Strategy Lecture 5 PDF

Lecture 5 – Internal Company Analysis Prof. Dr. Eva Niesten Use Edusign QR code to register attendance LECTURE 5 – Internal Company Analysis What are resources & capabilities? Identifying, appraising & a...

Lecture 5 – Internal Company Analysis Prof. Dr. Eva Niesten Use Edusign QR code to register attendance LECTURE 5 – Internal Company Analysis What are resources & capabilities? Identifying, appraising & accessing 1. Resources & Capabilities resources & capabilities Data: Statista / Google Finance / EPO 2. Identifying Resources & Cost strategy Capabilities Differentiation strategy & signaling 3. Resources for Business theory Strategy Internal analysis 4. Strategy Frameworks SWOT Strategic capabilities 5. Example of Amazon Benchmarking Strategy Identifying & appraising resources 5.1 Resources & Capabilities THE FIRM THE INDUSTRY Goals & Values ENVIRONMENT Resources & STRATEGY Competitors Capabilities Substitutes Structure & Suppliers Systems The The Firm-Strategy Environment-Strategy Interface Interface  5.1 Resources & Capabilities Source: Rothaermel, Strategic Management  5.1 Resources & Capabilities Why Do We Need a Resource-Based View (RBV)? When the industry environment is volatile, internal resources and capabilities offer a more stable basis for strategy than a focus on industry or market. Resources and capabilities are the primary sources of profitability: they are heterogeneous and immobile across firms. Source: Rothaermel, Strategic Management 5.1 Resources & Capabilities Resources: Productive assets owned by the firm. Organizational capabilities are created by combining and integrating the organization’s resources, resulting in an organization’s skills or competences, or in ‘what a firm can do’. Core competences or capabilities are fundamental to a firm’s strategy, performance and competitive advantage. 5.1 Resources & Capabilities INDUSTRY KEY SUCCESS FACTORS COMPETITIVE STRATEGY ADVANTAGE ORGANIZATIONAL CAPABILITIES RESOURCES TANGIBLE INTANGIBLE HUMAN Financial Technology Skills/know-how Physical Reputation Capacity for communication & Culture collaboration Motivation  5.2 Resources & Capabilities – identification RESOURCES TANGIBLE INTANGIBLE HUMAN Financial Technology Skills/know-how Physical Reputation Capacity for communication & Culture collaboration Motivation Performance appraisal Firm’s balance Competence sheet development Undervalued or omitted from a Assessment centers firm’s balance sheet Divergence between firm’s balance- sheet and stock-market valuations, due to brand of the firm 5.2 Resources & Capabilities – identification RESOURCE CHARACTERISTICS INDICATORS Financial Borrowing capacity Debt/Equity ratio Internal funds generation Credit rating Balance Tangible Net cash flow sheets - Resources Orbis Physical Plant and equipment: Market value of fixed assets. Size, location, technology flexibility. Scale of plants Land and buildings Alternative uses for fixed assets Raw materials Patent Technology Patent, copyrights, know-how, R&D facilities No. Of patents owned databases Technical and scientific employees Royalty income Intangible R&D expenditure Resources R&D staff Reputation Brands. Customer loyalty, company Brand equity Statista, reputation (with suppliers, customers, Customer retention government) Google Supplier loyalty Finance, Training, experience, adaptability, Employee qualifications, Factiva Human Resources commitment and loyalty of employees Pay rates, turnover 5.2 Resources & Capabilities – identification Source: Statista (based on survey data from Brand Finance) 5.2 Resources & Capabilities – identification Use share price (evolution) as indication of brand value Compare share price (evolution) to competitors Source: Google Finance 5.2 Resources & Capabilities – identification Sources: https://www.epo.org/searching- for-patents.html https://worldwide.espacenet.com/  5.2 Resources & Capabilities – appraisal Source: Rothaermel, Strategic Management  5.2 Resources & Capabilities – appraisal ► Time compression diseconomies ► It takes time to build a resource or capability ► Even if rivals know the source of an advantage, they may not be able to recreate the resource in a timely fashion (Dierickx and Cool, 1989) ► History or path dependence is the barrier to imitation (Barney, 1991) π [ 5 mil. R&D investment (year1) + 5 mil. R&D investment (year2) ] > π [ 10 mil. R&D investment (year2) ] 14  5.2 Resources & Capabilities – appraisal Rare & Inimitable = competitive advantage: Laphroaig whisky flavoured by peat of Scottish island Islay 5.2 Resources and Capabilities – access Strategic alliances between firms: Purposive relationships between independent firms that involve the exchange, sharing, or co-development of resources or capabilities to achieve mutually relevant benefits. Inter-firm alliances focus on financial performance of alliance partners. Public-private partnerships: Collaboration between firms & government. Cross-sector partnerships: Collaboration between firms & Non- Governmental Organizations (NGOs). 5.2 Resources & Capabilities – access Why do firms collaborate? Two theories Resource-Based View Institutional Theory To access complementary To gain legitimacy: “the generalized resources & capabilities: perception that organizations or activities are - knowledge desirable or appropriate in an institutional - finance setting.” - markets / distribution channels Firms collaborate with partners that have - production capacity legitimacy in a particular market or industry. 5.2 Resources & Capabilities – access Why do firms collaborate? Example 1 - RBV 2015: ABB and Samsung formed an alliance on energy storage and connecting batteries to the grid. The alliance will combine ABB’s grid technologies with Samsung’s lithium-ion battery technology. “This strategic alliance allows us to combine our complementary capabilities and will enable us to bring optimized solutions to our customers.” Source: Factiva 5.2 Resources & Capabilities – access Why do firms collaborate? Example 2 - IT Firms (Coca Cola) and NGOs (World Wildlife Fund) collaborate to enhance social and environmental legitimacy of the firm. “The Coca-Cola Company and WWF are working to advance Coca-Cola’s sustainability stewardship with the announcement today of new, bold global environmental goals and an expanded global partnership.” “At Coca-Cola, we are deeply committed to working with partners to address our collective environmental challenges and responsibly manage the planet’s resources,” said Muhtar Kent, CEO of Coca Cola. Source: Factiva  5.3 Resources for Business Strategy Defining Competitive Advantage: When two or more firms compete within the same market, one firm possesses a competitive advantage over its rivals when it earns (or has the potential to earn) a persistently higher rate of profit. Source: Rothaermel, Strategic Management  5.3 Resources for Business Strategy Two sources of competitive advantage: Porter’s generic strategies to achieve competitive advantage: 5.3 Resources for Business Strategy Resources and capabilities for two types of strategies COST LEADERSHIP STRATEGY DIFFERENTIATION STRATEGY Scale-efficient plants Creative skills Access to capital Research & development capabilities Cost control routines/processes Product engineering skills Process innovation and engineering skills Cross-functional coordination skills Design for manufacture capabilities Marketing capabilities 5.3 Resources for Business Strategy Companies must be able to differentiate: They must have the resources and capabilities to produce unique products and services. Companies must be able to communicate about its unique products. SIGNALING THEORY  5.3 Resources for Business Strategy Source: Connelly et al., 2010, Signaling Theory: A Review and Assessment, Journal of Management, 37, 39-67.  