寻找价值和维护竞争优势课件

Session8THESEARCHFORVALUEANDSUSTAINABLECOMPETITIVEADVANTAGE

Session8SustainablecompetitiveadvantageTheultimatedeterminantsofsuccessandfailureinthefirm’ssearchforvalue.Arethereanyusefulgeneralisationstobemadewhichcanhelptoguidethestrategyprocess?SustainablecompetitiveadvantSustainablecompetitiveadvantageandresourcebasedtheoryIntroduction::anexaminationofthesourcesofsustainabilityofprofitsWhyaresomefirmsabletosustainsuccessoveralongperiod?Porter’sapproachtobusinessperformance::competitiveadvantage.ThecapabilitiesapproachtofirmperformanceThenatureandsignificanceofcapabilitiesArchitecture,reputation,andinnovationThevalueofcapabilities:Aresourcebasedtheoryoffirmperformance::Peteraf’smodel.ConclusionsSustainablecompetitiveadvantPart1:Porter’sapproachPorter’sfiveforcesapproach(industryattractiveness)seesindustryperformanceasafunctionofindustrystructure/conduct.(P&S,table10.1)BUTwithinindustriesfirmperformancevaries,Sowhatdeterminesrelativefirmperformance?In‘CompetitiveAdvantage’hetriedtoanswerthis?Part1:Porter’sapproachPortPorter,cont.‘Competitiveadvantage’arguesthatitdependsonthefirm’sabilitytomanagethecostdrivers/differentiationdriverssoastoproduceacostadvantageoradifferentiationadvantage.Butthisapproachhasproblemsandisincomplete.Porter,cont.‘CompetitiveadSomequestionsaboutPorterWhydoesthesuccessfulfirmnotbuytheunsuccessfulandteachithowtominimisecosts?Whydoesthesuccessfulfirmnotsellitsexpertiseincostreducingtolesssuccessfulfirms?Whydoesthesuccessfulfirmnotcutitspricesanddriveitscompetitorsoutofbusiness?Whydoestheunsuccessfulfirmnotbidfortheexecutive(s)inchargeofcostdriversfromthesuccessfulfirm?Thesedohappen:e.g.battlebetweenGeneralMotorsandVolkswagenfortheservicesofcostguruMr.Lopez.SomequestionsaboutPorterWhyPorter’srecipeIfitispossibleforMichaelPortertodescribehowtocreateandsustaincompetitiveadvantagethensurelyallfirmshaveequalaccesstothisknowledgeoncePorterhascodifiedit.SocanitbeasourceofSCA?Bewarerecipes!Finally,lowcost/differentiationcan’tbetheultimatesource.Theultimatesourceissurelywhoorwhatproducesthelowcost/differentiationadvantage.Porter’srecipeIfitispossiBeyondPorterDoesanyoneofferabetterexplanationoftherootsofbusinessperformance?Inthe90’sacapabilitiesapproachemergedasa‘neworthodoxy’leadingtoadistinctive‘resourcebasedview’ofthefirmandstrategy.BeyondPorterDoesanyoneoffePart2:Thecapabilitiesapproach

Question:Whatcouldgiveaparticularfirmasustainableedgeoveritsrivals?AseriesofinfluentialarticlesintheHBRduringthe90’ssuggestedanewapproach(althoughitturnedoutitsoriginsweremuchearlier)Part2:ThecapabilitiesapproPrahaladandHamel(1990):

corecompetenciesManagement’sabilitytoconsolidatetechnologyandproductionskillsintocompetenciessothebusinesscanadaptquicklytochangingopportunities/circumstances.Corecompetencies=collectivelearningoftheorganisationaboutprod/tech/markets.

e.g.Sony’sminiaturisationskills.Competencieshavetobebuiltoveralongperiod.Theyaredifficulttoidentifypreciselyandhardtoimitate.Manyfirmsfailtoidentifytheirowncorecompetenciesandsofailtonurturethemproperlyorexploitthemfully.PrahaladandHamel(1990):

cStalk,Evans,andShulman(1992):capabilitiesCompetitiveadvantageisbasedontheabilitytorespondtoevolvingopportunitieswhichdependsonbusinessprocessesorcapabilities.Businesssuccessinvolveschoosingtherightcapabilitiestobuild,managingthemcarefully,andexploitingthemfully.

e.g.Honda,Canon.

