blackboard actx

blackboard actx

5. UNDERSTANDING THE EMPIRICAL DATA ON POVERTY: Below you will be examining some graphs and data related to poverty. THERE WILL BE A SECTION ON YOUR TEMPLATE TO TYPE IN YOUR ANSWERS! Please type in the correct answers in the blanks based on reading the data in the data and graphs.

5 A) Read the information below and answer 5A) So, who are the people you helped in doing your service project?

Well, according to the National Center for Children in Poverty (NCCP, 2014), a large percentage of people you are helping with your service project include American children and adolescents. More than sixteen million children and adolescents in the United States (21% of all children under the age of 18) live in families with incomes below the federal poverty level (NCPP, 2014). As well, only three in four American adolescents graduate from high school. That means, 25% of all American teens won’t graduate high school. This is troubling because not graduating from high school raises the chance of living in poverty by 49%, generating a cycle of poverty within families.

Other problems with poverty and lack of proper education are seen in the problem of homelessness. One in 50 U.S. children are currently are homeless. Outside of the issue with lack of education, another reason for homelessness is that 44.9% of the children and adolescents who are now homeless had parents that were alcohol or drug addicted. There are many problems associated with homelessness. When children and teens are homeless it makes them more vulnerable to getting sick, as more than 1 in 7 homeless children and teens have moderate to severe health conditions, such as asthma. Tragically, homelessness also leads to 13 children dying on the streets of America every day (Slesnick, 2004). Most children whose families are chronically homeless will not graduate high school.

Research conducted by Betts (1995) indicates that the most poverty-stricken neighborhoods have a negative impact on schools due to a declining tax base, making it harder to have decent facilities, educational supplies, and quality teachers. Many schools in low income areas are underfunded, and have trouble taking on all the challenges of giving the most needy children and adolescents the type of education that can lead them out of poverty (Betts, 1995). Hence, we see the succession of poverty that extends generationally in an unending cycle of despair.

Betts, J.R. (1995). Does school quality matter? Evidence from the National Longitudinal Survey of YouthThe Review of Economics and Statistics, 77-2, pp 231-250.

National Center for Children in Poverty (2014): Basic facts about low-income children. Retrieved from

Slesnick, N. (2004) Homeless children and youth: A guide to understanding. Praeger Publisher.


5A) Calculate how many homeless children and teens will die each year in America based on 352 days in a year.





For 5B: Homelessness, Children & Teens: Fill in the blank: These two pie charts show the distribution of ages when it comes to homeless children and teens, as well as the racial make-up of the over 3.5 million homeless Americans. Type your answers in the blanks!


5B) By looking at the data in both the pie graphs below on the percentages of age groups and percentages of racial designations of the homeless children in America, if I am a homeless child in America, I am MOST likely _____________________(which age group?) and LEAST LIKELY to be _____________________ (which race)?

 Figure 1: Age groups of homeless children in U.S.



5C ) TRENDS in POVERTY and UNEMPLOYMENT as they RELATE TO EDUCATIONAL ATTAINMENT: The line graph below shows us trends across 4 decades of time in the relationship between poverty and educational levels. The 2nd graph, a comparative bar graph, gives us a graphic representation of data on unemployment rates and salaries based on educational attainment.

5C) Based on the line graph below, and IF the current trends in poverty rates continue into 2020, put your ANSWERS ABOVE in the space for answers by filling in the statistical percentages for each educational level for living in poverty (based on the previous decades of change). If current trends hold steady, in 2020, we can predict that _______________% of people without a high school degree will live in poverty, while only ____________ % of people with a two-year college degree will be living in poverty.


Figure 21 March Curnet Population Survey NOTE: Civilians 25 years and older


5D and 5E) Relationships between educational attainment salary and unemployment. This comparative bar graph shows us the relationships between educational attainment, salary and unemployment rates. Calculate and fill in the blanks for the questions below based upon these data!

5D) Based on the comparative bar graph below, Calculate: In 2014, people with an Associate’s degree will make $____________ a week MORE than someone WITH a high school diploma and $______________ MORE a week than someone WITHOUT a high school diploma, and based on 50 weeks for a year, you would make $____________ a year with a high school diploma versus $__________ a year with a Bachelor’s Degree. .

5E) According to the bar graph below, you are ________ times more likely to be unemployed and if you have a high school diploma or just take a few classes here at Amarillo College, than if you stay the course and finish your ASSOCIATES degree or certification program.



APPENDIX A: The GRADING RUBRIC FOR YOUR SERVICE PROJECT ASSIGNMENT : This is how you will be graded on this assignment. Worth 100 points


  Levels of Achievement

Weight 20.00%


Contains clear, thorough responses to each of the parts of EACH of the questions identified in the assignment. It provides evidence that the student has diligently researched the history of the agency the agency/organization, the social issue the agency is concerned with, and the specific intervention(s) used to help the issue. It provides evidence that the student has diligently identified the tasks and worked alongside the staff at the chosen agency


Addresses almost all of the parts of the questions, and answers ALL the questions identified in the assignment. Provides some evidence that the student has researched the history, social issues and specific interventions of the agency with which they were involved. In second paragraph, student provides some evidence that he or she worked with staff at the chosen agency.


Does not address all of the parts of the questions in the assignment, or skipped one of the questions. It provides minimal evidence that the student has diligently researched the history of the agency, the social issue the agency is concerned with and the specific intervention used to help the issue, the social issue the concerned with and the specific intervention used to help the issue. Fails to provide clear evidence that the student has diligently identified the tasks and worked alongside the staff at the chosen agency.


Minimally addresses and or fails to answer some of the questions in item #1. It does not provide evidence that the student researched the history of the agency, the social issue the agency is concerned with or the specific intervention used to help the issue. It doesn’t provide evidence that the student has diligently identified the tasks and worked alongside the staff at the chosen agency


Did not provide an answer.


Weight 10.00%


Contains clear, thorough responses to the question identified in the assignment. It provides evidence that the student has diligently reflected on experiences, prior knowledge and new knowledge learned while working at the chosen agency.


Addresses the question identified in item #2, in a minimal manner and/or provides some evidence that the student has done some reflection on their experiences, as well as discussing previous and new knowledge gained while working at this agency. Needs improvement and some added depth.


Addresses some of issues raised by the question in item #2 in a perfunctory manner. It provides minimal reflection from the student regarding their experiences, prior knowledge and new knowledge gained in this experience. Needs a quite a bit of improvement. and depth of reflection on the experience.


Minimally addresses the items in the assignment. Provides very little, if any, evidence that the student has reflected on experiences, prior knowledge and new knowledge gained in this experience. Needs much more depth of reflection and improvement in communicating that experience.


Did not provide an answer.


Weight 20.00%


Contains clear, thorough responses to each part of the question identified in the assignment. It provides evidence that the student has diligently applied or related concepts from at least 2 specific concepts from their textbook to their experience in their agency. Cited sources in the text and within the bibliography section.


Contains a minimum required response to the question identified and its parts. Provides some evidence that student applied and/or related at least 1 concept from the textbook to their experience at the agency. Cited source in text and within bibliography section.


Does not address all of the parts of question in the assignment and/or responses lack clarity and depth. It provides minimal evidence of the student’s reflective thought. There is only minimal indication that the student applied or related 1 concept from their textbook in this class to their experience in their agency. Fails to cite source in text or bibliography.



Minimally addresses the items in the assignment. It does not provide evidence of the student’s reflective thought. There is no specific indication that the student applied or related any concepts from their textbook in this class to their experience in their agency. Fails to cite source(s) in text and bibliography.


Did not provide an answer.


Weight 10.00%


Contains clear, thorough responses to the question identified in the assignment. It provides evidence that the student has diligently described the impact he or she hopes to have by continuing to volunteer at their selected agency. If the student chose not to volunteer at their selected agency, then he or she described in detail one action step that they would be willing to do to apply some aspect of “social responsibility” that they learned in their volunteer work in their life.


Contains minimal response to the question identified in the assignment. Provides some evidence that student described the impact he or she hope to have by continuing to volunteer at selected agency. If the student chose not to volunteer at the agency, then he or she gave a brief but not specific description of at least one action step if that they are willing to do to apply some aspect of “social responsibility” that they learned in their volunteer work in their life.


Does not address all of the parts of the questions in the assignment. It provides minimal evidence that the student has diligently described the impact he or she hopes to have by continuing to volunteer at their selected agency. If the student chose not to volunteer at their selected agency, then he or she described one general and somewhat vague action step that they would be willing to do to apply some aspect of “social responsibility” that they learned in their volunteer work in their life.


Minimally addresses the items in the assignment. It does not provide evidence that the student has described the impact he or she hopes to have by continuing to volunteer at their selected agency or, if the student chose not to volunteer at their selected agency, then he or she failed to describe in any detail one action step that they would be willing to do to apply some aspect of “social responsibility” that they learned in their volunteer work in their life


Did not provide an answer.

KNOWLEDGE Empirical Data Question #5

Weight 25.00%


All five questions and all parts are correct indicating that the student has mastery over understanding empirical and graphical representation of data in social and behavioral sciences research


Four of the 5 questions were correct, and/or the student missed a few of the components in a couple of the questions, indicating student has an understanding of empirical and graphical representation of social and behavioral science research.


Three of the five questions were correct, and/or student missed multiple components within some of the questions, indicating that the student has difficulty and lacks a complete understanding of empirical and graphical representation of social and behavioral science research.


Two or less of the five questions were correct, and student missed multiple components within these questions, indicating that the student lacks understanding of empirical and graphical representation of social and behavioral science research.


0 points Did not provide an answer.


Weight 5.00%


Information is clearly organized throughout the four questions on the essay, ideas flow nicely.


Some sections of the are well organized while others are loosely organized, lacking flow


Information is loosely organized throughout and there is a lack of flow of ideas.


Information is present, but very difficult to understand due to poor organization.


Did not provide an answer.


Weight 10.00%


Proper grammar and spelling used throughout the answer to the question. Minimum word count is exceeded.


Generally, grammar and spelling used are correct with a few errors. Minimum word count is reached.

Arbitrary synonym

Arbitrary synonym

Fundamental of Public Administration PPA 101



Learning Objectives Chapter 2

  • Understanding the organization and function of the branches of the federal government
  • Understanding the organization and function of the other levels of government
  • Understanding the policy process
  • Exploring the controls exerted by the legislative branch on administrators
  • Exploring the controls exerted by the judicial branch on administrators

Administrative Organizations

  • The Executive Office of the President
  • Cabinet-Level Executive Departments
  • Independent Agencies, Regulatory Commissions, and Public Corporations
  • Agencies Supporting the Legislature and the Judiciary

The State Level

  • Its own constitution
  • Its own asssets
  • Numerous departments and commissions

The Local Level

  • Cities
  • Counties
  • Native American Tribes
  • Special Purpose Governments
  • Nonprofit Organizations and Associations


  • The Policy Process


  • Agenda Setting
  • Policy Formulation
  • Policy Legitimation
  • Policy Implementation
  • Policy Evaluation and Change

Political Context of PA

  • Public administrators need awareness of how all the government systems work in an effort to become more effective in regards to what they do
  • Attention to how leadership works in our political settings is essential to understanding how to get things done as a public administrator

Public Administrators

  • Public administrators are responsible for implementing public policy
  • Proposals are written and submitted the process includes….
  • Organizations develop policies to guide their activities
  • Public agencies work together with executive, the legislature and the judiciary to seek important policy goals

Federal Government 3 Branches

  • Executive
  • Legislature
  • Judiciary
  • ‘Founding Father’s’ had fears of concentrated power that’s why they divided the power

Administrative Organizations & Executive Leadership

Executive Office of the President- Office of Management & Budget, National Security Council, Council of Economic Advisers

Cabinet level executive departments- Department of Defense, Health & Human Services, Treasury, Agriculture, Housing & Urban Development, Education, Veterans Affairs, Homeland Security (2002,) Ambassador to United Nations

Independent Agencies, Regulatory Commissions, and Public Corporations

Jurisdiction & Federalism


  • Jurisdiction- territorial range of government authority is sometimes used as a synonym for city or town
  • Federalism- a system of government in which powers are divided between a central (national) government and regional (state) goverments.

Relationship Among 3 Levels of the Government

  • Federal
  • State
  • Local
  • Cooperation vs. conflict
  • Who has policy making authority?

