Friday, April 2, 2010

Internal Analysis [MBA]

In preparation for my MBA finals and graduation on April 18, I'm reviewing Strategic Management by Charles Hill and Gareth Jones and trying to apply the lessons to my Web strategy business, Gunner Technology.

Chapter 3 covers External Analysis: Distinctive Competencies, Competitive Advantage and Profitability.

Resources, both tangible (physical entities, such as land, buildings, plant, equipment and money) and intangible (non physical entities that are created by managers and other employees, such as brand names; the reputation of the company; the knowledge that employes have gained through experience; and the intellectual property of the company), and capabilities (a company's skill at coordinating its resources and putting them to productive use) build the firm's distinctive competencies, which are firm-specific strengths that allow a company to differentiate its products from those offered by rivals, and/or achieve substantially lower costs than its rivals.

The company's distinctive competencies shape the firm's strategies, which leads to competitive advantage, which leads to superior profitability.

Competitive advantages come in one or two broad ways (more are discussed later): Lower cost structure and differentiation.

By pursuing low cost, the company sees its product as a commodity and goes about implementing cost-lowering measures that will allow it to sell the product or service and a lower price  than its competitors.

By pursuing differentiation, the company is saying that there is something (brand, patent, quality, etc) that the competition can't match and it allows the company to charge a higher price for its product or service.

In both cases, superior quality, customer responsiveness, innovation and efficiency help shape which advantage is pursed.

For example, superior customer responsiveness gives a product or service a higher level of quality, differentiating it from the competition and allowing for a higher price.

Superior efficiency means a company can produce a product or implement a service more seamlessly than the competition, thus lowering its cost structure, allowing the firm to outsell the competition.

Superior innovation can be applied both ways. R&D can provide superior innovation in the form of a new product such as Blu-ray. Or it can provide a new way of building a product, lowering the cost structure.

At Gunner Technology, we pursue a differentiating strategy. We want to provide end-to-end solutions for small businesses in the form of Web strategy.

While small businesses may have to go to many different vendors for development (iPhone, Web, etc), design, logo, SEM, Social Media, Online Business Directories and so on. With Gunner Technology, we have competencies in each. More importantly, we know our limits and with our emergence in the Internet, we know where to go to supplement our knowledge and talent with affordable expertise if the need arises.

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