Stalk,Evans,andShulman(199Chandler(1990):

initialriskyinvestmentsChandler(1990):successfulgiantssuchasIBMandBayerderivefromtheinitialheavyandriskyinvestmentsinbuildingorganisationalknowledgeandcapabilitieswhichallowedthemtoexploittheopportunitiesavailabletoexploitscaleandscopeeconomies.

Chandler(1990):

initialriskCollisandMontgomery(1995):competingonresourcesCompetitiveadvantagederivesultimatelyfromtheownershipofavaluableresource.Superiorperformancederivesfromdevelopinga‘competitivelydistinct’setofresourcesanddeployingtheminawellconceivedstrategy.Resourcescanbephysical,intangible,ororganisationalcapabilities.Example:MarksandSpencer(poortiming!)CollisandMontgomery(1995):JohnKay(1993):Distinctivecapabilities.Inhisbestseller,‘Thefoundationsofcorporatesuccess’Kayarguesthatthesourceofcompetitiveadvantageisthecreationandexploitationofdistinctivecapabilities.Thevalueofanyadvantagecreateddependsonitssustainabilityanditsappropriability.Kayprovidesadetailedanalysisofthis(seealsoP&S)JohnKay(1993):DistinctivecDistinctivecapabilitiesKayidentifiesonlythreebasictypesofdistinctivecapability:CorporateArchitectureInnovationReputation.DistinctivecapabilitiesKayidDistinctivecapabilitiesWhatisitaboutthesethingsinparticular?Difficulttobuildandmaintain.Difficulttocodify/makeintorecipes.Difficulttocopy/emulate.Can’tsimplybebought‘offtheshelf’.DistinctivecapabilitiesWhatiStrategicassetsHealsodiscussesmarketdominance(monopoly)basedontheownershipofstrategicassetsasasourceofsuccess.Naturalmonopoliessuchasutilitynetworks,orlicensedmonopoliessuchasthenationallottery.Andthosebasedonheavysunkcostswhichdiscouragechallengersforthefirstmover.

Buthearguesthatinthesecaseitisessentiallystructuralfactorsthatcountnotdistinctivecapabilities.