The Capacity of States & Localities

  • In the 1950’s & 60’s policy reflected the interest of the elite
  • 1980’s state government transformed from weak links to progressive political units
  • 1990’s brought about local governments being ‘proactive rather than reactive’

How States & Localities Increased Their Capacities

  • Two-party competition
  • Lobbying presence
  • More effective, capable & professional leaders
  • Unified court system, hiring of court administrators, and creation of additional layers of court

Improved Revenue System

  • Taxing legalized gambling, alcohol, tobacco
  • Providing property-tax relief to residents
  • Increasing local sales tax
  • NYC sales replicas of street signs

Expanding the Scope of State Operations

  • States are now policy innovators; i.e. family leave act, Amber alert then the federal government followed suit
  • Before the federal government reformed welfare several states had established workfare program and imposed time limits on the receipt of welfare benefits

Leaders & Followers

  • Here are some examples of states adopting policy and then the federal government following; stopping telephone solicitation, self extinguishing cigarettes, privatizing the running the schools ‘charter’, use of social media to inform and share

Inter-jurisdictional Cooperation

  • Joint problem solving; aide one another when natural disasters happen, 42 states banned together in a lawsuit to recover the Medicaid cost of treating tobacco related diseases against tobacco companies
  • Anti-trust lawsuit against Microsoft (1998) the firm illegally stifled competition, harmed consumers, undercut competition

Increased National-State Conflict

  • One states interest negatively affects another state; i.e.
  • Very common inter-jurisdictional conflict in areas of natural resources and economic development; i.e. one states water supply, moving business to another state

Political Corruption

  • Corruption can undermine public trust
  • Data indicates that political corruption are associated with declines in job growth because corruption creates uncertainty and inflates costs
  • Transparency more openness and more rules

How is Local Government Organized

  • Local government is organized in 3 ways
  • 47% of municipalities use mayor-council form (council or mayor are elected). Strong mayor systems are used in most large and industrial cities, sometimes the Deputy Mayor has the role of administrator (internal management)
  • Council -manager- (52% municipalities employ this model) council makes policy, appropriation, primary executive responsibilities lies with the city manager (populations of 25-250,000)
  • Counties- (small to huge populations,) provide services on behalf of state government; public works, mental health, police. Elected officials such as a sheriff, auditor, tresurer. A chief executive and holds power similar to that of a governor

Native American Tribes

  • Native Americans have inherent rights to possess and use their land and sovereignty over running their own affairs/ American government acts a guardian (Supreme Court Justice Marshall, known as the Marshall Trilogy 1827-32)
  • There are more than 500 recognized tribes in the United States

Special Purpose Governments

School districts

Economic development (public non-profit)

Non-profit organizations & associations- can have a profit but can only be used for purposes of the organization it cannot be distributed to shareholders or members (faith based organizations, healthcare, unions, colleges, youth activities/ Boy Scouts) 1.5 million organizations nationwide. Provide services for public benefit or to some segment of the public. They are tax exempt and must be governed by a board of trustees


Policy Process

Agenda setting- problems needing action

Policy formulation- development of formal policy statement

Policy legitimation- giving legal force to decision justifying policy action (political as once a policy is in place how to role out???)

Policy implementation- activities directed toward putting a program

Policy evaluation and change- assessment as to whether policies are working well (cost, programs worth)

Types of Policy

Regulatory- i.e.; criminal justice laws, business practice laws, access to certain goods clean water and air….

Distributive- (most common form of government policy) tax revenues provide benefits to individuals or groups (grants, subsidies) military, parks….

Redistributive- takes taxes from one group and gives them to others (Medicare, Medicaid

Constituent- intended to benefit the public or serve the government, i.e; foreign defense policies

Sources of Bureaucratic Power

  • Government agencies have influence in government because they have specific expertise in their area so they can provide guidance in design and implementation
  • Many times the legislation is vague so the government is reliant on the expertise of a particular agency
  • Support can come to agency from members of the legislature that champion the agency’s cause
  • You can get support from the executive branch
  • Lobbying strategies
  • Commitment by it’s members

Legislative Supervision: Structural Controls

  • Legislative Veto- Statutory provision that gives Congress the authority to approve or disapprove certain executive actions.
  • Sunset Laws- Provision that sets a specific termination date for a program.
  • Sunshine Laws- Provision that requires agencies to conduct business in public view.
  • Agency Conduct



Legislative Supervision: Structural Controls

  • Judicial review; courts may review administrative actions through this process. They can set aside actions deemed unconstitutional that extend beyond the limits of statutory authority, that are arbitrary, capricious or abuse discretion that are procedurally unfair or without substantive justification
  • Courts have ruled in cases involving the managing of prisons,

Legislative Supervision: Oversight

Legislative Supervision: Casework

  • Students analyze the power of the governor in your state, giving special attention to the governor’s power to exercise executive leadership over the agencies of state government. The analysis should be based on the formal and informal powers of officeholders discussed in Chapter 2. How do the governor’s executive powers compare to those of the president of the United States? How do they compare to those of the local mayor?


  • Quasi-legislative Action
  • Quasi-judicial Action
  • Agency Discretion
  • Judicial Review
  • Concerns for Due Process


  • The Courts and Agency Administration

Group Discussion

  • Let’s choose a current event or topic and walk students through the process of how a policy might be developed to address this topic. Base your discussion on the stages of the policy process outlined in this chapter.


  • Now you’re realizing that public administrators require vast knowledge of how policies, local government, and executive branch work and affect day to day operations of public agencies


Pertinent Negative

Pertinent Negative

Our perception can sometimes ignore important aspects when we scan our surroundings. For example, in a situation, our assumptions quickly set in. We focus on what is present and ignore what is missing, which can possibly clarify the behavior of those around us. Amy Herman termed this phenomenon as the pertinent negative (Burkus, 2016). Sometimes, the most valuable information is what we cannot see. In the study of perceptions, this consideration can help us to respond better and avoid misjudgments.

Research the concept, Pertinent Negative as it relates to our personal behaviors and perceptions. Then answer the following questions in essay format:

  1. What are the benefits of Pertinent Negative in human interaction?
  2. How can we use the broader view of things in improving our relationships with others?
  3. If you were a manager, how would you use pertinent negative in understanding employee behaviors and actions?
  4. Reflect on your current situation to see how this concept can improve your own attitudes, perceptions, and behaviors.

The Portfolio Activity entry should be a minimum of 400 words and not more than 750 words. Use APA citations and references if you use ideas from the readings or other sources.

Aesthetic things to draw

Aesthetic things to draw

Chapter Introduction

The Concept of Aesthetics

Enlarge Image

Casper Holroyd

Learning Objectives

After studying this chapter, you should be able to:

· 3-1Define aesthetics.

· 3-2List three things a teacher can do to help children develop their aesthetic sensitivity.

· 3-3List five benefits of aesthetic sensitivity in children.

· 3-4List at least three art elements to discuss with children.


NAEYC Program Standards

· 2a

Involving families and communities in their children’s development and learning.

· 4c

Teachers use a broad repertoire of developmentally appropriate teaching/learning approaches.

· 5c

Using their own knowledge, appropriate early learning standards, and other resources to design, implement, and evaluate meaningful, challenging curricula for each child.


DAP Criteria

· 3D2

Teachers plan curriculum experiences to draw on children’s own interest and introduce children to things likely to interest them.

· 1E2

Teachers foster in children an enjoyment of and engagement in learning.

Just as creativity is nurtured in the early childhood classroom, a child’s aesthetic sensitivity—the sense of and appreciation for beauty in the world—is cultivated in much the same way. In this chapter, we explore the concept of aesthetics and the ways in which early childhood teachers can create an environment in which the young child’s aesthetic sensitivity can blossom and grow.


LO 1

The term  aesthetics  refers to an appreciation for beauty and a feeling of wonder. Aesthetic experience begins with and depends on the senses. It is seeing beauty in a sunset, hearing rhythm in a rainfall, and loving the expression on a person’s face. Each person has an individual, personal sense of what is or is not pleasing.

The  Aesthetics Movement  in the art world began in early 1800 and lasted the decade. In the art world, the term aesthetics was invented or adapted from Greek by the German philosopher Alexander Baumgarten, whose work Aesthetica was published in 1750. In this particular work, the word was defined to mean the “science of the beautiful” or the “philosophy of taste.” The word was used with its opposite, “Philistine,” which in this context meant “one lacking culture” whose interests were bound by material and commonplace things as opposed to the high-minded spiritual and artistic values of the aesthetes. By 1880, the Aesthetic Movement in the arts was a well-established fact and the name itself became a part of everyday speech.

In the center of the movement was a close-knit group of self-appointed “experts” who passed on to their followers standards of color, ornament, and form for all aspects of art. These standards were in direct opposition to the ornate Victorian style. The Aesthetic Movement preferred the simple and sensible over the ornate. One of the most influential figures of the whole movement was Oscar Wilde, who lectured and spread the word of the Aesthetic Movement. The famous painter, Whistler, was another supporter of the Aesthetic Movement.

Aesthetic experiences  emphasize doing things for the pure joy of it. Although there can be, there does not have to be any practical purpose or reason for doing something. The goal of aesthetic experiences is a full, rich life for the child. You may take a ride in a car to feel its power and enjoy the scenery rather than to visit someone or run an errand. In the same way, a child plays with blocks to feel their shapes and see them tumble rather than to build something.

Young children benefit from aesthetic experiences. Children are fascinated by beauty. They love nature and enjoy creating, looking at, and talking about art. They express their feelings and ideas through language, song, expressive movement, music, and dance far more openly than adults (see  Photo 3-1 ). They are not yet hampered by the conventional labels used by adults to separate each art expression into pigeonholes. Young children experience the arts as a whole. They are creative, inquisitive, and delighted by art.

Photo 3-1

Opportunities for aesthetic experiences abound in the early childhood program.

Opportunities for aesthetic experiences abound in the early childhood program.

Casper Holroyd

On the contemporary arts scene,  multimedia artwork , such as walk-in sculpture environments; mixes of live dance and films; and art exhibitions with drama, where actors move into the audience to engage it in the drama, are all ways adults are integrating the arts. Like young children, they are learning to experience the arts as a whole.

This exciting art form may be novel for sophisticated adult artists, but it is a familiar approach for young children. For instance, in early childhood programs, it is a common occurrence to find young children singing original songs while they paint or moving their bodies rhythmically while playing with clay. Young children naturally and unself-consciously integrate the arts—weaving together graphic arts, movement, dance, drama, music, and poetry in their expressive activities (see  Photo 3-2 ).

Photo 3-2

Children grow in their aesthetic appreciation as they are actively involved in creative learning experiences.

Children grow in their aesthetic appreciation as they are actively involved in creative learning experiences.

Casper Holroyd

The capacity for aesthetics is a fundamental human characteristic. Infants sense with their whole bodies. They are open to all feelings; experience is not separated from thinking. A child’s aesthetic sense comes long before the ability to create. All of an infant’s experiences have an aesthetic component—preferring a soft satin-edged blanket, studying a bright mobile, or choosing a colorful toy. These choices are all statements of personal taste. As infants grow into toddlers, the desire to learn through taste, touch, and smell as well as through sight and sound grows, too. The ability to make aesthetic choices continues to grow through preschool (see  Photo 3-3 ). Preschoolers’ ability to perceive, respond, and be sensitive becomes more obvious and more refined. This is obvious in their spontaneous creations using a wide variety of materials.

Photo 3-3

The capacity to make aesthetic choices continues to grow through preschool.

The capacity to make aesthetic choices continues to grow through preschool.

Casper Holroyd

To develop an aesthetic sense in children, one must help them continuously find beauty and wonder in their world. This is any child’s potential. In fact, it is the potential of every human being. To create, invent, be joyful, sing, dance, love, and be amazed are possible for everyone.

Children sometimes see and say things to please adults; teachers must realize this and the power it implies (Auzmendi et al., 1966). Teachers who prefer that children see beauty as they themselves do are not encouraging a sense of aesthetics in children. They are fostering uniformity and obedience. Only children who choose and evaluate for themselves can truly develop their own aesthetic taste. Just as becoming literate is a basic goal of education, one of the key goals of all creative early childhood programs is to help young children develop the ability to speak freely about their own attitudes, feelings, and ideas about art. Each child has a right to a personal choice of beauty, joy, and wonder.

Children gain an aesthetic sense by doing, that is, sensing, feeling, and responding to things. It can be rolling a ball, smelling a flower, petting an animal, or hearing a story. Aesthetic development takes place in secure settings free of competition and adult judgment.

TeachSource Video

Infants and Toddlers: Cognitive Development and Imaginative Play


© 2015 Cengage Learning

1. Using the material from your text, explain how the teacher in this video could expand the children’s aesthetic experiences in her questioning about animals.

2. Discuss how this teacher could involve more of the children’s senses in this activity.

Did You Get It?

· A kindergarten teacher discourages her young student from coloring with black crayons, and encourages her to use “pretty” colors such as pink and purple. From a creativity perspective, what is the main flaw in the teacher’s approach?

1. She is not helping her student fulfill her potential to find beauty in the world.

2. She is expressing ethnic stereotypes.

3. She is placing gender expectations on her student.

4. She is directing her student instead of allowing her to make choices on her own.

Take the full quiz on CourseMate.

