Strategic Management Assignment: Resource-based & Value-based Capability of SociétéGénérale & Whirlpool

Question

Task: Strategic capabilities
Executives emphasize different strategic capabilities in different organisationsFreeport-McMoRan Copper and Gold, Inc. is an international mining company in North America. It claims a leading position in the mining industry on the basis of ‘large, long-lived, geographically diverse assets and significant proven and probable reserves of copper, gold and molybdenum’. More specifically, in terms of its Indonesian operation it points to a ‘principal asset’ as the ‘world class Grasberg mine discovered in 1988’ which has ‘the world’s largest single copper reserve and world’s largest single gold reserve’.

Daniel Bouton, Chairman and CEO of SociétéGénérale, in response to the question: How do you maintain your competitive advantage in equity derivatives The barrier to entry is high, because of two significant costs. The first is IT. The systems you need to perform well cost at least A200 million a year, and it’s not something you can buy from Dell or SAP. The second is the sheer number of people you need to work on managing your risk. Before you launch a product, you need to have the front office guys that propose, calculate and write the first model. Then you need the IT guy that creates the IT system in order to be able to calculate risks every 10 seconds. And you need a good validating team in order to verify all the hypotheses. After that, you need high-quality middle and back office people.

Tony Hall, Chief Executive of the Royal Opera House: ‘world-class’ is neither an idle nor boastful claim. In the context of the Royal Opera House the term refers to the quality of our people, the standards of our productions and the diversity of our work and initiatives. Unique Unashamedly so. We shy away from labels such as ‘elite’, because of the obvious negative connotations of exclusiveness. But I want people to take away from here the fact that we are elite in the sense that we have the best singers, dancers, directors, designers, orchestra, chorus, backstage crew and administrative staff. We are also amongst the best in our ability to reach out to as wide and diverse a community as possible.

Dave Swift, President of Whirlpool North America: Executing our strategy requires a unique toolkit of competencies that we continue to build for our people globally. The starting point of building new competencies is what we call ‘Customer Excellence’ – our ability to proactively understand and anticipate the needs of customers. Customer Excellence is a collection of tools that allows our people to analytically assess and prioritize the needs and desires of customers along all aspects of the purchase cycle – from when they first might investigate an appliance on a web site, to the in-store experience on a retailer’s floor, to the features and aesthetics of the product, to the installation and service experience, and ultimately to their need to repeat this cycle. With these consumer insights in-hand, we then turn them into customer solutions through our innovation tools. As a result, our innovation capability has produced a robust pipeline of products, achieving a steady-state estimated value of over $3 billion. Our knowledge of customers, coupled with our innovative customer solutions, is driving the attractiveness of our brands and creating greater value for our shareholders.

Questions to be addressed in this strategic management assignment:
1 Categorise the range of capabilities/ competencies and approaches (resource based / value based) highlighted by the executives in the above case study.
2 Choose any of the two cases from the above case study and identify which of the capabilities might be especially important in terms of achieving competitive advantage and why

Answer

1 Introduction
The concept of strategic management examined in the segments of strategic management assignment is regarded as the ongoing monitoring, assessment and analysis of each necessity a company needs for achieving itsobjectives. Analysis of trends and uncertainties, current and future industry attractivenesscompetitive advantage and sustainability are the ways to develop a business’ strategy. This report will categorize the range of capabilitiesand approaches both from resource and value-based perception. Also, it is going to identify the appropriate capabilities that might be especially important in terms of achieving competitive advantage and provide justification for it.

2 Resource-based capability
Resource and capability are interconnected in organizational terms since resource of a company is its assets and the basic blocks are thus built while capability is businessroutines and processes that manage the communication between resources for transforming inputs into outputs. Successful companies implement their strategy by using resources for gaining competitive advantage through classifying and identifying resources in respect to weaknesses and strengths and combining the industry’s strengths into particular core competenciesand capabilities (Yu et al., 2018).

In this context, SociétéGénérale, a financial service company, considers maintaining itscompetitive advantage by better IT infrastructures and thus investing financial resources of approximately A200 million per year that can ensure an enhanced strategic competency. Following Porter’s Five Forces Modelcan be considered by the organizationfor gaining competitive advantage and even assure higher risk management within the business.

Figure 1: Porter’s Five Forces Strategy
(Source:Mathooko and Ogutu, 2015)

Competitive Rivalry – MLP, United Capital Financial Advisers, Ameriprise Financial are the main rivals of SociétéGénérale to receive immense competition. Financial industry requires to develop customer base for maintaining leading position. Supplier Power –A moderate supplier power is there in SociétéGénérale since the bank supplies a major amount of customers. It is important to to develop customer base for getting high market share. Buyer Power –This holds a moderate rank due to the output market. Lesser switching cost are possessed by consumers in financial industry and SociétéGénéraleneeds to give the best financial services for retaining the consumers.

Threat of Substitution – Threat of Substitution is high in financial services from both international and domestic competitors. Financial services do not possess any alternative in deposit areas and withdrawals.

Threat of New Entry –This is high for a financial industry because such industry requires substantial capital and resource investment. Since the financial industry services are not much differentiated, new entrants requires developing brand name (Onuman and Christopher, 2016).

Figure 2: Compensation and performance report of SociétéGénérale
(Source: societegenerale.com, 2019)

SociétéGénéraleexecutive even considers about the human resource indicated by a number of individuals who works in order to manage the risks. The company requires the IT system for being able to estimate risks each 10 seconds. Also, a well validated group is required in HRM strategy for verifying the hypotheses.