Theremayofcourseberoomfordebateinsomecases.StrategicassetsHealsodiscuArchitectureasadistinctivecapabilityConcernsorganisationaleffectivenessinthesearchforvalue.Connectsbacktothediscussionofcorporateobjectivesandtheco-operationneededtogetthingsdoneinP&Schap4.Howtofocusindividualsonachievingorganisationalgoals.ArchitectureasadistinctiveArchitectureThenetworkofcontractualrelationshipswhichdefinesthefirm.Thecapacityoforganisationsto:1.Createandstoreorganisationalknowledgeandroutines2.Promotemoreeffectiveco-operationbetweenthemembers.3.Achieveanopenandeasyflowofinformationbetweenmembers.4.Adaptrapidlyandflexibly.ArchitectureThenetworkofconArchitectureArchitectureislargelyabouthowyouorganisetogetthingsdoneaseffectivelyaspossible.ButNBitalsoinfluenceswhatyouchoosetodo(strategy)inthefirstplace.Because?Architectureisaboutorganisationalform,incentivemechanisms,workorganisation,performanceevaluation,andgovernance.ArchitectureArchitectureislaArchitecturee.g.IBMinitsheyday,MarksandSpencer(backwhen!),LiverpoolFootballClub.e.g.ManyJapanesefirms:theJapaneseemploymentsystem,itssuppliernetworks,thecloserelationsbetweenindustryandfinance,thegreatemphasisonco-operationandcollaboration,thedevelopmentoflongtermcommercialrelationships,andthegenerallyhigherleveloftrustwhichencouragesco-operationArchitecturee.g.IBMinitsheArchitectureNowaspecialisedstudyarea.Seeforexample,Brickley,Smith,andZimmerman:EconomicsandOrganisationalArchitecture.ArchitectureNowaspecialisedReputationasadistinctivecapabilityThisisaboutconveyinginformationtoconsumersaboutquality.Butitisn’tequallyimportantforallgoodsandservices.Itappliestoaparticularcategoryofgoodscalled,Longtermexperiencegoods.Thesearegoodswhereproductqualityisvitaltotheconsumerbutwhereitisdifficultfortheconsumertoestablishqualityexceptthroughtimeandexperience.ReputationasadistinctivecaReputationKaymentionscarhireservices,legalservices,accountancyservices,funeralservices(?),consumerdurables.Addvitaminpills,roofingservices,pensionfunds,and……Allstudentsareveryfamiliarwiththeprobleminvolved.ReputationKaymentionscarhiReputationProblemisthatyouwantquality,butthatqualitytakestimetomanifestitself.Allsupplierswill‘guaranteesatisfaction’.Howcanyoudistinguishbetweenthem?Ifdifficultthenconsumerswillassumelowqualityandpayonlylowprices.Ifyoucanconvincethemyoucanobtainapremiumpriceforqualityassurance.ReputationProblemisthatyouReputationSellingonreputationissayingwehavemadeaninvestmentinanassetsowehavealottoloseifwefailtosatisfy.Soyoucantrustus,butnotthe‘hitandrun’supplierswhosellon(low)pricealone.Howmightitbedone.Longevity(est.1768sortofthing).Warranties.Advertising?ReputationSellingonreputatiAdvertisingandreputationHeavyadvertisingmaybeaway.Advisasunkcostwhichimpliescommitmenttotheservice.Thereissomethingtolose.Evidenceisthat‘longtermexperience’goodsdohavethehighestadv/salesratio(5%).(B.S.R.1992).AdvertisingandreputationHeaReputationanddiversificationNoteforlater,ReputationmightbeabasisforgrowththroughdiversificationbutKaynotesthatanexpensivelycreatedreputationcanbedamagedbyunwisediversificationwhenfirmsstrayintoareastheydon’tfullyunderstand.ReputationanddiversificationInnovationasadistinctivecapabilityAcapacityforloweringcostsorimprovingitsproductsorintroducingnewproductsaheadofitscompetitors.Innovationbyitselfasasourceofcompetitiveadvantageisactuallyquiterare.Innovationisverydifficult.Itisuncertain,anditishardtomanageproperly.Therearenorecipes.ItcanbedifficultforfirmswhichinvestinR&Dtosecureorappropriateallthereturns.Sobeingabletodoitwellwillundoubtedlygiveyouagoodedge.Howevermanyfirmswhichseekcompetitiveadvantagebythisroutefail.Oftenwhatappearstobecompetitiveadvantagebasedonacapabilityforinnovationisactuallybasedultimatelyonarchitecture.e.g.SonyandGlaxoInnovationasadistinctivecaTheValueofCapabilitiesDistinctivecapabilitiesgeneratesuccesswhichattractscompetitors.Theirvaluedependsontheirsustainabilityandtheappropriabilityofthevaluetheygenerate.(seealsoCollisetalHBR95)Theseinturndependonthefollowingfactors:TheValueofCapabilitiesDistTheValueofCapabilitiesTransparency:howeasyisittoidentifyandunderstand?J.managementtechniques?Replicability:howeasytoimitate/replicate?Ateamformationsuchas4-4-2iseasy,butGerman‘efficiency’orBrazilian‘flair’ismoredifficult.Substitutability:Howeasytofindasubstitutefor.Sonyo/mofinnovation,M&Ssupplychainorganisation.TheValueofCapabilitiesTransTheValueofCapabilitiesWhocapturestheincomestreamfromthecapability?Theorganisationortheunderlyingresources.Thisistheissueofappropriability.Tobevaluabletotheorganisationthecapabilityhastobeimmobile/organisationallyspecific.Notabletowalk!TheValueofCapabilitiesWhocAppropriabilityResourcessuchaspeoplearemarketableandcancapturetheirfullmarketvalue.Sotheorganisation’scapabilityhastobemorethanthesumofits(marketable)parts.TakeManchesterUnitedandtheRoyKeaneeffect(£50,000perweek!).TobeavaluablebusinessMUmustproduceateamcapabilitybeyondthemarketvalueofitsexpensiveplayersandcoaches.AppropriabilityResourcessuchTosumupThevalueoftheorganisationscapabilityrequiresthatthecompetition:Can’tseeiteasily.Can’timitateit.Can’tfindasubforit.Can’tjustbuyit.TosumupThevalueoftheorgIsolatingmechanismsNamegiventobarrierspreventingthereplicationoforganisationscapabilities.Causalambiguity.Timecompressiondiseconomies.Extracostsofaccumulatingresourcesandcapabilitiesquicklytotakeonafirstmover.IsolatingmechanismsNamegivePART3:RESOURCEBASED‘THEORY’OFTHEFIRMAdistinctiveresourcebased‘theory’ofthefirmhasemergedtryingtoformalisethecapabilitiesapproach.The“resource-based”approachisconcernedwiththenatureofthefirm’sresourcesandhowtheseresourcesarecombinedintocapabilities.KeyexampleisPeteraf(1993).Herapproachisoutlinedbelowandsummedupinthisfigure.NotesheusesthetermRENTcommoninUSwritingtoconnotetheresultofsustainablecompetitiveadvantage.TheLinnexampleisfromastudentcasestudy.PART3:RESOURCEBASED‘THEORYPeterafmodelHeterogeneityEx-postlimits