Developing Children’s Aesthetic Sensitivity

LO 2

  Aesthetic learning  means joining what one thinks with what one feels. Through art, ideas and feelings are expressed. People draw and sculpt to show their feelings about life. Art is important because it can deepen and enlarge understanding. All children cannot be great artists, but children can develop an aesthetic sense—an appreciation for art.

Teachers can encourage the aesthetic sense in children in a variety of ways. For example, science activities lend themselves very well to beauty and artistic expression. Because children use their senses in learning, science exhibits with things such as rocks, wood, and leaves can be placed in attractive displays for children to touch, smell, and explore with all of their senses. With their senses, they can experience artistic elements such as line, shape, pattern, color, and texture in these natural objects.

Sensory awareness  is nourished by teachers who help young children focus on the variations and contrasts in the environment: the feel and look of smooth bark and rippling rough bark, the heaviness of rock and the lightness of pumice stone, the feathery leaf and the leathery leaf, the slippery marble and the sticky tar. Aesthetic appreciation of nature is not confined to the sense of sight. Appreciation of the outdoors may include listening to the song of birds, the smell of newly cut grass, or the soft feeling of moss on a rock. All these are opportunities for expression in the arts, poetry, sound, movement, and many other art forms.

The arts are developed best as a whole. After hearing a story, some children may want to act it out. Some may prefer to paint a picture about it. Others may wish to create a dance about it, and some may want to make the music for the dance. These activities can lead to others. There should be a constant exchange, not only among all the art activities but also among all subject areas. This prevents children from creating a false separation between work and play, art and learning, and thought and feeling.

A teacher can invite, encourage, or stimulate children’s aesthetic experiences by:

· Offering possibilities for firsthand, vivid personal perceptions with trips, resources brought into the classroom, and new materials and equipment

· Asking questions to encourage personal, felt responses

Having one’s interest and energy invited is not the same as being persuaded to move toward a goal predetermined by someone else. For example, holding up a model of a finished product may stimulate the child’s desire to make one like it, or demonstrating how it is produced may invite the child’s interest in seeing if she can do it, too (see  Photo 3-4 ). Although these approaches are direct and fast ways to get a group of children to work, by themselves they do not invite the individual child to raise his own questions or to draw upon his own experiences and interests.

Photo 3-4

Provide children with many opportunities to look at and talk about art.

Provide children with many opportunities to look at and talk about art.

Casper Holroyd

In the classroom, most invitations to art work are offered in the whole group situation. Yet, the teacher knows that effective aesthetic response is individual and freely given, and not always in line with the group project.

The early childhood environment can be set up in such a way as to encourage this type of aesthetic discussion by implementing the following suggestions.

· In addition to the typical art center, include books about artists in the reading area.

· Include “real” art books in the reading and quiet areas of the room. These do not necessarily have to be children’s books; young children will enjoy looking at artwork in any book.

· Display fine-art prints on bulletin boards and walls so that children can easily see them. Be sure to change them regularly. If they are up too long, they will quickly fade into the background.

· Include art objects on the science table, where appropriate. Geodes, shards of pottery, and crystals are all good starting points.

· Invite guest art educators into the classroom to show children art objects to look at, touch, and talk about.

· Give children an opportunity to choose their favorites from a selection of fine-art prints.

· Display fine-art prints near the writing and art centers.

Suggestions for Aesthetic Experiences with Older Children

Children experience a developmental shift around ages  to  that allows them to deal with more abstract ideas (more information about this shift is in Chapter 10). At this point, older children not only are able to experience the arts aesthetically but also begin discussing their own opinions, aesthetic tastes, and experiences. Thus, the teacher can engage children in grades 4 to 5 in discussions about what is art and why they consider something to be art or not. The following is an example of a combination th- to th-grade class involved in this type of aesthetics discussion.

This example demonstrates the type of environment for older children in which questioning is valued. In such an environment, students will feel comfortable raising questions about art and expressing their reactions to it. Teachers of older children need to encourage rather than suppress discussion of aesthetic questions as they emerge. This is done by providing students the time and environment for art-related experiences and inquiry.

In their unit on art and history, prints of the work of Civil War photographer Matthew Brady were displayed and discussed. The fact was brought up by the teacher that Brady frequently repositioned and rearranged bodies of dead soldiers and other objects in composing war scenes to be photographed. The teacher used this fact to encourage the students’ responses to her initial question: “Is there anything about Brady’s practice that should disturb us?”

This One’s for You!

Art, Aesthetics, and Nature in the Life of the Child

The outdoors has something more to offer than just physical benefits. Because the natural world is filled with beautiful sights, sounds, and textures, it is the perfect place for aesthetic experiences for young children.

Preschoolers learn much through their senses. Outside there are many different and wonderful things for them to see (animals, birds, and green plants), to hear (the wind rustling through the leaves, a bird’s song), to smell (fragrant flowers and the rain-soaked ground), to touch (a fuzzy caterpillar or the bark of a tree), and even to taste (newly fallen snow or a raindrop on the tongue). Children who spend a lot of time experiencing things through television and computers are using only two senses (hearing and sight), which can seriously affect their perceptual abilities as well as their aesthetic development.

In this overly electronic and technical world, it seems old-fashioned to include nature study in the early childhood curriculum. Yet, sometimes looking back is necessary to move forward for the sake of the child. Looking back to the teachings of Friedrich Froebel, the founder of the kindergarten, can help us see the value of nature study in the early childhood curriculum.

Froebel was a passionate advocate for art and nature studies as well as for their integration. He spent most of his life (1782–1852) in or very near the Thuringian Forest of central Germany, a breathtakingly beautiful area of wooded old mountains, rolling hills, and green valleys. As a young man, he worked as a forester, studied mineralogy, and collected and classified plants—anything that would keep him outdoors.

Nature study was the foundation of Froebel’s pedagogy. He saw it as an essential pathway to understanding the interconnectedness of all things. Froebel believed children’s intellectual, moral, and spiritual development were all dependent upon their relationships with nature. When referring to nature in his autobiography, he wrote, “Every contact with her elevates, strengthens, and purifies (Froebel, 1889, p. 82).

Froebel preferred to engage children in self-directed dialogue with nature, each other, and supportive adult guides. He believed that through nature, children would not only learn the secrets of the world around them but also learn about themselves and their unity with the world.

Today, our students may be quite familiar with how to search for stream beds on the Internet to write a report for their science class, but they might have never seen the phenomenon firsthand in a way that enables them to describe it using their own words or drawings.

When we look back, we find that even this divide between childhood and nature is not a new concern. In 1883, G. Stanley Hall published results of a study focused on what children did and did not know in a variety of areas, including nature studies. He found, among other things, that  of – to -year-old children in Boston had never seen a crow,  had never seen a sparrow, and  had never planted a seed (Hall, 1883).

More recently, Louv holds that children need to interact with nature for the sake of their abilities to learn and create. Nature deficit, as explained by Louv (2008), has highlighted the need to reconnect childhood with nature. Art, as a natural language of childhood, is uniquely equipped to make the connection participatory and expressive, permeated with imaginative problem identification and solving.

So, we have a  history full of rich rationale and examples to encourage early childhood teachers to return nature to the curriculum. As we have seen in this chapter, aesthetic development is easily encouraged in a natural setting. Many activities can be taken outdoors for the children’s aesthetic benefit. How much more exciting it is to hear a story sitting on the grass on a sunny day! How much more alive science activities can be when they are taking place in a natural setting!

Now when asked why your children are so often outside instead of in the classroom, you can say Froebel made you do it!

The discussion led the students in many directions involving such issues as differences between “real” photographic art and “staged” art and which was art in the truest sense. They also questioned the worth of Brady’s work in general, with students evaluating each in their own way. Some saw the work as “political” and of little artistic worth. Others saw it as an artist using his “props” just like any other artist does. One student compared it to a still-life painting the class had seen earlier.

Needless to say, this discussion led to a lot of research into Matthew Brady’s life and work. But more importantly, the discussion helped students learn how to reflect upon and present their own opinions of art and to consider the views of others.

This One’s for You!

The Real Christina’s World

Andrew Wyeth’s famous painting, Christina’s World, shows a crippled woman dragging herself across a field toward a farmhouse. A tour of the house, which was declared a National Historic Landmark, offers a fascinating, in-depth look at the real world of Christina Olson and her family. It also reveals Wyeth’s relationship with them.

Wyeth spent  producing about  works of art depicting the Olsons and their home. Wyeth met the Olsons in 1939 through his wife, Betsy. Wyeth’s father had a summer home nearby. Betsy, whose family also spent summers in the area, was  when she met Christina, who was beloved by local children for her cookies and storytelling. After the Olsons died, the house was briefly used as an art gallery.

Wyeth got the inspiration for Christina’s World after seeing Christina crawling across the field in May when it was lush and green. But when he painted the picture, he used fall colors, adding to the painting’s stark and lonely mood.

And though he observed Christina from an upstairs window, heading away from the house as she pulled herself to a garden where she grew flowers, he chose to depict her heading toward the house, up a hill.

Christina was  when Wyeth finished the painting, but the figure in the painting is of a young, shapely woman in a pretty dress. Wyeth used his wife and an aunt as models for this painting.

When the work was finished in 1948, the Wyeths hung it in their home and invited the Olsons over for dinner. Not a word about the painting was said during the meal, but afterward, Christina kissed Wyeth’s hand in a sign of approval. The painting was then shown at a Manhattan gallery and was purchased by the Museum of Modern Art for . Wyeth received ; the gallery got .

Christina’s World remains an immensely popular and well-known painting, but experts also consider it a masterpiece of twentieth-century realism in the American Gothic tradition (Harpaz, 2011).

If we could see the miracle of a single flower clearly, our whole life would change.


Did You Get It?

· A fourth grade teacher demonstrates how to make a model of the constellations. The teacher’s approach might fail to ignite a sense of aesthetics because it

1. asks them to view the world around them as something that can be copied.

2. science-based and art-based.

3. shows them something that naturally occurs instead of something that they create.

4. does not invite the children.

Take the full quiz on CourseMate.

Benefits of Aesthetic Sensitivity

LO 3

  An  aesthetic sense  does not mean, “I see,” or “I hear.” It means, “I enjoy what I see,” or “I like what I hear.” It means that the child is using taste or preference. Aesthetic sensitivity is important for children because it improves the quality of learning and encourages the creative process. Aesthetic sensibility in children has many other benefits, too.

· Children are more sensitive to problems because they have more insight into their world. This means they can be more helpful to other children and to adults.

· Children are more likely to be self-learners because they are more sensitive to gaps in their knowledge.

· Life is more exciting for children because they have the capacity to be curious and to be surprised.

· Children are more tolerant because they learn that there are many possible ways of doing things.

· Children are more independent because they are more open to their own thoughts. They are good questioners for the same reason.

· Children can deal better with complexity because they do not expect to find one best answer.

3-3aAesthetic Experiences

  Aesthetic experiences for young children can take many forms. They can involve an appreciation of the beauty of nature, the rhythm and imagery of music or poetry, or the qualities of works of art. Far from being a specialized talent, the recognition of aesthetic qualities comes quite naturally to children.

This One’s for You!

Van Gogh’s Yellows

It’s hard to imagine some of Vincent van Gogh’s signature works without the vibrant strokes of yellow that brightened the sky in Starry Night and drenched his sunflowers in color. But the yellow hues in some of his paintings have mysteriously turned to brown, and a team of European scientists has figured out why.

Using X-rays, they found the chemical reaction to blame—one never before seen in paint. Van Gogh’s decision to use a lighter shade of yellow paint mixed with white is responsible for the unintended darkening, according to a study published in Analytical Chemistry.

In some of Van Gogh’s paintings, the yellow has dulled to coffee-brown. The discoloration is serious in about  of them, said Koen Janssens, an analytical chemist at Antwerp University in Belgium who co-authored the study.

The problem is the lead-chromate paint he used. It was called chrome yellow, part of a generation of paints that were far brighter than previous yellow ochre shades. Soon after their introduction in the nineteenth century, it became apparent that chrome yellow would degrade under sunlight.

Although conservators took pains to protect Van Gogh’s paintings from the sun’s ultraviolet rays, the gradual darkening continued. The effect was unpredictable, afflicting the yellow in some works, while sparing others.

What was causing Van Gogh’s sunflowers to wither and the golden tone in his daylight scenes to dim? And why did the victims appear to be picked at random?

After trying other tests without success, the researchers hit the paint with a high-intensity X-ray. They found that the colorfast samples were made of chromium in its pure, crystalline form.

