In the 1990s, Circuit City was the largest and most successful consumer-electron
ID: 396885 • Letter: I
Question
In the 1990s, Circuit City was the largest and most successful consumer-electronics retailer in the United States. Indeed, Circuit City was so successful it was included as one of only 11 companies featured in Jim Collins’ bestseller Good to Great.To qualify for this august group of high performers, a company had to attain “extraordinary results, averaging cumula-tive stock returns 6.9 times the general market in the 15 years following their transition points.” 1 Indeed, Circuit City was the best-performingcompany on Collins’ good-to-great list, outperforming the stock market 18.5 times during the 1982–1997 period.How did Circuit City become so successful? The company was able to build and refine a set of core competencies that enabled it to create a higher eco-nomic value than its competitors. In particular, Circuit City created world-class competencies in efficient and effective logistics expertise. It deployed sophisti-cated point-of-sale and inventory-tracking technology, supported by IT investments that enabled the firm to connect the flow of information among geographi-cally dispersed stores. This expertise in turn allowed detailed tracking of customer preferences and enabled Circuit City to respond quickly to changing trends. The company also relied on highly motivated, well-trained sales personnel to provide superior service and thus build and maintain customer loyalty. These core competencies enabled Circuit City to implement a “4S business model”—service, selection, savings, and satisfaction—that it applied to big-ticket consumer electronics with an unmatched degree of consistency throughout the United States.
Perhaps even more important during the company’s high-performance run, many capable competitors were unable to replicate Circuit City’s core competen-cies. Further underscoring Circuit City’s superior per-formance is the fact, as Jim Collins described it, that “if you had to choose between $1 invested in Circuit City or $1 invested in General Electric on the day that the legendary Jack Welch took over GE in 1981 and held [that investment] to January 1, 2000, you would have been better off with Circuit City—by [a factor of] six times. In the fall of 2008, however, Circuit City filed for bankruptcy. How did Circuit City go from "good to create to done?
Circuit City’s core competencies lost value because the firm neglected to upgrade and protect them. As a consequence, it was outflanked by Best Buy and online retailers such as Amazon. Moreover, Circuit City’s top management team was also distracted by pursuing noncore activities such as the creation of CarMax, a retail chain for used cars, a foray into providing an alternative to video rentals through its proprietary DivX DVD player, and an attempted merger with Blockbuster (which filed for bankruptcy in 2010).
Perhaps the biggest blunder that Circuit City’s top-management team committed was to lay off 3,000 of the firm’s highest-paid sales personnel. The layoff was done to become more cost-competitive with Best Buy and, in particular, the burgeoning online retailers. The problem was that the highest-paid salespeople were also the most experienced and loyal ones, better able to provide superior customer service. It appears that laying off key human capital—given their valuable, rare, and difficult-to-imitate nature—was a supreme strategic mistake! Not only did Circuit City destroy part of its core competency, it also allowed its main competitor—Best Buy—to recruit Circuit City’s top salespeople. With that transfer of personnel to Best Buy went the transfer of important tacit knowledge underlying some of Circuit City’s core competencies, which in turn not only eroded Circuit City’s advantage but also allowed Best Buy to upgrade its core competencies. In particular, Best Buy went on to develop its innovative “customer-centricity” model, based on a set of skills that allowed its store employees to identify and more effectively serve specific customer segments. Highlighting the dynamic nature of the competitive process, however, Best Buy now faces its own challenges competing with online retailers such as Amazon.
Employees at Circuit City stores and even at the headquarters in Richmond, Virginia, were shocked and devastated when the firm actually ceased operations in March 2009. More than a year after the closing, former headquarters workers noted that the firm had a good, hard-working, and family-friendly atmosphere. They believed to the end that, in the worst case, another firm would buy Circuit City and per-haps reduce its size but not permanently close the business. _______________________________________________________________________________
Question based on this case (Help me pls)