tocompetitionImperfect

mobilityEx-antelimits

tocompetitionRentsobtainedRentscaptured

bythefirmRentssustainedRentsnotoffset

bybuildingcostsCompetitive

advantagePeterafHeterogeneityEx-postliCompetitiveAdvantageEx-postlimitstocompetitionEx-antelimitstocompetitionHeterogeneityImperfectMobilityTheindustryismadeoffirmswithaccesstodifferentresourcesandskills.Linnhasparticulardistinctivecompetencies.SpecialistknowledgeandreputationSharedspecialistknowledgeandreputationLinnhasdemonstratedanabilitytoleveragethepotentialofexistingtechnologiesPeteraf’smodel-LinnProductsALLTHESELEADTOSUSTAINABLECOMPETITIVEADVANTAGETHROUGHDIFFERENTATIONCompetitiveAdvantageEx-postlCompetitiveAdvantagealaPeterafAfirmissaidtohaveacompetitiveadvantagewhenitcan:achieverents:whichrequiresresourceheterogeneitybetweenfirms(somebetterbundlesthanothers).enjoyrentsthatarenotoffsetbythecostsofachievingasuperiorsetofresources:whichrequiresexantelimitstocompetitionforthoseresources.appropriatethoserentsforthefirm:whichrequiresimperfectresourcemobility.sustainthoserents:whichrequiresex-postlimitstocompetition.CompetitiveAdvantagealaPetHeterogeneity:Bundlesofresourcesandcapabilitiesareheterogeneousacrossfirms.Heterogeneityimpliesthatfirmswithsuperiorresources/capabilitieswillearnsuperiorreturns.Animportantclassofresourcesarethosewhicharelimitedintheshortrunbutmayberenewedandexpandedwithinfirmsthatusethem.PrahaladandHamel(1990)arguethatcorecompetencies-particularlyknowledge-basedresources-areenhancedastheyareusedbecauseoflearning.Heterogeneity:BundlesofresouEx-postlimitstocompetitionForceswhichlimitcompetitionfromimitators.Thesearisefromsourcesalreadydiscussed:Imperfectimitability,replicability,andsubstitutabilityofresources/capabilitiesisolatingthefirmfromchallengers.Ex-postlimitstocompetitionFExantelimitstocompetitionThesourceofafirm’srentsisasuperiorresourceposition.Butimaginethesituationbeforeanyfirmhasachievedthisposition.Ifmanyfirmsrecogniseditspotential,acompetitivestrugglewouldensuetoobtaintheresourcesandbuildthecapabilitiestooccupythatposition.Thisprocesswouldcompeteawayallrentsthatcouldbeobtainedfromoccupyingtheposition.Forexample,NorthSeaOilfields.ManchesterUnitedteam!NationalLotterylicence.Sonylicencefortransistor.Thescriptfor‘FourweddingsandaFuneral’