The darkened sample contained sulfates, which are associated with white pigment. Those sulfates, Janssens said, probably helped reduce the chromium’s oxidation state from chromium- to chromium-, taking on an increasing greenish hue that contributed to the overall darkening (Van der Snickt et al., 2009)

For instance, let us consider  art appreciation . What adults have come to regard as strictly a “museum-type” experience—seeing and appreciating good artwork—is an enjoyable experience for young children whose fear of the “intellectual” is not yet developed. Art appreciation can occur in the early childhood program through the combined experiences of learning to look at and learning to create visual arts. Introducing young children to art appreciation should be a series of pleasurable experiences with time to look, enjoy, comment, and raise questions. It is a time when children learn to “see” with their minds, as well as their eyes. They begin to feel with the painter, the sculptor, or the architect and to explore their ideas and techniques.

As early childhood teachers, we don’t ask ourselves whether language appreciation should be emphasized in our programs. We automatically encourage children to express themselves verbally and reflect on the words used by others. We want children to have fun with language, to appreciate its variety and its shades of meaning. Why should we not do the same for visual imagery—that is, encourage children to go beyond art’s functional aspects and find satisfaction in its aesthetic possibilities (Epstein, 2001)?

Early childhood teachers have a responsibility to provide the very best our culture has to offer by introducing young children to a range of fine art by recognized artists, not merely what is easiest or most familiar.

Most children have plenty of exposure to cartoon characters, advertising art, and stereotyped, simplistic posters. These do not foster aesthetic development and are sometimes demeaning to children. Teachers often say, “Children like them,” but the fact that children like something—for example, candy and staying up late at night—does not necessarily mean it is good for them. Children might never have seen a Van Gogh sunflower, a mother and child by Mary Cassatt, or a sculpture by Henry Moore. Yet, young children can learn to appreciate such fine art as these, as well as arts and crafts from many cultures, if introduced to them in the early years. From such experiences, children also gradually learn the concepts of design.

Colors speak all languages.

 Joseph Addison

3-3bMulticultural Aesthetic Experiences

Aesthetic experiences can also be  multicultural aesthetic  experiences. Multiculturalism is so much more than curriculum—it is a worldview. Art is an ideal means of conveying multiculturalism. Multiculturalism honors heritage, community, and tradition. Art objects from different cultures expand beyond their mere physical experience. A Pueblo pot, a Peruvian textile, and a Celtic illumination each represent centuries of culture and civilization. Works of art are valued for their artistic contribution, originality, purpose, collective identity, and universal appeal. In using art reproductions and actual art objects such as pottery in the early childhood program, you are not only providing amazing aesthetic experiences, but you are also bringing the cultures of the world into children’s daily lives.

In the past, roll sheets that once listed Billy, Betty, Jack, and Sue are now joined by Jamar, Okezie, Shanta, Esperanza, and Thuy. Every one of the names on the roll sheet brings tradition along with hopes, fears, and dreams. Each student brings the gift of self and of culture. What a thrill to see a big smile grow on the face of a shy student who is new to the United States when the art activity or object is a familiar reminder of family and home! We all want to feel valued and recognized. Pride in cultural heritage helps students learn. Art is a reaffirmation of who we are. Thus, multicultural art objects provide more than aesthetic experiences to young children.

The work can wait while you show the child the rainbow, but the rainbow won’t wait while you do the work.

 Patricia Clifford

Did You Get It?

Thomas, age , is concerned when his friend Luke starts to cry. He 3-4aSome Other Art Terms

The following list includes more art terms to use in the classroom:

· Foreground, middle, and background. The areas in a piece of art that appear closer to the viewer, next closest, and farthest away.

· Contrast. This is created by putting lighter colors next to darker ones.

· Light. The illusion created with lighter colors such as white.

· Design concepts. Three design concepts in art are  pattern  (repetition and rhythm),  balance , and  unity .

1. Pattern (repetition and rhythm) is created when a particular shape, color, or motif (design) is repeated in a rhythmic way. Patterns provide harmonious or decorative effects in works of art.

Example: “Tell me how you made that pattern around the edge of your picture.”

2. Balance is the principle of design that deals with visual weight in a work of art (see Photo 3-7). Balance may be symmetrical, radial, or overall.

Photo 3-7

When a child adds trees to each side of her drawing, she is creating balance.

When a child adds trees to each side of her drawing, she is creating balance.

Casper Holroyd

Example: “Adding flowers on both sides of your house gives your picture balance, Sally.”

3. Unity is the feeling of wholeness or oneness in an artwork that is accomplished by using the elements and principles of art (see Photo 3-8). A unified artwork seems harmonious; nothing should be added or removed.

Photo 3-8

A unified artwork seems harmonious. Nothing needs to be added or removed.

A unified artwork seems harmonious. Nothing needs to be added or removed.

Casper Holroyd

Example: “Rose, that round grouping of flowers gives your painting a sense of unity, bringing it all together.”

Teachers can make children’s art experiences meaningful through thoughtful dialogue. For example:

· Use descriptive rather than judgmental terms when talking about art. Say “I see …” or “It makes me think of …” rather than “I like it” or “It’s pretty.” Praise such as “Good work!” sets the teacher above the child artist in a superior judgmental position. It may leave the child artist anxious about whether you will at some later time announce that you do not like the child’s efforts. And if you inadvertently pass over one child, does this overlooked child then worry that he or she is not “a good artist”? Respond to the child’s efforts not from your head, but from your heart. Rather than pronounce a judgment, try describing your heartfelt response to the art. Use, “In your art, I feel (an emotion)” statements. For example, “I feel happiness, sadness, fear, love, power.” You will create a better connection with the child by saying “I feel an emotion” rather than “I feel THAT YOU are showing (an emotion).” The “that you” makes an assumption. Thus, avoid phrases such as “I feel … that, like, as if … you are showing ….” Using your own emotions, no one can argue about what you feel (see Photo 3-9).

Photo 3-9

Children develop their aesthetic senses by doing, sensing, and responding.

Children develop their aesthetic senses by doing, sensing, and responding.

Casper Holroyd

· After a small-group art activity, encourage children to look at one another’s work and ask them, “Why do you think they look so different from one another even though you all made them out of the same paper and markers?”

· Introduce language to talk about the affect and aesthetics of the artwork. For example, “These colors look sad” or “All these little dots look busy on the page” or “This big, bright circle makes my eye keep coming back to it.”

· Ask children to reflect on artistic intentions and feelings. “Why do you think this artist makes little pictures but that artist makes big pictures?” is a question that young children can ponder.

Aesthetic experiences for young children should be chosen according to their interests and level of understanding. For young children ages  to , use artwork that is colorful and reflects a subject matter familiar to them, such as children, families, and animals. Older children can explore more abstract imagery, although research suggests that young children, while preferring both abstract and realistic art, tend to gravitate more toward abstract art (Danko-McGhee, 2006). Such details as dates and the social–political implications of a piece of art or music have no relevance for young children. Instead, a painting may appeal to them because of its bold colors as well as familiar subject.

Art appreciation also includes the development of an awareness of the aesthetic qualities of everyday man-made objects (see Photo 3-10). Children are surrounded daily by an endless number of objects such as furniture, clothing, toys, buildings, and machines, along with countless images in films, television, newspapers, books, magazines, advertisements, and exhibits. Examples of good and bad design can be found in all areas of the environment. With guidance and experience, children will become more sensitive to their environment and eventually will develop more selective, even discriminating, taste.

Photo 3-10

Children gain an aesthetic sense by using many kinds of art materials.

Children gain an aesthetic sense by using many kinds of art materials.

Casper Holroyd

· approaches Luke and tries to comfort him. Which benefit of having developed an aesthetic sense is Thomas demonstrating?

1. independent thinking

2. more sensitivity to problems

3. an appreciation of complexity

4. a willingness to question

Take the full quiz on CourseMate.

Language for Talking about Art: Art Elements

LO 4

During group discussions, children should be encouraged to talk about the design qualities of a specific color, the movement of lines, the contrast of sizes and shapes, and the variety of textures. They should be helped to think and feel, as individuals, about a certain art object or piece of music. Their understanding of aesthetics, and their willingness and ability to discuss its concepts, will increase with experience.

As you talk about art with young children, start to introduce the language of art. For example, the teacher may say, “You made a secondary color here,” or in another instance, “I see you drew straight lines, zigzag lines, and diagonal lines in your drawing of our school.” Talking about art in this way strengthens language development at an age when children are quickly developing a language system and vocabulary (Althouse, Johnson, & Mitchell, 2003).

The  language of art  is an expansion of the language of the early childhood classroom. Each language has its own system of words and rules of grammar. The language of visual art has its own system. The words of the language are the elements of art. They are the basic visual symbols in the language of art. Just as there are basic kinds of words in a spoken language such as nouns, verbs, adjectives, and adverbs, there are basic kinds of  art elements line, shape/form, color, space, pattern, and texture. These six elements are the visual building blocks that the artist puts together to create a work of art. No matter what materials are used, the artwork will contain one or more of these visual elements. Sometimes one element will be more important than the others. The following are definitions for each of these elements with examples of using them in discussing art with young children.

· Line  is a continuous mark on a surface. Lines have a direction: horizontal, vertical, and diagonal. Lines may be straight or curved, fat or thin, or long or short.

Example: “I notice you made your house with vertical and horizontal lines.”

· Shape and form  are two terms to describe the contours of enclosed spaces in art. Shape is used to refer to two-dimensional works such as drawings and paintings that can be measured by height and width. Form is used for three-dimensional pieces such as sculpture and architecture that can be measured by height, width, and depth (see  Photo 3-5 ). Shapes and forms may be described as geometric, organic, or free-form.

Photo 3-5

This artwork reflects the art elements of shape/form, color, and balance.

This artwork reflects the art elements of shape/form, color, and balance.

Casper Holroyd

Geometric forms are mathematically precise forms based on the following geometric shapes: square, rectangle, triangle, circle, oval, and diamond. Organic forms are those that are natural. Free-form shapes are images made of straight or curved lines or a combination of both.


· “Look at that big yellow circle in the center of your drawing!” (geometric)

· “Did you see how Mark made an organic-shaped design with his printing tool?” (organic)

· “Watch how Eric uses his crayons to make a free-form design for a border.” (free-form)

· There are three characteristics of  color  hue  value , and  intensity .

1. Hue is the color name, such as blue-green. There are primary, secondary, and tertiary colors. The  primary colors  are red, blue, and yellow. The  secondary colors  are orange, violet (purple), and green. The  tertiary colors  are red-violet, red-orange, blue-violet, blue-green, yellow-orange, and yellow-green.

Example: “You used so many nice primary colors in your collage—red and blue especially.”

2. Value refers to the relative lightness or darkness of a hue. Tints and shades are made when white (tint) or black (shade) is added to a hue.

Example: “I see you have made a lovely green tint for the leaves on your tree.”

3. Intensity is varied by adding a hue’s complementary color, the color opposite it on the color wheel, to the hue. For example, red becomes duller, less intense, when its opposite color, green, is added to it.

Example: “The intensity of your red flowers is great!”

· Space refers to the areas above, below, between, within, and around an object. Space is created as an illusion in two-dimensional artwork (see  Photo 3-6 ). A three-dimensional art form—a sculpture, for example—has actual space such as width, height, and depth. Young children learn to create space by several means: overlapping, scale (size), and placement of shapes.

Photo 3-6

Space is created as an illusion in two-dimensional artwork.

Space is created as an illusion in two-dimensional artwork.

Casper Holroyd

Example: “Scott, I can see in your picture how big your house is in your neighborhood.”

· Texture refers to the way something feels or looks like it would feel. It can be rough (such as a sandpaper alphabet letter) or soft (such as a chalk drawing); it can be furry (as in a piece of fabric) or slick (as in manipulating finger paint). It can be real, such as a piece of tree bark glued in a collage, or it can be visual, such as the implied bark of a tree trunk drawn with crayons.

Example: “I see you used that piece of velvet to give the puppet’s face a soft, smooth texture.”

3-4bThe Aesthetic Environment: Art Elements in Action

  The classroom environment can help young children develop their aesthetic sense. The elements in the early childhood classroom, just like those in a painting, all work together to produce a unified, aesthetically pleasing environment for young children. Simply visualize the early childhood room as a canvas, and each part of this canvas (room) is important to the entire composition (program). Next, consider the basic art elements listed below and how they are applicable to an aesthetically appealing early childhood environment.


Just like in a piece of artwork, the use of color can create very different effects. Lots of blue in a painting gives the viewer a calm, quiet feeling. Bright reds and oranges create the opposite effect. Just as bright colors can dominate a painting, the same applies to color in the classroom. Too many bright colors may detract from art and natural beauty. If you have a choice, it is best to choose soft, light, neutral colors for walls and ceilings. This neural background allows children’s artwork to stand out.

Just as color can be used to create unity and balance in a painting, it can also be used to create an aesthetically balanced early childhood classroom. For example, you can use color to coordinate learning centers so that children begin to see them as wholes rather than as parts. For the same reason, avoid having many different kinds of patterns in one place, as they disturb the balance in the room and can be distracting and overstimulating for young children.