1. What is VRIO (V) Valuable ? (R) Rare ? (I) Imperfect Imitability ? (N) Non-Substitutability ?
2. Resources based view (RBV) Tangible resources ? and intangible resources ?
3. Value Chain model analysis
4. Cost leadership or Different analysis
5. Blue Ocean analysis
6. Core competencies
* resources structure model framework on book * with which firms gain and sustain a competitive advantage and weather an adverse exter- nal environment. As to the second point, we will soon introduce tools to help bring more opaque aspects of a firm's core competencies into the daylight to be seen with clarity. We start by looking at both tangible and intangible resources. LO 4-2 4.2 The Resource-Based View Compare and contrast To gain a deeper understanding of how the interplay between resources and capabilities tangibile and intangible creates core competencies that drive firm activities leading to urn to the resource-based view of the firm. This model systematically aids in identifying core competencies As the firm performance. As Exhibit 4.4 illustrates, resources fall broadly into two categories: tangible and intangible. Tangible resources have physical attributes and are visible. Examples of tangible resources are labor, capital, land, buildings, plant, equipment, and supplies. Intangible resources have no physical attributes and thus are invisible. Examples of intangible resources are a firm's culture, its knowledge, brand equity, reputation, and intellectual property name suggests, this model sees resources as key to superior Consider Google. Its tangible resources valued at S16 billion, include its headquar- ters (The Gioogleplex' in Mountain Vvie Tangble and California, and numerous server farms (clusters of computer servers) across the globe. The Google brand, an intangible resource, is valued at roughly $160 billion (number one worldwide)-10 times higher than the value of its tangible assets. Resources Tangible Intangible Google's headquarters provides examples of both tangible and intangible resources. Visible, Invisible, The Googleplex is a piece of land withPhysical Attributes No Physical Attributes a futuristic building, and thus a tangible resource. The location of the company in the heart of Silicon Valley is an intangible resouree that provides access to a valuable network of contacts and gives the com- pany several benefits. It allows Google to tap into a large and computer-savvy work force and access graduates and knowledge spillovers from a large number of universi ties, including San Francisco State Univer- sity, San Jose State University, Santa Clara University, Stanford, and the University of erkeley, among others, which Labor Capital Land Buildings Plant Equipment Supplies . Culture Knowledge Brand Equity Copyrights Trademarks Trade Secrets tangible resourees s cetain types of resourcesResaurces that have physical atributes and Resources that do not have physical intangible resources thas are visible attributes and thus are invisible.
Explanation / Answer
1) In the VR IO analysis, which is complementary to a pestel analysis and helps evaluate the resources of a company along with its ability to utilise and exploit the resource. It's can be said to be pestel analysis of the microeconomic environment within the organisation.
V stands for the value of the resources being analysed which is derived through the cost of the resource and its availability within the market. The company is using a resource not valuable for it it can be outsourced. The R stands for rareness of the resource on the basis of its cost, as well as availability and continued availability in the future on the basis of it being renewable. Resource is valuable but not rare it will provide an organisation competitive conformity meaning organisation is at the same level as its competitors. the I stands for imitability of the resource and whether it is easily imitable and cheaply imitable without requiring any major investment or expense. When a resource is valuable and rare but not difficult or expensive to imitate it provides an organisation with a temporary competitive advantage until they are able to imitate the resource subsequently negating the competitive advantage. The earth camp organised or facilities arrangements available within the organisation for effective utilisation of the resource. If a resource is valuable rare and difficult to expensive to imitate but an organisation is unable to take advantage of this due to lack of facilities arrangements for exploitation of the resource the resource becomes expensive due to costs incurred on unutilized assets. subsequently making arrangements for utilisation of the resource you provide a temporary competitive advantage. If excellent facilitative arrangements for utilisation of the resources are available with an organisation it provides it with the permanent competitive advantage.
The Logistic support of circuit City provided them with extensive advantage over competition as the resource had value, was rare as most competitors did not have their own Logistics, was expensive to imitate and Organisation have the required arrangements to facilitate utilisation of the resource in the form of stores.
2) Resources based view is utilised for determination of all available strategic resources of an organisation whether tangible or intangible. It is based on achieving an efficient application of all useful resources strategic interlinking of the tangible and intangible resources to ensure optimal efficiency and output is generated to confer the organisation with the competitive advantage.
Circuit City utilised the tangible resources in the form of Logistics vehicles for delivery, and a superior IT framework for enabling optimal customer service, along with intangible facilitative support through highly motivated well trained staff which enabled it to implement 4s business model. Superior customer service also resulted in an excellent brand name and goodwill which further enhanced business.
3) Value chain model of circuit City clearly indicates that the company identified the importance of inbound and outbound logistics support for success in its segment. It performed an accurate analysis of the major Focal Point in primary activities and support activities by focusing on and obtaining Logistic support through vertical integration, and ensuring Human Resource Management and Technology support along with form infrastructure was available to facilitate utilisation of investment in primary activities.
4) Circuit City utilised differentiation strategy rather than cost leadership as it provided a service which was desired by the consumers but not offered by competitors thereby filling an available requirement gap. Companies utilising differentiation strategy mostly provide a certain value within their product or service, which is largely unavailable in the market. The major disadvantages that if this value is easily imitable it can provide only a temporary advantage over the competition and to stay a head the company needs to constantly upgrade and enhance the value to maintain uniqueness. Unless the company is able to fulfill this requirement it may not be able to capitalise on the value it created due to competitors usurping their position and extracting the retained value for themselves.