ExantelimitstocompetitionTEntrepreneurshipandrent Soafirmneedstheforesighttoacquireresourcesandbuildcapabilitiesintheabsenceofsuchcompetition.Thisrequiresthepresenceofuncertaintyandincompleteinformationandawillingnesstotakerisks.TheessenceofsuccessfulENTREPRENEURSHIPisofcourseforesightandtakingadvantageofuncertaintyandincompleteinformationbeforesomeoneelsedoes.SowhatPeterafseemstobesayinghereissimplythatallrentsbeginwithanentrepreneurialact.Whichseemsinherentlysensible.Entrepreneurshipandrent SoaImperfectresourcemobilityThisreferstothemarketabilityorotherwiseoftheunderlyingresourcesandcapabilities.Seediscussionaboveofappropriability.Thusgoodhighstreetlocationsareimportantforretailersbutcompetitionmeanstherentalcostsreflectthisfact.Thevalueofthelocationiscapturedbythepropertyownernottheretailerperse.ImperfectresourcemobilityThiSumminguponSCATheultimatedeterminantsofsuccessandfailure?Norecipesbutthestartingpointisbeingcheaper,orbetter,orfastertomarket.Thecapabilitiesapproachdevelopedinthe90’slookstothedevelopmentanddeploymentofadistinctivesetofresourcesandcapabilities.SumminguponSCATheultimateSummingupThevalueofdistinctivecapabilitiesliesinthefactthattheyarehardtocreateandmaintain,hardtocodifyormakeintorecipes,hardtocopyoremulate,andcan’tsimplybebought‘offtheshelf’.Organisationalarchitectureisafundamentalsourceofadvantage.Strategyandstructurearecloselyconnectedasdeterminantsofsuccess.SummingupThevalueofdistinTEAMTASKS8WhatiscompetitiveadvantageandhowaccordingtoPortermightitbeachieved?WhataccordingtoKayaretheultimatesourcesofsuperiorbusinessperformance?Whatisitaboutthenatureofthingslikeinnovationandcorporatearchitecturewhichmakethemfundamentaltobusinesssuccess?EvaluatetheextenttowhichyourcaseenterprisehasSustainablecompetitiveadvantage.Ifithasithowdiditgetit,onwhatisitbased?Ifithasn’t,howmightitgoaboutachievingbetterperformance?Evaluatethekeycapabilitiesofyourmaincompetitor.

TEAMTASKS8WhatiscompetitivSession8THESEARCHFORVALUEANDSUSTAINABLECOMPETITIVEADVANTAGE