The way the artist creates space in a painting either gives the viewer a definite sense of “openness” or “closeness” or maybe a feeling in between the two. In the classroom, the sense of space is created by placement of the furniture and equipment.

Group similar furniture together to enhance the spacious feel of the room. Keep colors of furniture, such as shelving, as natural and neutral as possible. This helps focus children’s attention on learning materials on the shelves. When choosing furnishings, select natural wood, which is more aesthetically appealing than metal or plastic. If furniture must be repainted, use one neutral color for everything so that there is greater flexibility in moving it from space to space. Instead of a mismatched collection that breaks up the space in the room, one color of furniture creates a sense of spaciousness because all things “fit together.”


When a child adds flowers to both sides of her house, she is creating balance in her art. In the same way, a teacher can create balance in the early childhood classroom by arranging materials in an orderly, aesthetically pleasing manner. For example, rotate materials on shelves rather than crowding them together. Crowded shelves are unbalanced as well as unattractive. They are also hard for children to use and maintain. Aesthetically pleasing containers for holding materials are natural wicker baskets and storage tubs. If storage tubs are used, put all of the same kind together on one shelf to maintain a sense of balance. For the same reason, if cardboard boxes are used for storage, cover them with a neutral color paper or paint them.


Just as this art element refers to the arrangement of the objects and spaces in a piece of art, it can also apply to the various arrangements in the classroom. To create an aesthetically pleasing environment, be conscious of the fact that everything in the room has an aesthetic effect. For this reason, decorate your classroom with care. Mount and display children’s artwork rather than simply taping it to the wall. Provide artwork by fine artists from many cultures and avoid garish, stereotyped posters. Make sure that most artwork is displayed at the children’s eye level. Be careful to avoid too many visual stimuli when displaying materials in the classroom. Consistently use one pattern or color combination on all display areas throughout the room. Display work by every child, but not every child’s work in every display. Allow children to choose what they want displayed. Encourage children to help you create and change displays. They will take pride in seeing their work go on display.

Use shelf tops to display sculpture, plants, and items of natural beauty such as shells, stones, and fish tanks. Avoid storing teachers’ materials on the tops of shelves. If there is no other choice, create a teacher “cubby” using a covered box or storage tub.

The information in this section can help you create a “masterpiece” environment for the young children in your care.

Did You Get It?

· When setting up her preschool classroom, a teacher chooses to group all the tables together. Which element of an aesthetic environment is she introducing?

1. hue

2. space

3. balance

4. composition

Take the full quiz on CourseMate.

Think about It

Aesthetic Awareness in Young Children—Theorists’ Views

Many theorists study and write about young children and aesthetics. As teachers of young children, it is important to be aware of this area of early childhood education and how it relates to classroom practice. The following summary of some of their ideas provides more ideas about young children’s  aesthetic development  and how to enhance it.

Teaching young children ways to appreciate art is not the daunting task that it appears to be. At a very young age, children are quite capable of having an aesthetic experience on their own, whether it is the delight of mixing different-textured foods on the high chair tray or becoming visually engaged with a mobile suspended over the crib (Danko-McGhee, 2006).

When children express preferences for colors, shapes, sounds, tastes, and textures, they are actually making aesthetic choices. Long before young children can speak, their responses to shapes, colors, and other stimuli around them help to form their own special style of interacting with the world (Schirrmacher, 2005).

As young children grow, they continue to exercise their aesthetic senses while observing lines, textures, shapes, colors, and designs found in their environment. This includes images in picture books and artwork found in museums and in the popular media. These aesthetic experiences provide a starting point for understanding that there is a “language of art” (Anderson & Milbrandt, 2005, p. 4). Knowledgeable teachers can facilitate this learning process by pointing out to the child what is to be found in the beauty of an object or work of art.

Developmentally appropriate ways of engaging young children in appreciating works of art include play, conversations, and authenticating the experience (Danko-McGhee, 2006). Play involves finding connections between an artwork and the child by using tangible objects. Conversations engage the child in talking about the artwork with a focus on language details. When viewing art, adults can serve as role models for young children by using rich language to describe aesthetic qualities found in nature and in works of art. And finally, authenticating the experience guides children into related art activities. During this “appreciating” process, children develop their perceptual discernment. “Looking at, reflecting upon, creating, and experiencing art teaches, guides, and refines perception. True perception requires thought” (Anderson & Milbrandt, 2005, p. 16).

Having an aesthetic experience is the result of being deeply affected by sensory perception and in-creases our cognitive (mental) abilities. Through sensory perception, we are prompted to reflect and think (Csikszentmihalyi, 1996; Eisner, 2002; Goodman, 1984; Parsons & Blocker, 1993; Siegesmund, 2000; Smith, 2002).

Aesthetic education need not be exclusive to art activities. Eisner (2002, p. 43) suggests: “Aesthetic experience is in no way restricted to what we refer to as the fine arts…. Aesthetic experience, therefore, is potentially in any encounter an individual has with the world.”

Maxine Greene (2001) suggests that teachers follow the thoughts of Herbert Read and instruct students to experience what it “feels like to live in music, move over and about a painting, travel round and in between the masses of sculpture, dwell in a poem.” We should teach our students to pay heed to and use their senses and feelings to understand the qualities of what is perceived in everything. In so doing, we should create more chances for students to find those “a-ha” moments by simply asking questions or calling attention to the elegance of uncomplicated tasks and everyday situations (Flannery, 1977).

Teachers can help their students to slow down, to smell the bread baking in the school kitchen, to listen to morning sounds, to catch and taste a raindrop, and to feel the stippling on the cinder block hall walls. Teachers can extend these lessons by allowing time for students to talk to their peers and write about their feelings and responses to their aesthetic experiences. Students begin to embrace authentic and meaningful learning as they come to realize that they are the agents that create these experiences, and they do not need to have something that an artist delivers to the classroom for passive appreciation (Heid, 2005).


· 3-1Define aesthetics.

The term aesthetics refers to an appreciation for beauty and a feeling of wonder. Aesthetic experience begins with and depends on the senses. Each person has an individual, personal sense of what is or is not pleasing. Aesthetic experiences emphasize doing things for the pure joy of it. The goal of aesthetic experiences is a full, rich life for the child.

· 3-2List three things a teacher can do to help children develop their aesthetic sensitivity.

· Provide many opportunities to create art.

· Provide many opportunities to look at and talk about art.

· Help children become aware of art in their everyday lives.

· 3-3List five benefits of aesthetic sensitivity in children.

Aesthetic sensitivity in children provides the following benefits:

· It improves the quality of learning and encourages the creative process.

· Children are more sensitive to problems because they have more insight into their world.

· Children are more independent because they are more open to their own thoughts.

· Children are better questioners for the same reason.

· Children can deal better with complexity because they do not expect to find one best answer

· 3-4List at least three art elements to discuss with children.

Basic art elements to discuss with children are line, shape/form, color, space, pattern, and texture. Some other art terms to discuss are foreground, middle and background, contrast, light, balance, and unity.

Eco-map Example

CWTS CWFT Module 7 Chapter 2 Eco-maps


ECO-MAPS The eco-map helps to identify family resources at-a-glance. Areas of strength and concern are presented to assist in creating a picture of the family’s world. Information is gathered in circles. Eco-maps are a snapshot in time. Periodically update changes in connections to resources—especially natural familial and community resources to maximize usefulness of the tool. The list below helps spur questions and generate deeper discussion about resources and strengths during the initial visit. Extended Family Medical/Health Care Who is in the area that can be a support for you ALL family members: physical illness or disease What kind of relationship Effects of chemical use What kind of insurance Income Effects of chemical use Financial status Access to medical care Sources of income Psychological illness, disease Budgeting Social Services/Resources Friends County or Tribal/Financial Services/Child Welfare Close – Supportive – Conflictive Names of workers Where located Neighborhood centers What kind of contact – frequency Agencies / counseling involved with in the past Positive or negative experiences Recreation What do you do for fun Work/School What do you do for relaxation Employment—past/present What would you like to do What work are you interested in pursuing Interests and / or hobbies What type of skills, vocation What have you done in the past Degree or school until what grade

Positive or negative experiences Spiritually/Religion Spirituality and/or religious affiliation growing up Neighborhood What kind of experiences did you have How long at present home With what activities were you involved What is your neighborhood like Current spiritual beliefs and religious affiliations Do you feel safe in your home and neighborhood

Where did you grow up, and what was it like When showing connections with the ecomap, indicate the nature of the connections with a descriptive word or by drawing different kinds of lines: Strong connections: ———- Tenuous connections: ._._._._ Stressful connections: ////// Draw arrows along the connection lines to signify the flow of energy and resources. Identify significant people and fill in empty circles as needed. See the example Kelly Family below.



CWTS CWFT Module 7 Chapter 2 Eco-maps







Extended Family/ Significant Others NEIGHBORHOOD



NAME: ________________________





CWTS CWFT Module 7 Chapter 2 Eco-maps





Absent father





HOUSING: Homeless



(foster homes)



Rehabilitation Program for


_____________ = flow of energy = stressful relationship = strong flow






CWTS CWFT Module 7 Chapter 2 Eco-maps


Name: _________________________

Date: __________________________















  • Recreation
  • vERONA
  • gLORIA



Requirements for patient encounters per course

· Consensus of patient numbers by course. These are MINIMUM numbers of patients:

· NURS 6531 – 144 patients in 144 hours

· NURS 6540 – 100 patients in 144 hours

· NURS 6541 – 144 patients in 144 hours

· NURS 6550 – 75 patients in 144 hours

· ***NURS 6551 – 100 GYN patients; 25 OB patients in 144 required hours

· NURS 6560 – 75 patients in 144 hours

· NURS 6565 – 144 patients in 144 hours

· PMHNP Courses: NURS 6640, NURS 6650, NURS 6660, NURS 6670:

· “Students in the PMHNP program will need to complete 144 hours of practicum in EACH of the four practicum courses. It is acknowledged that a variety of factors will influence the number of clients seen, but students should strive to see as many clients possible each clinical day.”

· *A minimum of 144 clinical hours are required in each practicum course. More hours can be completed but cannot transfer to another clinical course.



· Students are to upload their information on the time log and patients log every 48 hours.

· Midterm and final evals by preceptor need to be completed in Meditrek.

· Midterm eval should be completed prior to midterm conference call, then reviewed.

· Didactic faculty are responsible to ensure ALL clinical students have their time logs signed and final evals completed prior to entering final grade.


Documenting Clinical Experiences for the Course

· To prepare for this course’s Practicum Experience, address the following in Practicum Journal (AGPCNP and FNP students ONLY):

· Select and describe a nursing theory to guide your practice.

· Develop goals and objectives for your Practicum Experience in this course. When developing r goals and objectives, students are to be sure to keep the competency domains of practice in mind.

· Create a timeline of practicum activities based on your practicum requirements.

Midterm and Final Evaluations

· All students are required to have their preceptor complete a midterm and final evaluation in order to pass the course

· Midterm evaluation is done through Meditrek and should be completed by the preceptor during weeks 4-6; the preceptor will receive login credentials to Meditrek beginning in week 3.

· Students must have a satisfactory final evaluation by preceptor in Meditrek by end of week 10.

All students are required to have their preceptor and practicum site evaluation in Meditrek by end of week 10

Primary Care of Women NURS 6551

Directions* There is not a page requirement for the journals as long as the topics listed are covered. Each week needs its own scholarly reference section and must be sighted within the paper.

Week 1 Journal

As a future advanced practice nurse, it is important that you are able to connect your classroom experience to your Practicum Experience. By applying the concepts you study in the classroom to clinical settings, you enhance your professional competency. Each week you complete an Assignment such as Journal Entries or SOAP Notes that prompts you to reflect on your Practicum Experiences and relate them to the material presented in the classroom. This week you begin documenting your Practicum Experiences in your Practicum Journal.

To prepare for this course’s Practicum Experience, address the following in your Practicum Journal: • Select and explain a nursing theory or feminist perspective to guide your clinical practice. • Develop goals and objectives for the Practicum Experience in this course. When developing your goals and objectives, be sure to keep women’s health guidelines and best practices in mind. • Create a timeline of practicum activities based on your practicum requirements.

(Uploaded a power point with requirements listed on a slide about half way through the power point)

Week 2 Journal

To prepare for this course’s Practicum Experience, think about common screenings for women. Explain how screenings differ for younger women and older women, and explain the implications of these differences.