Whirlpool North America executes its strategy by a unique competency toolkit that is helpful for building its people internationally. Starting point regarding forming new competencies is called ‘Customer Excellence’ that is regarded as the company’s capability of proactively understanding as well as anticipating customer requirements.VRIO Analysis can be taken into consideration to demonstrate the customer excellence.

Table 1: VRIO analysis of Whirlpool
(Source: Learner)

Brand Name – Being the largest multinational manufacturer, Whirlpool is known for high trust and customer base (Meidtet al., 2015).

Customer Experience – With competitors such as Samsung or LG, Whirlpoolranks 1st in diversity and 2nd in CEO. Hence the company needs to intensify its customer experience investment.

Research and Development – While other industries invest in R&D, in the multinational manufacturing industry especially, no match is there for Whirlpool’s capabilities of research and development. It is therefore a valuable, rare and inimitable resource.

Customer Base –Whirlpool’swide customer base includes millions in the USA and many markets across the world also are sources of competitive advantage in respect to the brand. Customer Loyalty - Multinational manufacturing industry is filled with intense competition and therefore Whirlpoolneeds to develop its customer loyalty as a chief source of competition (Whirlpool Corporation, 2020).

3 Value-based capability
The process of value creation needs an understanding regarding market attractiveness or industry of one’scompetition, associated with one’s position of competitionin relation with other players. Governance, organizational culture, change management, leadership, communication are the core elements of a value-based approach in a company (Töytäri and Rajala, 2015).

Figure 4: Definition of value in organizational term
(Source:Hofer et al., 2015)

In consideration with value-based capabilities, Freeport-McMoRan Copper andGold,Inc occupies a leading position among mining industry based onlong lived, large, geographically diverse commodities and essential proven as well as probable reserves of gold, copper and molybdenum (fcx.com, 2020). On the other hand, Royal Opera House,the UK based company considers ‘world-class’ neither boastful nor an idle claim when value-based competitive advantage is concerned. So far this specific company is concerned, the term actually refers to its people’s quality, production standards and the diversity regarding the company’s initiatives and work (Age et al., 2020).

So far value-based competencies are concerned; the 5Ps Strategic Model can be an example for both companies.Freeport-McMoRan enhances its workforce dynamics understanding and transformed trends bytrackingpeople turnover, withinvoluntary layoffs, voluntary resignations and retirements. In 2019, 9% was total people turnover rate which was increased by 7% the year prior. In a value-based approach, health and safety of employee should be concern in a company’s process and planning for future. The Health and Safety Vice President of Freeport-McMoRan takes care of it with company-wide initiative implementation, incident investigations and safety audit (Farima andNur, 2018).

Figure 5: The 5Ps strategic modelr (Source:Gulbrandsen, 2015)

4 Identification of the capabilities from two of the case studies

There are number of competencies or capabilities that are significant in attaining competitive advantage for a business. In this context, the competencies identified by Daniel Bouton, the CEO of SociétéGénérale and the competencies that have been recognized by Dave Swift, the president of Whirlpool, North America can be taken under consideration.

Daniel Bouton have recognised the resource-based capability of implying the technological infrastructure as well as the importance of the human based resources that can help in calculating the risks as well as formulate strategies in order to take the business to its next level.

The Porter’s Generic Strategy focuses on thesesources of competitive advantage which are: Cost Leadership, Differentiation as well as Focus (FirozSulemanet al., 2019).

Figure 6: Porter’s Generic Strategy
(Source:Islamiet al., 2020).

The business of SociétéGénérale can gain a competitive advantage with their superior technological infrastructure that can help deliver high quality products as well as services. Since innovation is important for making the products and services much more attractive than the competitors, a differentiation strategy can be implied by SociétéGénérale in order to gain competitive advantage.Thus, investing financial resources for better fortification of theIT infrastructure in order to ensure good research, innovation and development can be considered to be especially important to gain competitive advantage through differentiation.

Apart from this, a well-developed and skilled human resource can be one such resource-based capabilities that can ensure an advanced workforce and a business wherein all the employees are well performing (Société Générale,2014). This is important for better workforce productivity and even ensures that the business can facilitate better risk management. As far as the business of Whirlpool is concerned the value-based competency of providing the best customer service and the ability to proactively understand the need and demands of the customers is extremely significant in gaining competitive advantage (Whirlpool Corporation,2020). Innovative customer solution helps in enhancing the brand image and develop greater value for the shareholders. The use of innovation tools is thus considered as one of the best ways to understand the needs of the consumers and thus ensure better positioning in the market. As far as innovative products are concerned, the extreme awareness about sustainability and environmental degradation makes the consumers take a deeper dive into the corporate social responsibility of the business. Maintaining the triple bottom line has now become the norm of the day.

Figure 7: Triple Bottom Line
(Source:Miemczyk and Luzzini, 2019)

The triple bottom line theorysuggests that a business needs to focus on three bottom lines, and these are: People, Profit and Planet. While profit denotes the traditional measures of the corporate profit, people refers to how socially responsible the business is, and planet refers to how environmentally responsible the business has been. Whirlpool believes in customer excellence and developing innovative products that can satisfy them (Whirlpool Corporation,2020). However, in order to develop such products, the business needs to keep in mind the sustainability aspects because better CSR programs can help gain better competitive advantage.

5 Conclusion
Strategic management includes implementationand formulation of major initiatives and goals taken by a company’s managers from the owners’ behalf, considering an assessment and resources of theexternaland internal environments where the company operates. Both resource and value-based competencies of certain companies are categorized in the present case study and in order to do so, Porters’ Five Forces Model, Porters’ Generic Strategy,VRIO Analysis and 5Ps Strategic Model have been demonstrated.

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