Session8SustainablecompetitiveadvantageTheultimatedeterminantsofsuccessandfailureinthefirm’ssearchforvalue.Arethereanyusefulgeneralisationstobemadewhichcanhelptoguidethestrategyprocess?SustainablecompetitiveadvantSustainablecompetitiveadvantageandresourcebasedtheoryIntroduction::anexaminationofthesourcesofsustainabilityofprofitsWhyaresomefirmsabletosustainsuccessoveralongperiod?Porter’sapproachtobusinessperformance::competitiveadvantage.ThecapabilitiesapproachtofirmperformanceThenatureandsignificanceofcapabilitiesArchitecture,reputation,andinnovationThevalueofcapabilities:Aresourcebasedtheoryoffirmperformance::Peteraf’smodel.ConclusionsSustainablecompetitiveadvantPart1:Porter’sapproachPorter’sfiveforcesapproach(industryattractiveness)seesindustryperformanceasafunctionofindustrystructure/conduct.(P&S,table10.1)BUTwithinindustriesfirmperformancevaries,Sowhatdeterminesrelativefirmperformance?In‘CompetitiveAdvantage’hetriedtoanswerthis?Part1:Porter’sapproachPortPorter,cont.‘Competitiveadvantage’arguesthatitdependsonthefirm’sabilitytomanagethecostdrivers/differentiationdriverssoastoproduceacostadvantageoradifferentiationadvantage.Butthisapproachhasproblemsandisincomplete.Porter,cont.‘CompetitiveadSomequestionsaboutPorterWhydoesthesuccessfulfirmnotbuytheunsuccessfulandteachithowtominimisecosts?Whydoesthesuccessfulfirmnotsellitsexpertiseincostreducingtolesssuccessfulfirms?Whydoesthesuccessfulfirmnotcutitspricesanddriveitscompetitorsoutofbusiness?Whydoestheunsuccessfulfirmnotbidfortheexecutive(s)inchargeofcostdriversfromthesuccessfulfirm?Thesedohappen:e.g.battlebetweenGeneralMotorsandVolkswagenfortheservicesofcostguruMr.Lopez.SomequestionsaboutPorterWhyPorter’srecipeIfitispossibleforMichaelPortertodescribehowtocreateandsustaincompetitiveadvantagethensurelyallfirmshaveequalaccesstothisknowledgeoncePorterhascodifiedit.SocanitbeasourceofSCA?Bewarerecipes!Finally,lowcost/differentiationcan’tbetheultimatesource.Theultimatesourceissurelywhoorwhatproducesthelowcost/differentiationadvantage.Porter’srecipeIfitispossiBeyondPorterDoesanyoneofferabetterexplanationoftherootsofbusinessperformance?Inthe90’sacapabilitiesapproachemergedasa‘neworthodoxy’leadingtoadistinctive‘resourcebasedview’ofthefirmandstrategy.BeyondPorterDoesanyoneoffePart2:Thecapabilitiesapproach

Question:Whatcouldgiveaparticularfirmasustainableedgeoveritsrivals?AseriesofinfluentialarticlesintheHBRduringthe90’ssuggestedanewapproach(althoughitturnedoutitsoriginsweremuchearlier)Part2:ThecapabilitiesapproPrahaladandHamel(1990):

corecompetenciesManagement’sabilitytoconsolidatetechnologyandproductionskillsintocompetenciessothebusinesscanadaptquicklytochangingopportunities/circumstances.Corecompetencies=collectivelearningoftheorganisationaboutprod/tech/markets.

e.g.Sony’sminiaturisationskills.Competencieshavetobebuiltoveralongperiod.Theyaredifficulttoidentifypreciselyandhardtoimitate.Manyfirmsfailtoidentifytheirowncorecompetenciesandsofailtonurturethemproperlyorexploitthemfully.PrahaladandHamel(1990):

cStalk,Evans,andShulman(1992):capabilitiesCompetitiveadvantageisbasedontheabilitytorespondtoevolvingopportunitieswhichdependsonbusinessprocessesorcapabilities.Businesssuccessinvolveschoosingtherightcapabilitiestobuild,managingthemcarefully,andexploitingthemfully.

e.g.Honda,Canon.

Stalk,Evans,andShulman(199Chandler(1990):

initialriskyinvestmentsChandler(1990):successfulgiantssuchasIBMandBayerderivefromtheinitialheavyandriskyinvestmentsinbuildingorganisationalknowledgeandcapabilitieswhichallowedthemtoexploittheopportunitiesavailabletoexploitscaleandscopeeconomies.

Chandler(1990):