This discussion will be a means of collecting important use case information about MyCWU from you, the student users. There are other classes of MyCWU users as well (for example instructors, course schedulers, graduation requirement specifiers, financial aid managers, registrar staff members,…), but we’ll focus on Students for now. Notice that in this effort we’re just analyzing the As-Is system — the way MyCWU works now — not the To-Be system that we as analysts will soon be wanting to specify. Now that you have been reviewing the whole breadth of MyCWU capabilities from the Student’s point of view, let me ask each class member State a goal that Students can accomplish with the help of MyCWU (for example, “keep informed as to service outages that may affect me”) List the names of the use cases that MyCWU currently enables which can help me accomplish that goal (for example, “obtain list of planned outages and closures,” “obtain details of a specific planned outage or closure,” “communicate with person responsible for specific outage listing.” For each of these use cases, state the steps a Student will typically follow to carry out the use case. You can do this in outline form. For example: (goal) keep informed as to service outages that may affect me (use case 1) obtain list of planned outages and closures on the MyCWU home page, observe the list within the box “Service Outages and Closure” if the word “More…” is present, click it, to go to the Outages and Closures page with the complete current list of outages and closures (use case 2) obtain details of a specific planned outage or closure on the MyCWU home page or Outages and Closures page, click on any one of the listed outages and closures to see its details (use case 3) communicate with person responsible for specific outage listing when the details for a single outage or closure are showing, see the email address at its bottom or the name of the source at its top send an email to this person

The Role of Technology in Today’s Classrooms

The Role of Technology in Today’s Classrooms

Technology is everywhere and used in every aspect of life. Practically every job uses some technology. Students should learn how to use technology to fit in this technology-based country. In classrooms, it enhances the teaching process, which in turn motivates students in learning. Research on the effectiveness of technology suggests that specific technology can improve students of all grades learning capabilities. Technology should be used in classrooms because it prepares children for the future and enhances collaboration in students.

Using technology in the classroom would help prepare students for the digital future. Through teaching students skills like coding, it can help them set up for success. In addition, introducing instructional technology in the classrooms at a young age can help prepare students for future digital demands. As more and more employers demand potential employees to be technology literate, it is clear that students need digital literacy to begin their careers. Skills like creativity, problem-solving and critical thinking are also necessary to succeed in the workplace, and being technology literate will allow the students to develop this important life skill (Bronwyn).

An increased frequency of students helping each other when they are using technology in the classroom has been observed. Many technology-based tasks have challenges, leading to situations where students need to seek help from the teachers or their peers. When students are assigned to small groups, the more technologically advanced students can help their inexperienced peers. Another problem uses social media, which does not include censored content while in class. Bronwyn states the issue of censorship. He says, “The lesson for social media policy is that censorship can lead to unintended side effects that undermine the development of more robust outcomes, which exacerbates the original problem in the long term”. Students can also practice collaboration skills by getting involved in different online activities. Thus, technology allows collaboration of students in the same classroom, same school, and even with other classrooms worldwide (Wexler).

However, many people believe that introducing children to technology is harmful. Some believe that technology encourages laxity, can be expensive and interferes with children interacting with their teachers. For technology to be properly used in the classroom, instructors must invest time and be interested in getting the proper training required to integrate technology and not obstruct children from appropriate learning effectively. “When students read text from a screen, it’s been shown; they absorb less information than when they read it on paper” (Wexler). Of course, there will be challenges along the way as we try to implement new technologies in education and improve them to outfit student outcomes. However, the advantages hugely outweigh the shortcomings of technology in classrooms. It is important to remain aware of the current technology coming up and adjust courses for the best possible learning outcome for the students (Bronwyn).

In conclusion, we have seen many examples of technology use in the classroom and its benefits in today’s technology-based society; hence, technology is a useful and valuable tool for teaching, learning, becoming a way of life. The most important thing is for educators to use these technologies effectively. Schools can use technology effectively and for the benefit of students, teachers, and the entire society.

Work Cited 

Bronwyn, Howell. “Social Media, Censorship, And Coddling Internet Users”. Aei.Org, 2020, Accessed 11 Oct 2020.

Wexler, Natalie. “How Classroom Technology Is Holding Students Back”. MIT Technology Review, 2019, Accessed 11 Oct 2020.













Sustainable strategic management (Under Armour)






Sustainable strategic management


SWOT Analysis


· Brand recognition

· Availability of raw materials

· Good distribution network

· Advanced technology


· High employee turnover rates

· Low current ratio

· Centralization of leadership


· Low inflation rates

· Subsidies on environmental-friendly goods

· Social media network


· Competition

· Political divisions

· Substitute products

· Rapid technological advancements


According to the previous New York Times business journal report on exchange rates, there has been an increase in cash flow in the market, which is characterized by the existence of large firms. However, it is also anticipated that in the long run, if such companies do not take precautionary measures through the execution of sustainable strategic plans, there will be a drop in the level of cash flow in the market which will affect the economy due to inflation. The inflation will come as a result of the high level of competition, ease of entry into the market, high bargaining power of suppliers, high bargaining power of consumers, and the existence of substitute products in the market. When such precautionary measures are not taken care of, there will be an automatic decline in prices. The decrease in prices will affect the day-to-day operations of the company because the company will not manage to produce high-quality products at a low cost. This may eventually lead to a collapse of the firm. Having that in mind, a research study is hereby conducted to address sustainable strategic management for Under Armour Company and recommend some of the necessary changes it should embrace.

According to Stead &Stead, 2014, sustainable strategic management is used in business to evaluate, formulate and execute plans on how the company will take the market by storm by increasing sales and solidifying the customer base. To have sustainable strategic management, the Under Armour Company should have a mission that will act as a guide to achieving the objectives. The strategic management will help the company to make decisions that will give a solution to stiff competition from companies like Nike and Adidas. Some of the strategies that should be addressed include a periodic assessment of the goal set. This can be done using data collection methods. The evaluation should also evaluate the company’s resources and liabilities.

The company’s council, which consists of senior leaders like the chief supply chain officer, material advancement, licensing, and legal teams, should lead the process. The strategies council has the role of determining the company’s core competencies, which is core for competitive strategies. Learning core competencies help the company to come up with the stages that will guide the company into attaining the desired outcome (Stead & Stead, 2014). First, the company is required to come up with a strategic plan that will meet most of the demands made by its customers. Under Armour should also get local and international acceptance to guarantee a good market for the products. In sustainable strategy management, the company is supposed to follow the right steps that lead to competitive advantages.

Stages followed in sustainable strategy management

Strategic Analysis

In this step, the leaders are supposed to use all the models that will give a reflection of the strength, weaknesses, opportunities, and threats. SWOT and PESTLE analysis can be instrumental in this case. The PESTLE analysis will help the company to deal with external factors that can positively or negatively affect the company by assisting the company to know its current positions and identify areas it needs to invest (Admin, 2019). Under Armour, will Company will be able to set a higher goal that is achievable within a specified period.

Strategy formulation

Strategy formulation is the second step in this process. Here, the team will come up with ideas that will propel the company towards meeting the objectives that will be set. In this stage, the company focuses on the strategic plans and the tactics that will be used to maximize the opportunities and curbing threats. This stage is also concerned with the strategies that will steer the company towards achieving the mission that was set during the initial step. The company is expected to come up with both long-term and short-term policies. It is in this stage the company reduces the gap that exists between the current financial position and the anticipated one (Stead & Stead, 2014).

Strategy implementation

Here, the company is expected to execute the plans that were initially formulated are put into action. This means that the team should have a workable follow-up plan that will ensure every policy is implemented. The systems can also review and updated depending on market changes and consumer preferences. The review by the council will accommodate changes that will give the company an advantage over the other companies dealing in athletic wear. Policies implementation is the essential responsibility that the management team has to do (Stead & Stead, 2014). Managerial and supervision are done in this stage too.

Strategy evaluation

Strategy evaluation is the final step in the sustainable strategy management process. In this stage, the management monitors the headway the execution of the policies. The assessment will ensure that the company’s day-to-day activities are in line with the objectives that were set initially (Stead & Stead, 2014). The evaluation will show if there are any deviations from the goals and help the company to get back on track if such a case occurs.


The company should invest more in e-commerce. If a company takes full advantage of this opportunity, it will be able to raise more revenue and attract more customers. Ecommerce will enable the company to interact with customers who have different tastes and opinions about the commodities. The strategies’ core competencies should help the company to spot the gaps, be more accessible, reach a more comprehensive, and enter new markets (Salgado, 2017). The company has the opportunity to maximize sales of products all over the world through the internet. Ecommerce has been one of the latest trends where a client can check out the products they wish to buy and can get in contact with the sales department for inquiries. After that, the customer uses an online payment method to complete the transactions, and then goods are delivered at the appropriate time. The company can use this idea to increase more sales and attract more customers from different parts of the world.

Porter’s Five Forces Model

This is one of the models used to analyze the competitive strengths of the organization. The analysis helps the company to deal with threats that are posed by companies that are entering the market. The strategies will cover risks like the introduction of new products and the prices of commodities. Substitute products can be a challenge to Under Armour. Porter’s five models will help the company to deal with substitute products and services while maintaining a customer base (Omsa, Abdullah & Jamali, 2017). The model will also determine the bargaining power of the buyer. Under Armour will be able to prioritize the bargaining power depending on the number of purchases they make. Larger companies might have more considerable bargaining power compared to retailers. The model also aids the company in knowing the bargaining power of suppliers depending on the uniqueness, quality, and price. Porter’s five forces model will guarantee that the company offers similar products that cannot be imitated by rivals (Brett, 2018). This will help the company maintain its brand and serve loyal customers.

Lewin’s democratic leadership style

The leadership theory will help the company to get fresh ideas as all stakeholders are involved in the decision-making process. This style will also increase the satisfaction rate of customers as commodities will be crafted creatively. The laissez-faire style of leadership also allows the employees to raise their concerns, making them more comfortable with their workplace (Fiaz & Saqib, 2017).

Cost leadership

Cost leadership strategies will ensure that the company minimizes the cost of production, and prices are kept lower compared to other companies dealing in the same line of commodities. Under Armour has attained cost leadership, and this can help the company to control costs and compete effectively. Under Armour has a steady flow of raw materials, so it needs cost leadership to reduce wastage and maximize its opportunities (Brett, 2018). This helps the company to ensure that customers are satisfied, and prices are within the ceiling and the floor. It becomes more comfortable for the company to change the designs because there are a lot of materials and technological advancements that can accommodate the changes and costs are low.

Access new markets

Under Armour should enter new markets too. The Chief Executive Officer should have a clear strategic vision to guide the team on how to access the international markets. The company has been dominant in the U.S but has been able to sell more commodities across the world. This has been attained through technological advancements, brand recognition, and a good distribution network. In the past, Under Armour increased the sales margin by 57% by 2017 (Salgado, 2017). However, the company should expand the scope of its operations worldwide.

Technological Advancements

Over the years, Under Armour has come up with better designs, shoes, and other merchandise. This has been done through advanced technology that the company has adopted (Admin, 2019). This maintains the flexibility as demand increases and taste and preference of the customers’ change. Under Armour can use this opportunity to come up with creative inventions that will be more appealing to the customers and ensure the broader market is reached. The old designs can be improved to cope with the competition.

For Under Armour to achieve sustainable strategic management, the council should have meetings from time to time to ensure that desired results are achieved the team guarantees that the company improves over time and meet the goals that were set. The team should also advise the management on how Under Armour should deal with competition in the coming years. The council should evaluate and suggest strategies like early entry into the market or fundamentally becoming a late mover so as the company reduces mistakes and unnecessary costs (Salgado, 2017).

Capitalize on low inflation rates and subsidies

Under Armour Company should also make the best use of low inflation rate subsidies by the government. Since the company enjoys inflation rates that will be experienced for the next two years, it is expected to produce more and market its commodities. This will help the company to earn more revenue as the cost of production will be low, and customer and customers’ needs can be met (Salgado, 2017). Under Armour is also one of the companies that delight in subsidies since it deals with environmentally friendly commodities.

Triple bottom line

The company focuses on the triple bottom line by observing environmental and social distresses. Tipple bottom line ensures that the Under Armour compile with the government policies and the terms produced are acceptable by the public (Stead & Stead, 2014). Ways in which Under Armour Company utilizes the concept of the triple bottom line is by ensuring safe products that meet the government standards. The company produces environmentally friendly products, which gives it the potential to grow bigger.


In conclusion, sustainable strategy management will play fundamental roles in establishing ways that will help the company to compete effectively. Therefore, Under Armour is required to observe the core competencies to increase the sales margin and win over the customers. The company has more strengths and opportunities that it can capitalize on. The chances that are in Under Armour’s disposals should be used to beat the threats and weaknesses posed to the business. The company should also have a long term strategic plan that will guarantee more success in the coming years. A proper leadership style should also be adopted to warrant the smooth running of operation and quality products.






Admin-J.-L.M.W. (2019, December). The History of Under Armour and their Logo. Retrieved from

Brett, M. R. (2018). Cost Leadership or Differentiation? Applying Porter’s Competitive Strategies in Ecotourism: A Case Study of Mkhuze Game Reserve.