5.3 Resources for Business Strategy SIGNALER: RECEIVER: Firm produces Information Asymmetry Consumer a high-quality wanting to buy product high-quality product Credible Signal Brand name, extended warranty, money-back guarantee, expensive packaging, carefully designed retail environment, advertising etc. Source: Connelly et al., 2010, Signaling Theory: A Review and Assessment, Journal of Management, 37, 39-67.  5.4 Strategy Frameworks - internal analysis IV. Develop strategy implications: a) In relation to strengths, i. how can these be exploited more effectively and fully? STRATEGY b) In relation to weaknesses, FORMULATION / i. Identify opportunities to outsourcing activities that can be EVALUATION better performed by other organizations ii. How can weaknesses be corrected by acquiring and developing capabilities to mitigate threats? III. Appraise the firm’s capabilities in terms of their: a. Value POTENTIAL FOR i. Relevance b. Rarity SUSTAINABLE ii. Scarcity c. Inimitability COMPETITIVE iii. Transferability d. Organized ADVANTAGE iv. Replicability v. Durability II. Explore the linkages between resources and CAPABILITIES assets I. Identify the firm’s resources and RESOURCES & assets in the value chain ASSETS 26 Adapted from Grant 2016  5.4 Strategy Frameworks - SWOT Combining Internal and External Analysis You can also use a SWOT analysis to think about your company’s strategic problem or even to reflect on strategic recommendations Source: Rothaermel, Strategic Management  5.4 Strategy Frameworks - strategic capabilities 1. Understand how an 2. Where do resources & organization compares to capabilities reside? others – typically competitors Benchmarking (strategic positioning). 4. How do they fit with the external environment? (Internal analysis) S W VRIO Analysis SWOT Analysis Are capabilities: O T □ Valuable to customers? (External analysis) □ Rare to find/create? □ Inimitable? □ Organized 3. Which ones are superior and why? 28  5.5 Amazon ► Three interviews with Jeff Bezos https://www.veed.io/view/faf2dff5-d542-4c97-9cd2-d6cf85457bf2?panel=share 29  5.5 Amazon ► Three interviews with Jeff Bezos Amazon's Plans Before The Dotcom Crash Amazon Business Model Mission Jeff Bezos Explains Why Amazon Makes No Profit. Source: CNBC, 1999 Source: The Charlie Rose Show, 2010 Source: Business Insider, 2014 Q: It seems like investors are making a big bet Q: Competitors (Walmart) will kick you out Q: Amazon is not profitable. Can it ever make if they invest in your company… of the market… profits? A: It does not matter… What matters is that A: Amazon’s strategy is not focused on A: Amazon reinvests every penny… if you focus we provide the best customer service competitors; it is focused on on the inputs to your business instead of the customers… outputs, you will win customers in the long term 30  5.5 Amazon - Value KEY FACTS ► Founded in July 1995 as the “Earth’s Biggest Bookstore” ∆Stock Value (2024 vs 1997) ► Initial Public Offering (IPO) □ Amount raised on May 15, 1997: USD 54M □ Industry Code: Electronic Shopping ► Today Jeff Bezos resigns as CEO □ Market Capitalization on Sept 22, 2024: USD 2.01T (2021) □ Industry Code(s): Electronic Shopping, Web Services, Internet Broadcasting, Wholesale Trade Third interview video (2015) Second interview video First interview video (2010) (1999) 1997 2003 2009 2015 2021 Source: Google Finance  5.5 Amazon - Analysis 1. Understand how an 2. Where do resources & capabilities organization compares to others – typically competitors reside? Benchmarking (strategic positioning) 4. How do they fit with the external environment? (Internal analysis) S W VRIO Analysis SWOT Analysis Are capabilities: O T □ Valuable to customers? (External analysis) □ Rare to find/create? □ Inimitable? □ Organized 3. Which ones are superior and why? 32  5.5 Amazon - Benchmarking (early years) U.S. Etailing (electronic retailing) Industry in 2008 Sales Market cap Net income Net profit Employees (Million USD) (Million USD) (Million USD) margin Amazon.com, Inc. 19,166.00 29,413.66 20,700 645.00 3.41% eBay, Inc. 8,541.26 15,305.78 16,200 1,779.47 20.83% Priceline.com, Inc. 