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Accounting & Financial Management
AFM 241
Theophanis Stratopoulos

Week 4 (May 27-31) Lecture 1 Agenda ● What is your business strategy? ● Value Chain ● Resource based view What is your business strategy? 1. Think about the choices you have made so far in terms of the university/school/program that you have chosen and consider their implications. 2. What do these choices mean in terms of your business strategy? Are your choices indicating that you are product differentiator or cost leader? 3. Make sure that the resources and capabilities that you are acquiring or you develop in the near future (while a student at UW) or long term (after your graduation and while working) are aligned with your business strategy. Value Chain 1. What is a value chain, what are its components, what are the value chains of different companies in different industries. 2. How is the value chain related to a firm’s competitive position? 3. What is a possible way that we can use to evaluate the strength/weakness of a firm’s primary and support activities? Resource Based View (RBV) 1. Approach a firm’s competitive position from a resource rather than a product standpoint. 2. Use the flowchart below (or the one in teaching notes) to evaluate the contribution of a resource/capability (existing or new one) to a firm’s competitive position. 3. What attributes define whether a resource or capability will be a source of competitive advantage and its duration? a. path dependence, causal ambiguity, etc. 4. Evaluate the investment of WHR using the RBV flowchart. You need to read the case carefully in order to make this evaluation. We will revisit this discussion when we talk about ERP systems. RBV Flowchart ● Is the resource/capability valuable? ○ No (NPV<0) - the resource/capability does not add value - the firm’s competitive position may deteriorate. If the firm invests in such resources/capabilities (NPV<0) the firm may end in a position of competitive disadvantage. ○ Yes (NPV>0) - the resource/capability adds value. The question is whether this will improve the firm’s competitive position. To answer this question we have to ask the following question: ■ What is the number of firms that have access to this resource/capability? ● If the number is large, this means that this particular resource/capability does not have the potential to differentiate the firm from its competitors. Given that the NPV>0, this means that the firm has to make this investment to stay competitive. Therefore the result of investing in such resource/capabilities is competitive parity. ● If the number is small, this means that th
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