Fiaz, M., Su, Q., & Saqib, A. (2017). Leadership styles and employees’ motivation: Perspective from an emerging economy. The Journal of Developing Areas51(4), 143-156.

Omsa, S., Abdullah, I. H., & Jamali, H. (2017). Five Competitive Forces Model and the Implementation of Porter’s Generic Strategies to Gain Firm Performances.

Salgado, O. S. L. (2017). SWOT analysis of the competitive intelligence in small enterprises in the clothing industry.

Stead, J. G., & Stead, W. E. (2014). Sustainable strategic management. Routledge.

resource and capability analysis

Resource and capability analysis is a powerful tool

Learning Objectives THIS CHAPTER 4 WILL HELP YOU UNDERSTAND: LO 1 How to take stock of how well a company’s strategy is working. LO 2 Why a company’s resources and capabilities are centrally important in giving the company a competitive edge over rivals. LO 3 How to assess the company’s strengths and weaknesses in light of market opportunities and external threats. LO 4 How a company’s value chain activities can affect the company’s cost structure and customer value proposition. LO 5 How a comprehensive evaluation of a company’s competitive situation can assist managers in making critical decisions about their next strategic moves. page 83 Crucial, of course, is having a difference that matters in the industry. Cynthia Montgomery—Professor and author If you don’t have a competitive advantage, don’t compete Jack Welch—Former CEO of General Electric Organizations succeed in a competitive marketplace over the long run because they can do certain things their customers value better than can their competitors. Robert Hayes, Gary Pisano, and David Upton—-Professors and consultants Chapter 3 described how to use the tools of industry and competitor analysis to assess a company’s external environment and lay the groundwork for matching a company’s strategy to its external situation. This chapter discusses techniques for evaluating a company’s internal situation, including its collection of resources and capabilities and the activities it performs along its value chain. Internal analysis enables managers to determine whether their strategy is likely to give the company a significant competitive edge over rival firms. Combined with external analysis, it facilitates an understanding of how to reposition a firm to take advantage of new opportunities and to cope with emerging competitive threats. The analytic spotlight will be trained on six questions: How well is the company’s present strategy working? What are the company’s most important resources and capabilities, and will they give the company a lasting competitive advantage over rival companies? What are the company’s strengths and weaknesses in relation to the market opportunities and external threats? How do a company’s value chain activities impact its cost structure and customer value proposition? Is the company competitively stronger or weaker than key rivals? What strategic issues and problems merit front-burner managerial attention? In probing for answers to these questions, five analytic tools—resource and capability analysis, SWOT analysis, value chain analysis, benchmarking, and competitive strength assessment—will be used. All five are valuable techniques for revealing a company’s competitiveness and for helping company managers match their strategy to the company’s particular circumstances. QUESTION 1: HOW WELL IS THE COMPANY’S PRESENT STRATEGY WORKING? LO 1 How to take stock of how well a company’s strategy is working. In evaluating how well a company’s present strategy is working, the best way to start is with a clear view of what the strategy entails. Figure 4.1 shows the key components of a single-business company’s strategy. The first thing to examine is the company’s competitive approach. What moves has the company made recently to attract customers and improve its market position—for instance, has it cut prices, improved the page 84design of its product, added new features, stepped up advertising, entered a new geographic market, or merged with a competitor? Is it striving for a competitive advantage based on low costs or a better product offering? Is it concentrating on serving a broad spectrum of customers or a narrow market niche? The company’s functional strategies in R&D, production, marketing, finance, human resources, information technology, and so on further characterize company strategy, as do any efforts to establish alliances with other enterprises. FIGURE 4.1 Identifying the Components of a Single-Business Company’s Strategy The three best indicators of how well a company’s strategy is working are (1) whether the company is achieving its stated financial and strategic objectives, (2) whether its financial performance is above the industry average, and (3) whether it is gaining customers and gaining market share. Persistent shortfalls in meeting company performance targets and weak marketplace performance relative to rivals are reliable warning signs that the company has a weak strategy, suffers from poor strategy execution, or both. Specific indicators of how well a company’s strategy is working include: Trends in the company’s sales and earnings growth. Trends in the company’s stock price. The company’s overall financial strength. The company’s customer retention rate. page 85The rate at which new customers are acquired. Evidence of improvement in internal processes such as defect rate, order fulfillment, delivery times, days of inventory, and employee productivity. Sluggish financial performance and second-rate market accomplishments almost always signal weak strategy, weak execution, or both. The stronger a company’s current overall performance, the more likely it has a well-conceived, well-executed strategy. The weaker a company’s financial performance and market standing, the more its current strategy must be questioned and the more likely the need for radical changes. Table 4.1 provides a compilation of the financial ratios most commonly used to evaluate a company’s financial performance and balance sheet strength. TABLE 4.1 Key Financial Ratios: How to Calculate Them and What They Mean Ratio How Calculated What It Shows Profitability ratios  Gross profit margin Shows the percentage of revenues available to cover operating expenses and yield a profit.  Operating profit margin (or return on sales) Shows the profitability of current operations without regard to interest charges and income taxes. Earnings before interest and taxes is known as EBIT in financial and business accounting.  Net profit margin (or net return on sales) Shows after-tax profits per dollar of sales.  Total return on assets A measure of the return on total investment in the enterprise. Interest is added to after-tax profits to form the numerator, since total assets are financed by creditors as well as by stockholders.  Net return on total assets (ROA) A measure of the return earned by stockholders on the firm’s total assets.  Return on stockholders’ equity (ROE) The return stockholders are earning on their capital investment in the enterprise. A return in the 12%–15% range is average.  Return on invested capital (ROIC)—sometimes referred to as return on capital employed (ROCE) A measure of the return that shareholders are earning on the monetary capital invested in the enterprise. A higher return reflects greater bottom-line effectiveness in the use of long-term capital. Liquidity ratios  Current ratio Shows a firm’s ability to pay current liabilities using assets that can be converted to cash in the near term. Ratio should be higher than 1.0.  Working capital​Current assets – Current liabilities​page 86The cash available for a firm’s day-to-day operations. Larger amounts mean the company has more internal funds to (1) pay its current liabilities on a timely basis and (2) finance inventory expansion, additional accounts receivable, and a larger base of operations without resorting to borrowing or raising more equity capital. Leverage ratios  Total debt-to-assets ratio Measures the extent to which borrowed funds (both short-term loans and long-term debt) have been used to finance the firm’s operations. A low ratio is better—a high fraction indicates overuse of debt and greater risk of bankruptcy.  Long-term debt-to-capital ratio A measure of creditworthiness and balance sheet strength. It indicates the percentage of capital investment that has been financed by both long-term lenders and stockholders. A ratio below 0.25 is preferable since the lower the ratio, the greater the capacity to borrow additional funds. Debt-to-capital ratios above 0.50 indicate an excessive reliance on long-term borrowing, lower creditworthiness, and weak balance sheet strength.  Debt-to-equity ratio Shows the balance between debt (funds borrowed both short term and long term) and the amount that stockholders have invested in the enterprise. The further the ratio is below 1.0, the greater the firm’s ability to borrow additional funds. Ratios above 1.0 put creditors at greater risk, signal weaker balance sheet strength, and often result in lower credit ratings.  Long-term debt-to-equity ratio Shows the balance between long-term debt and stockholders’ equity in the firm’s long-term capital structure. Low ratios indicate a greater capacity to borrow additional funds if needed.  Times-interest-earned (or coverage) ratio Measures the ability to pay annual interest charges. Lenders usually insist on a minimum ratio of 2.0, but ratios above 3.0 signal progressively better creditworthiness. Activity ratios  Days of inventory Measures inventory management efficiency. Fewer days of inventory are better.  Inventory turnover Measures the number of inventory turns per year. Higher is better.  Average collection period Indicates the average length of time the firm must wait after making a sale to receive cash payment. A shorter collection time is better. Other important measures of financial performance page 87  Dividend yield on common stock A measure of the return that shareholders receive in the form of dividends. A “typical” dividend yield is 2%–3%. The dividend yield for fast-growth companies is often below 1%; the dividend yield for slow-growth companies can run 4%–5%.  Price-to-earnings (P/E) ratio P/E ratios above 20 indicate strong investor confidence in a firm’s outlook and earnings growth; firms whose future earnings are at risk or likely to grow slowly typically have ratios below 12.  Dividend payout ratio Indicates the percentage of after-tax profits paid out as dividends.  Internal cash flow​After-tax profits + Depreciation​A rough estimate of the cash a company’s business is generating after payment of operating expenses, interest, and taxes. Such amounts can be used for dividend payments or funding capital expenditures.  Free cash flow​After-tax profits + Depreciation – Capital expenditures – Dividends​A rough estimate of the cash a company’s business is generating after payment of operating expenses, interest, taxes, dividends, and desirable reinvestments in the business. The larger a company’s free cash flow, the greater its ability to internally fund new strategic initiatives, repay debt, make new acquisitions, repurchase shares of stock, or increase dividend payments. QUESTION 2: WHAT ARE THE COMPANY’S MOST IMPORTANT RESOURCES AND CAPABILITIES, AND WILL THEY GIVE THE COMPANY A LASTING COMPETITIVE ADVANTAGE OVER RIVAL COMPANIES? An essential element of deciding whether a company’s overall situation is fundamentally healthy or unhealthy entails examining the attractiveness of its resources and capabilities. A company’s resources and capabilities are its competitive assets and determine whether its competitive power in the marketplace will be impressively strong or disappointingly weak. Companies with second-rate competitive assets nearly always are relegated to a trailing position in the industry. CORE CONCEPT A company’s resources and capabilities represent its competitive assets and are determinants of its competitiveness and ability to succeed in the marketplace. Resource and capability analysis provides managers with a powerful tool for sizing up the company’s competitive assets and determining whether they can provide the foundation necessary for competitive success in the marketplace. This is a two-step process. The first step is to identify the company’s resources andpage 88 capabilities. The second step is to examine them more closely to ascertain which are the most competitively important and whether they can support a sustainable competitive advantage over rival firms.1 This second step involves applying the four tests of a resource’s competitive power. Resource and capability analysis is a powerful tool for sizing up a company’s competitive assets and determining whether the assets can support a sustainable competitive advantage over market rivals. Identifying the Company’s Resources and Capabilities A firm’s resources and capabilities are the fundamental building blocks of its competitive strategy. In crafting strategy, it is essential for managers to know how to take stock of the company’s full complement of resources and capabilities. But before they can do so, managers and strategists need a more precise definition of these terms. LO 2 Why a company’s resources and capabilities are centrally important in giving the company a competitive edge over rivals. In brief, a resource is a productive input or competitive asset that is owned or controlled by the firm. Firms have many different types of resources at their disposal that vary not only in kind but in quality as well. Some are of a higher quality than others, and some are more competitively valuable, having greater potential to give a firm a competitive advantage over its rivals. For example, a company’s brand is a resource, as is an R&D team—yet some brands such as Coca-Cola and Xerox are well known, with enduring value, while others have little more name recognition than generic products. In similar fashion, some R&D teams are far more innovative and productive than others due to the outstanding talents of the individual team members, the team’s composition, its experience, and its chemistry. A capability (or competence) is the capacity of a firm to perform some internal activity competently. Capabilities or competences also vary in form, quality, and competitive importance, with some being more competitively valuable than others. American Express displays superior capabilities in brand management and marketing; Starbucks’s employee management, training, and real estate capabilities are the drivers behind its rapid growth; LinkedIn relies on superior software innovation capabilities to increase new user memberships. Organizational capabilities are developed and enabled through the deployment of a company’s resources.2 For example, Nestlé’s brand management capabilities for its 2,000+ food, beverage, and pet care brands draw on the knowledge of the company’s brand managers, the expertise of its marketing department, and the company’s relationships with retailers in nearly 200 countries. W. L. Gore’s product innovation capabilities in its fabrics and medical and industrial product businesses result from the personal initiative, creative talents, and technological expertise of its associates and the company’s culture that encourages accountability and creative thinking. CORE CONCEPT A resource is a competitive asset that is owned or controlled by a company; a capability (or competence) is the capacity of a firm to perform some internal activity competently. Capabilities are developed and enabled through the deployment of a company’s resources. Types of Company Resources A useful way to identify a company’s resources is to look for them within categories, as shown in Table 4.2. Broadly speaking, resources can be divided into two main categories: tangible and intangible resources. Although human resources make up one of the most important parts of a company’s resource base, we include them in the intangible category to emphasize the role played by the skills, talents, and knowledge of a company’s human resources. page 89 Table 4.2 Types of Company Resources Tangible resources Physical resources: land and real estate; manufacturing plants, equipment, and/or distribution facilities; the locations of stores, plants, or distribution centers, including the overall pattern of their physical locations; ownership of or access rights to natural resources (such as mineral deposits) Financial resources: cash and cash equivalents; marketable securities; other financial assets such as a company’s credit rating and borrowing capacity Technological assets: patents, copyrights, production technology, innovation technologies, technological processes Organizational resources: IT and communication systems (satellites, servers, workstations, etc.); other planning, coordination, and control systems; the company’s organizational design and reporting structure Intangible resources Human assets and intellectual capital: the education, experience, knowledge, and talent of the workforce, cumulative learning, and tacit knowledge of employees; collective learning embedded in the