1,884.81 3,210.43 1,780 193.47 10.46% Ticketmaster Entertainment, 1,240.48 229.99 3,600 169.35 13.45% Inc. Overstock.com, Inc. 834,34 216.05 1,034 11.78 -1.52% Value Vision Media, Inc. 781.55 11.78 869 8.51 2.87% 33 Source: Dow Jones Factiva  5.5 Amazon - Benchmarking (early years) U.S. Etailing Industry in 2008 Total Revenues Net Income 25000 20000 (million USD) 15000 10000 5000 0 Amazon.com, Inc. eBay, Inc. Priceline.com, Inc. Ticketmaster Overstock.com, Inc. Value Vision Media, Inc. Entertainment, Inc. 34 Source: Dow Jones Factiva  5.5 Amazon - Benchmarking (today) (R)etailing Entertainment Web Services ► Walmart ► Netflix ► Oracle ► eBay ► Apple ► Microsoft ► Alibaba ► Google ► IBM ► Target ► Disney ► … ► Best Buy ► … ► Costco ► Etsy ► … What kind of industry is it? 35  5.5 Amazon - Benchmarking (2012-2020) (million USD) 600000 Total Revenues 500000 400000 300000 200000 100000 (million USD) 0 25000 (million USD) 20000 Net Income 15000 10000 5000 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 -5000 Walmart Walmart Walmart Walmart Walmart Walmart Walmart Walmart Walmart Amazon Amazon Amazon Amazon Amazon Amazon Amazon Amazon Amazon Alibaba Alibaba Alibaba Alibaba Alibaba Alibaba Alibaba Alibaba Alibaba Ebay Ebay Ebay Ebay Ebay Ebay Ebay Ebay Ebay 36 Source: WRDS Compustat  5.5 Amazon - Strategy Lower cost Lower Prices structure Selection and convenience Customer Sellers Growth experience Traffic Source: Drawn by Jeff Bezos in 2009 ► Selection – Provide the widest selection of products ► Price – Gain price leadership without sacrificing quality ► Convenience – Please and understand customers 37  5.5 Amazon - Analysis 1. Understand how an 2. Where do resources & organization compares to others – typically competitors (strategic capabilities reside? Benchmarking positioning) 4. How do they fit with the external environment? (Internal analysis) S W VRIO Analysis SWOT Analysis Are capabilities: O T □ Valuable to customers? (External analysis) □ Rare to find/create? □ Inimitable? □ Organized? 3. Which ones are superior and why? 38  5.5 Amazon - Resources RESOURCES CHARACTERISTICS INDICATORS Financial Borrowing capacity Debt/Equity ratio Internal funds generation Credit rating Tangible Net cash flow Resources Physical Plant and equipment: Market value of fixed assets Size, location, technology flexibility. Scale of plants Land and buildings Alternative uses for fixed assets Raw materials Technology Patent, copyrights, know how, R&D facilities Number of patents owned Technical and scientific employees Royalty income Intangible R&D expenditure Resources R&D staff Reputation Brands. Customer loyalty, firm reputation (with suppliers, Brand equity customers, government) Customer retention Supplier loyalty Culture Organization’s value, traditions, social norms ? Human Resources Training, experience, adaptability, commitment and loyalty of Employee qualifications, employees Pay rates, turnover 39  5.5 Amazon - Resources (million USD) 70000 Cash flow from operations 60000 50000 40000 30000 20000 10000 0 Walmart Walmart Walmart Walmart Walmart Walmart Walmart Walmart Walmart Amazon Amazon Amazon Amazon Amazon Amazon Amazon Amazon Amazon Alibaba Alibaba Alibaba Alibaba Alibaba Alibaba Alibaba Alibaba Alibaba Ebay Ebay Ebay Ebay Ebay Ebay Ebay Ebay Ebay 2012 2013 2014 2015 2016 2017 2018 2019 2020 Debt / Equity ratio – borrowing capacity Amazon 0.606 0.710 1.498 1.311 1.058 1.593 1.132 1.249 1.076 Ebay 0.217 0.174 0.383 1.031 0.850 1.238 1.469 2.926 2.334 Walmart 0.620 0.642 0.599 0.588 0.576 0.529 0.728 0.962 0.775 40 Source: WRDS Compustat  5.5 Amazon - Resources RESOURCES CHARACTERISTICS INDICATORS Financial Borrowing capacity Debt/Equity ratio Internal funds generation Credit rating Tangible Net cash flow Resources Physical Plant and equipment: Market value of fixed assets Size, location, technology flexibility. Scale of plants Land and buildings Alternative uses for fixed assets Raw materials Technology Patent, copyrights, know