initialriskCollisandMontgomery(1995):competingonresourcesCompetitiveadvantagederivesultimatelyfromtheownershipofavaluableresource.Superiorperformancederivesfromdevelopinga‘competitivelydistinct’setofresourcesanddeployingtheminawellconceivedstrategy.Resourcescanbephysical,intangible,ororganisationalcapabilities.Example:MarksandSpencer(poortiming!)CollisandMontgomery(1995):JohnKay(1993):Distinctivecapabilities.Inhisbestseller,‘Thefoundationsofcorporatesuccess’Kayarguesthatthesourceofcompetitiveadvantageisthecreationandexploitationofdistinctivecapabilities.Thevalueofanyadvantagecreateddependsonitssustainabilityanditsappropriability.Kayprovidesadetailedanalysisofthis(seealsoP&S)JohnKay(1993):DistinctivecDistinctivecapabilitiesKayidentifiesonlythreebasictypesofdistinctivecapability:CorporateArchitectureInnovationReputation.DistinctivecapabilitiesKayidDistinctivecapabilitiesWhatisitaboutthesethingsinparticular?Difficulttobuildandmaintain.Difficulttocodify/makeintorecipes.Difficulttocopy/emulate.Can’tsimplybebought‘offtheshelf’.DistinctivecapabilitiesWhatiStrategicassetsHealsodiscussesmarketdominance(monopoly)basedontheownershipofstrategicassetsasasourceofsuccess.Naturalmonopoliessuchasutilitynetworks,orlicensedmonopoliessuchasthenationallottery.Andthosebasedonheavysunkcostswhichdiscouragechallengersforthefirstmover.

Buthearguesthatinthesecaseitisessentiallystructuralfactorsthatcountnotdistinctivecapabilities.

Theremayofcourseberoomfordebateinsomecases.StrategicassetsHealsodiscuArchitectureasadistinctivecapabilityConcernsorganisationaleffectivenessinthesearchforvalue.Connectsbacktothediscussionofcorporateobjectivesandtheco-operationneededtogetthingsdoneinP&Schap4.Howtofocusindividualsonachievingorganisationalgoals.ArchitectureasadistinctiveArchitectureThenetworkofcontractualrelationshipswhichdefinesthefirm.Thecapacityoforganisationsto:1.Createandstoreorganisationalknowledgeandroutines2.Promotemoreeffectiveco-operationbetweenthemembers.3.Achieveanopenandeasyflowofinformationbetweenmembers.4.Adaptrapidlyandflexibly.ArchitectureThenetworkofconArchitectureArchitectureislargelyabouthowyouorganisetogetthingsdoneaseffectivelyaspossible.ButNBitalsoinfluenceswhatyouchoosetodo(strategy)inthefirstplace.Because?Architectureisaboutorganisationalform,incentivemechanisms,workorganisation,performanceevaluation,andgovernance.ArchitectureArchitectureislaArchitecturee.g.IBMinitsheyday,MarksandSpencer(backwhen!),LiverpoolFootballClub.e.g.ManyJapanesefirms:theJapaneseemploymentsystem,itssuppliernetworks,thecloserelationsbetweenindustryandfinance,thegreatemphasisonco-operationandcollaboration,thedevelopmentoflongtermcommercialrelationships,andthegenerallyhigherleveloftrustwhichencouragesco-operationArchitecturee.g.IBMinitsheArchitectureNowaspecialisedstudyarea.Seeforexample,Brickley,Smith,andZimmerman:EconomicsandOrganisationalArchitecture.ArchitectureNowaspecialisedReputationasadistinctivecapabilityThisisaboutconveyinginformationtoconsumersaboutquality.Butitisn’tequallyimportantforallgoodsandservices.Itappliestoaparticularcategoryofgoodscalled,Longtermexperiencegoods.Thesearegoodswhereproductqualityisvitaltotheconsumerbutwhereitisdifficultfortheconsumertoestablishqualityexceptthroughtimeandexperience.ReputationasadistinctivecaReputationKaymentionscarhireservices,legalservices,accountancyservices,funeralservices(?),consumerdurables.Addvitaminpills,roofingservices,pensionfunds,and……Allstudentsareveryfamiliarwiththeprobleminvolved.ReputationKaymentionscarhiReputationProblemisthatyouwantquality,butthatqualitytakestimetomanifestitself.Allsupplierswill‘guaranteesatisfaction’.Howcanyoudistinguishbetweenthem?Ifdifficultthenconsumerswillassumelowqualityandpayonlylowprices.Ifyoucanconvincethemyoucanobtainapremiumpriceforqualityassurance.ReputationProblemisthatyouReputationSellingonreputationissayingwehavemadeaninvestmentinanassetsowehav