added) – Marketing is an integral part of the value chain, since it is the primary basis for consumers’ perceived values. Automakers and individual dealers work together to create national, regional, and local marketing strategies. These may include television and radio advertising or special incentives offered to customers. In addition, firms have started advertising more online.
GM, for example, spent 67% more on online advertising in 2005 than it did in the previous year. Distribution and Sales (High Value Added) – After production is complete, automobiles are shipped to dealerships around the world to be sold. As mentioned previously, dealers may offer incentives to increase sales. 4) Five strategic moves that a firm can make to restore cost parity are: • Implement the use of best practices throughout the company, particularly for the high cost activities. • Try to make up the internal cost disadvantage by reducing costs in the supplier or forward channel portions of the industry value chain-usually a last resort. Redesign the product and / or some of its components to facilitate speedier and more economical manufacture or assembly. • Invest in productivity-enhancing, cost-saving technological improvements. • Relocate high-cost activities where they can be performed more cheaply. 5) Three strategic moves that a firm can make to restore cost parity are: • Pressure dealer-distributors and other forward channel allies to reduce their cost and markups, so a s to make the final price to buyers more competitive with the prices of rivals. Work closely with forward channel allies to identify win-win opportunities to reduce costs. • Change to a more economical distribution strategy including switching to cheaper distribution channels or perhaps integrating forward into company-owned retail outlets. 6) True. In using both the industry and competitive analysis and the evaluations of the company’s own competitiveness mangers can pinpoint the precise things they need to worry about and set an agenda for deciding what actions to take next to improve the company’s performance and business outlook.