how, R&D facilities Number of patents owned Technical and scientific employees Royalty income Intangible R&D expenditure Resources R&D staff Reputation Brands. Customer loyalty, firm reputation (with suppliers, Brand equity customers, government) Customer retention Supplier loyalty Culture Organization’s value, traditions, social norms ? Human Resources Training, experience, adaptability, commitment and loyalty of Employee qualifications, employees Pay rates, turnover 41  5.5 Amazon - Resources Distinctive capabilities: ► Selection – Provide widest selection of products ► Price – Gain price leadership without sacrificing quality ► Convenience – Please and understand demand 42  5.5 Amazon - Resources RESOURCES CHARACTERISTICS INDICATORS Financial Borrowing capacity Debt/Equity ratio Internal funds generation Credit rating Tangible Net cash flow Resources Physical Plant and equipment: Market value of fixed assets Size, location, technology flexibility. Scale of plants Land and buildings Alternative uses for fixed assets Raw materials Technology Patent, copyrights, know how, R&D facilities Number of patents owned Technical and scientific employees Royalty income Intangible R&D expenditure Resources R&D staff Reputation Brands. Customer loyalty, firm reputation (with suppliers, Brand equity customers, government) Customer retention Supplier loyalty Culture Organization’s value, traditions, social norms ? Human Resources Training, experience, adaptability, commitment and loyalty of Employee qualifications, employees Pay rates, turnover 43  5.5 Amazon - Resources Year Acquired firm Country SIC code Business Activity Amazon’s 1999 Della.com US 7375 Information Retrieval Services 1999 Drugstore.com US 5961 Catalog And Mail-Order Houses Corporate 1999 Gear.com US 5941 Sporting Goods Stores 1999 Greenlight.com US 5511 Motor Vehicle Dealers Venture 1999 Homegrocer.com US 7375 Information Retrieval Services Capital 1999 Pets.com US 5999 Miscellaneous Retail Stores 1999 WineShopper.com US 7375 Information Retrieval Services Investments 2000 Kozmo.com US 5961 Catalog And Mail-Order Houses 2000 eZiba US 5999 Miscellaneous Retail Stores 2004 Joyo.com China 7389 Business Services 2005 Del.icio.us US 7375 Information Retrieval Services 2007 Amie Street US 7375 Information Retrieval Services 2007 Tastemakers US 7375 Information Retrieval Services 2008 Atomic Moguls Inc US 7375 Information Retrieval Services 2008 Elastra Corporation US 7372 Prepackaged Software 2009 Audible Inc US 7375 Information Retrieval Services 2009 Booktour Inc US 7375 Information Retrieval Services 2011 Animoto Inc US 7372 Prepackaged Software 2011 Cirtas Systems US 3572 Computer Storage Devices 2011 LivingSocial Inc US 7375 Information Retrieval Services 2011 ParAccel US 7372 Prepackaged Software 2011 Yieldex Inc US 7372 Prepackaged Software 44 2012 Source: Sonian Thompson One Inc US 7374 Preparation Services 2014 Wikia Inc US 7375 Information Retrieval Services  5.5 Amazon - Resources Year Acquired firm Country SIC code Business Activity Amazon’s 1998 Bookpages Ltd UK 5192 Wholesale Trade-Nondurable Goods 1998 Internet Movie Database Inc US 7379 Business Services Acquisitions 1998 Junglee Corp US 7375 Business Services 1998 PlanetAll US 7372 Prepackaged Software 1998 Telebook Inc US 7375 Business Services 1999 Accept.com Financial Services US 7375 Business Services 1999 Alexa Internet US 7375 Business Services 1999 Back To Basics Toys US 3944 Miscellaneous Manufacturing 1999 Convergence Corp US 7372 Prepackaged Software 1999 Drugstore.com Inc US 8099 Health Services 1999 Exchange.com US 7389 Business Services 1999 Gear.Com US 5941 Miscellaneous Retail Trade 1999 HomeGrocer.com US 7375 Business Services 1999 Livebid.com US 5999 Miscellaneous Retail Trade 1999 Sothebys Holdings Inc US 7389 Business Services 1999 Tool Crib of the North US 5961 Miscellaneous Retail Trade 2000 Ashford.Com Inc US 5945 Miscellaneous Retail Trade 2000 Audible Inc US 7375 Business Services 2000 Basis Technology Corp US 7372 Prepackaged Software 2000 Eziba Inc US 5961 Miscellaneous Retail Trade 2000 GeoWorks Inc US 7372 Prepackaged Software 2000 Greg Manning Auctions Inc US 7375 Business Services 45 2000 Source: Living.com Thompson One Inc US 7375 Business Services 2000 f2 Ltd Australia 7375 Business Services  5.5 Amazon - Resources (million USD) 45000 40000 R&D expenditure 35000 30000 25000 20000 15000 10000 5000 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Amazon Amazon Amazon Amazon Amazon Amazon Amazon Amazon Amazon Alibaba Alibaba Alibaba Alibaba Alibaba Alibaba Alibaba Alibaba Alibaba Ebay Ebay Ebay Ebay Ebay Ebay Ebay Ebay Ebay 46 Source: WRDS Compustat  5.5 Amazon - Resources ► Trademarks and patents FIRST PATENT GRANTED? September 1999: Method and system for placing a purchase order via a communications network Licensed to Apple Computer in 2000 (for USD 1 million) 1-Click (Patent & Trademark) The technique of allowing customers to make purchases with the payment information needed to complete the purchase having been entered by the user previously (i.e., without having to use a shopping cart software). https://patents.google.com/?assignee=amazon 47  5.5 Amazon - Resources 50000 45000 Cumulative number of patents applied and/or acquired worldwide Alibaba 40000 35000 30000 Amazon 25000 ∠ Alibaba(2013-2016) higher than ∠ Amazon(2013-2016) 20000 15000 Ebay 10000 Walmart 5000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 48 Source: Google Patents  5.5 Amazon - Resources 49 Source: Statista  5.5 Amazon - Resources RESOURCES CHARACTERISTICS INDICATORS Financial Borrowing capacity Debt/Equity ratio Internal funds generation Credit rating Tangible Net cash flow Resources Physical Plant and equipment: Market value of fixed assets Size, location, technology flexibility. Scale of plants Land and buildings Alternative uses for fixed assets Raw materials Technology Patent, copyrights, know how, R&D facilities Number of patents owned Technical and scientific employees Royalty income Intangible R&D expenditure Resources R&D staff Reputation Brands. Customer loyalty, firm reputation (with suppliers, Brand equity customers, government) Customer retention Supplier loyalty Culture Organization’s value, traditions, social norms ? Human Resources Training, experience, adaptability, commitment and loyalty of Employee qualifications, employees Pay rates, turnover 50  5.5 Amazon - Resources Brand Value Most Valuable Retailers Worldwide – 2024 – in million USD 200,000 184,589 180,000 160,000 140,000 120,000 100,000 80,000 74,712 69,700 60,489 60,000 40,000 26,612 23,337 21,937 21,024 20,369 20,000 14,816 14,156 13,480 13,169 11,551 11,271 11,068 10,827 10,327 9,726 8,408 0 51 Source: Statista and data from Kantar, BrandZ  5.5 Amazon - Resources RESOURCES CHARACTERISTICS INDICATORS Financial Borrowing capacity Debt/Equity ratio Internal funds generation Credit rating Tangible Net cash flow Resources Physical Plant and equipment: Market value of fixed assets Size, location, technology flexibility. Scale of plants Land and buildings Alternative uses for fixed assets Raw materials Technology Patent, copyrights, know how, R&D facilities Number of patents owned Technical and scientific employees Royalty income Intangible R&D expenditure Resources R&D staff Reputation Brands. Customer loyalty, firm reputation (with suppliers, Brand equity customers, government) Customer retention Supplier loyalty Culture Organization’s value, traditions, social norms ? Human Resources Training, experience, adaptability, commitment and loyalty of Employee qualifications, employees Pay rates, turnover 52  5.5 Amazon - Resources Lower cost Lower Culture & leadership principles: structure Prices Selection and Obsess over customers, not competitors convenience Constant reinvention: constantly assess and adjust culture so it never loses agility, nimbleness, and hunger for experimentation. Sellers Customer Growth experience Two pizza rule for meetings: number of participants in a meeting is limited to a group that can be all fed with two pizzas Traffic Empower people—up to a certain point—to avoid Source: Drawn by Jeff Bezos in 2009 bureaucracy Diversity among the workforce Extremely high-performance standards https://www.cnbc.com/2016/05/13/5-key-business-lessons-from-amazons-jeff-bezos.html https://www.amazon.jobs/content/en/our-workplace/leadership-principles 53  5.5 Amazon - Resources RESOURCES CHARACTERISTICS INDICATORS Financial Borrowing capacity Debt/Equity ratio Internal funds generation Credit rating Tangible Net cash flow Resources Physical Plant and equipment: Market value of fixed assets Size, location, technology flexibility. Scale of plants Land and buildings Alternative uses for fixed assets Raw materials Technology Patent, copyrights, know how, R&D facilities Number of patents owned Technical and scientific employees Royalty income Intangible R&D expenditure Resources R&D staff Reputation Brands. Customer loyalty, firm reputation (with suppliers, Brand equity customers, government) Customer retention Supplier loyalty Culture Organization’s value, traditions, social norms ? Human Resources Training, experience, adaptability, commitment and loyalty of Employee qualifications, employees Pay rates, turnover 54  5.5 Amazon - Resources Nevertheless, Amazon has been consistently ranked among the best companies for career growth “Our 2022 LinkedIn Top Companies list is the 6th annual ranking of the 50 best workplaces to grow your career, all based on unique LinkedIn data. These are the companies that are offering stability in our ever -changing world of work — the ones that are not only attracting workers, but retaining them.” 55  5.5 Amazon - Resources The other side of the coin: Amazon’s relentless focus on efficiency and worker surveillance has treated employees like machines 56  5.5 Amazon - Resources Employees become owners Why starting from 2019 has Amazon been offering its own employees 10K USD to start their delivery business? 57  5.5 Amazon - Resources See excel video on K2 Financial Net Cash Flows E/D Ratio Tech R&D Expenditure Patents Amazon Amazon Amazon Amazon Alibaba Ebay Alibaba Ebay Alibaba Ebay Alibaba Ebay Walmart Walmart Walmart Walmart Reputational Brand value Human Median Gender Representation Amazon Annual Wage in Workforce Amazon Amazon Alibaba Ebay Alibaba Ebay Alibaba Ebay Walmart Walmart Walmart 58  5.5 Amazon - Analysis 1. Understanding how an organization compares with 2. Where do resources & capabilities others – typically reside? Benchmarking competitors (strategic positioning). 4. How do they fit with the external environment? (Internal analysis) S W VRIO Analysis SWOT Analysis Are capabilities: O T □ Valuable to customers? (External analysis) □ Rare to find/create? □ Inimitable? □ Organized? 3. Which ones are superior and why? 59  5.5 Amazon - Resources Ways those assets are used or deployed effectively Superior resources Superior competencies The key assets that the firm has and can ► Cash call upon ► E-commerce platform ► Collect information on markets (data analytics) Lower cost Lower Prices ► Warehouses ► Experimentation and adaptation structure to demand changes Selection ► Technology and ► Fast-delivery convenience ► Hired the best industry experts ► Efficiency in each category ► Reliability ► CEO skills, knowledge, and leadership ► Fast decision-making Customer Sellers Growth experience ► Strategic foresight ► Customer-centric culture What are Amazon’s Traffic distinctive capabilities? Source: Drawn by Jeff Bezos in 2009 Selection – Price – Convenience 60  What’s next? ►Get ready for the next session □ The next session is a lecture where we will analyze the case of BEYOND MEAT □ Watch the online tutorial on internal analysis in Excel □ Anticipate our case study discussion by reading and/or watching the materials on K2 □ Upload your answer to the case study question(s) in advance into the dedicated space on K2 61