organization, the intellectual capital and know-how of specialized teams and work groups; the knowledge of key personnel concerning important business functions; managerial talent and leadership skill; the creativity and innovativeness of certain personnel Brands, company image, and reputational assets: brand names, trademarks, product or company image, buyer loyalty and goodwill; company reputation for quality, service, and reliability; reputation with suppliers and partners for fair dealing Relationships: alliances, joint ventures, or partnerships that provide access to technologies, specialized know-how, or geographic markets; networks of dealers or distributors; the trust established with various partners Company culture and incentive system: the norms of behavior, business principles, and ingrained beliefs within the company; the attachment of personnel to the company’s ideals; the compensation system and the motivation level of company personnel Tangible resources are the most easily identified, since tangible resources are those that can be touched or quantified readily. Obviously, they include various types of physical resources such as manufacturing facilities and mineral resources, but they also include a company’s financial resources, technological resources, and organizational resources such as the company’s communication and control systems. Note that technological resources are included among tangible resources, by convention, even though some types, such as copyrights and trade secrets, might be more logically categorized as intangible. Intangible resources are harder to discern, but they are often among the most important of a firm’s competitive assets. They include various sorts of human assets and intellectual capital, as well as a company’s brands, image, and reputational assets. While intangible resources have no material existence on their own, they are often embodied in something material. Thus, the skills and knowledge resources of a firm are embodied in its managers and employees; a company’s brand name is embodied in the company logo or product labels. Other important kinds of intangible resources include a company’s relationships with suppliers, buyers, or partners of various sorts, and the company’s culture and incentive system. A more detailed listing of the various types of tangible and intangible resources is provided in Table 4.2. Listing a company’s resources category by category can prevent managers from inadvertently overlooking some company resources that might be competitively important. At times, it can be difficult to decide exactly how to categorize certain types of resources. For example, resources such as a work group’s specialized expertise in developing innovative products can be considered to be technological assets or human assets or intellectual capital and knowledge assets; the work ethic and drive of a company’s workforce could be included under the company’s human assets or its page 90culture and incentive system. In this regard, it is important to remember that it is not exactly how a resource is categorized that matters but, rather, that all of the company’s different types of resources are included in the inventory. The real purpose of using categories in identifying a company’s resources is to ensure that none of a company’s resources go unnoticed when sizing up the company’s competitive assets. Identifying Capabilities Organizational capabilities are more complex entities than resources; indeed, they are built up through the use of resources and draw on some combination of the firm’s resources as they are exercised. Virtually all organizational capabilities are knowledge-based, residing in people and in a company’s intellectual capital, or in organizational processes and systems, which embody tacit knowledge. For example, Amazon’s speedy delivery capabilities rely on the knowledge of its fulfillment center managers, its relationship with the United Postal Service, and the experience of its merchandisers to correctly predict inventory flow. Bose’s capabilities in auditory system design arise from the talented engineers that form the R&D team as well as the company’s strong culture, which celebrates innovation and beautiful design. Because of their complexity, capabilities are harder to categorize than resources and more challenging to search for as a result. There are, however, two approaches that can make the process of uncovering and identifying a firm’s capabilities more systematic. The first method takes the completed listing of a firm’s resources as its starting point. Since capabilities are built from resources and utilize resources as they are exercised, a firm’s resources can provide a strong set of clues about the types of capabilities the firm is likely to have accumulated. This approach simply involves looking over the firm’s resources and considering whether (and to what extent) the firm has built up any related capabilities. So, for example, a fleet of trucks, the latest RFID tracking technology, and a set of large automated distribution centers may be indicative of sophisticated capabilities in logistics and distribution. R&D teams composed of top scientists with expertise in genomics may suggest organizational capabilities in developing new gene therapies or in biotechnology more generally. The second method of identifying a firm’s capabilities takes a functional approach. Many capabilities relate to fairly specific functions; these draw on a limited set of resources and typically involve a single department or organizational unit. Capabilities in injection molding or continuous casting or metal stamping are manufacturing-related; capabilities in direct selling, promotional pricing, or database marketing all connect to the sales and marketing functions; capabilities in basic research, strategic innovation, or new product development link to a company’s R&D function. This approach requires managers to survey the various functions a firm performs to find the different capabilities associated with each function. A problem with this second method is that many of the most important capabilities of firms are inherently cross-functional. Cross-functional capabilities draw on a number of different kinds of resources and are multidimensional in nature—they spring from the effective collaboration among people with different types of expertise working in different organizational units. Warby Parker draws from its cross-functional design process to create its popular eyewear. Its design capabilities are not just due to its creative designers, but are the product of their capabilities in market research and engineering as well as their relations with suppliers and manufacturing companies. Cross-functional capabilities and other complex capabilities involving numerous linked and closely integrated competitive assets are sometimes referred to as resource bundles. CORE CONCEPT A resource bundle is a linked and closely integrated set of competitive assets centered around one or more cross-functional capabilities. page 91 It is important not to miss identifying a company’s resource bundles, since they can be the most competitively important of a firm’s competitive assets. Resource bundles can sometimes pass the four tests of a resource’s competitive power (described below) even when the individual components of the resource bundle cannot. Although PetSmart’s supply chain and marketing capabilities are matched well by rival Petco, the company has and continues to outperform competitors through its customer service capabilities (including animal grooming and veterinary and day care services). Nike’s bundle of styling expertise, marketing research skills, professional endorsements, brand name, and managerial know-how has allowed it to remain number one in the athletic footwear and apparel industry for more than 20 years. Assessing the Competitive Power of a Company’s Resources and Capabilities To assess a company’s competitive power, one must go beyond merely identifying its resources and capabilities to probe its caliber.3 Thus, the second step in resource and capability analysis is designed to ascertain which of a company’s resources and capabilities are competitively superior and to what extent they can support a company’s quest for a sustainable competitive advantage over market rivals. When a company has competitive assets that are central to its strategy and superior to those of rival firms, they can support a competitive advantage, as defined in Chapter 1. If this advantage proves durable despite the best efforts of competitors to overcome it, then the company is said to have a sustainable competitive advantage. While it may be difficult for a company to achieve a sustainable competitive advantage, it is an important strategic objective because it imparts a potential for attractive and long-lived profitability. The Four Tests of a Resource’s Competitive Power The competitive power of a resource or capability is measured by how many of four specific tests it can pass.4 These tests are referred to as the VRIN tests for sustainable competitive advantage—VRIN is a shorthand reminder standing for Valuable, Rare, Inimitable, and Nonsubstitutable. The first two tests determine whether a resource or capability can support a competitive advantage. The last two determine whether the competitive advantage can be sustained. CORE CONCEPT The VRIN tests for sustainable competitive advantage ask whether a resource is valuable, rare, inimitable, and nonsubstitutable. Is the resource or capability competitively Valuable? To be competitively valuable, a resource or capability must be directly relevant to the company’s strategy, making the company a more effective competitor. Unless the resource or capability contributes to the effectiveness of the company’s strategy, it cannot pass this first test. An indicator of its effectiveness is whether the resource enables the company to strengthen its business model by improving its customer value proposition and/or profit formula (see Chapter 1). Companies have to guard against contending that something they do well is necessarily competitively valuable. Apple’s OS X operating system for its personal computers by some accounts is superior to Microsoft’s Windows 10, but Apple has failed in converting its resources devoted to operating system design into anything more than moderate competitive success in the global PC market. Is the resource or capability Rare—is it something rivals lack? Resources and capabilities that are common among firms and widely available cannot be a source of competitive advantage. All makers of branded cereals have valuable marketing page 92capabilities and brands, since the key success factors in the ready-to-eat cereal industry demand this. They are not rare. However, the brand strength of Oreo cookies is uncommon and has provided Kraft Foods with greater market share as well as the opportunity to benefit from brand extensions such as Double Stuf Oreos and Mini Oreos. A resource or capability is considered rare if it is held by only a small number of firms in an industry or specific competitive domain. Thus, while general management capabilities are not rare in an absolute sense, they are relatively rare in some of the less developed regions of the world and in some business domains. Is the resource or capability Inimitable—is it hard to copy? The more difficult and more costly it is for competitors to imitate a company’s resource or capability, the more likely that it can also provide a sustainable competitive advantage. Resources and capabilities tend to be difficult to copy when they are unique (a fantastic real estate location, patent-protected technology, an unusually talented and motivated labor force), when they must be built over time in ways that are difficult to imitate (a well-known brand name, mastery of a complex process technology, years of cumulative experience and learning), and when they entail financial outlays or large-scale operations that few industry members can undertake (a global network of dealers and distributors). Imitation is also difficult for resources and capabilities that reflect a high level of social complexity (company culture, interpersonal relationships among the managers or R&D teams, trust-based relations with customers or suppliers) and causal ambiguity, a term that signifies the hard-to-disentangle nature of the complex resources, such as a web of intricate processes enabling new drug discovery. Hard-to-copy resources and capabilities are important competitive assets, contributing to the longevity of a company’s market position and offering the potential for sustained profitability. Is the resource or capability Nonsubstitutable—is it invulnerable to the threat of substitution from different types of resources and capabilities? Even resources that are competitively valuable, rare, and costly to imitate may lose much of their ability to offer competitive advantage if rivals possess equivalent substitute resources. For example, manufacturers relying on automation to gain a cost-based advantage in production activities may find their technology-based advantage nullified by rivals’ use of low-wage offshore manufacturing. Resources can contribute to a sustainable competitive advantage only when resource substitutes aren’t on the horizon. CORE CONCEPT Social complexity and causal ambiguity are two factors that inhibit the ability of rivals to imitate a firm’s most valuable resources and capabilities. Causal ambiguity makes it very hard to figure out how a complex resource contributes to competitive advantage and therefore exactly what to imitate. The vast majority of companies are not well endowed with standout resources or capabilities, capable of passing all four tests with high marks. Most firms have a mixed bag of resources—one or two quite valuable, some good, many satisfactory to mediocre. Resources and capabilities that are valuable pass the first of the four tests. As key contributors to the effectiveness of the strategy, they are relevant to the firm’s competitiveness but are no guarantee of competitive advantage. They may offer no more than competitive parity with competing firms. Passing both of the first two tests requires more—it requires resources and capabilities that are not only valuable but also rare. This is a much higher hurdle that can be cleared only by resources and capabilities that are competitively superior. Resources and capabilities that are competitively superior are the company’s true strategic assets. They provide the company with a competitive advantage over its competitors, if only in the short run. page 93To pass the last two tests, a resource must be able to maintain its competitive superiority in the face of competition. It must be resistant to imitative attempts and efforts by competitors to find equally valuable substitute resources. Assessing the availability of substitutes is the most difficult of all the tests since substitutes are harder to recognize, but the key is to look for resources or capabilities held by other firms or being developed that can serve the same function as the company’s core resources and capabilities.5 Very few firms have resources and capabilities that can pass all four tests, but those that do enjoy a sustainable competitive advantage with far greater profit potential. Costco is a notable example, with strong employee incentive programs and capabilities in supply chain management that have surpassed those of its warehouse club rivals for over 35 years. Lincoln Electric Company, less well known but no less notable in its achievements, has been the world leader in welding products for over 100 years as a result of its unique piecework incentive system for compensating production workers and the unsurpassed worker productivity and product quality that this system has fostered. A Company’s Resources and Capabilities Must Be Managed Dynamically Even companies like Costco and Lincoln Electric cannot afford to rest on their laurels. Rivals that are initially unable to replicate a key resource may develop better and better substitutes over time. Resources and capabilities can depreciate like other assets if they are managed with benign neglect. Disruptive changes in technology, customer preferences, distribution channels, or other competitive factors can also destroy the value of key strategic assets, turning resources and capabilities “from diamonds to rust.”6 A company requires a dynamically evolving portfolio of resources and capabilities to sustain its competitiveness and help drive improvements in its performance. Resources and capabilities must be continually strengthened and nurtured to sustain their competitive power and, at times, may need to be broadened and deepened to allow the company to position itself to pursue emerging market opportunities.7 Organizational resources and capabilities that grow stale can impair competitiveness unless they are refreshed, modified, or even phased out and replaced in response to ongoing market changes and shifts in company strategy. Management’s challenge in managing the firm’s resources and capabilities dynamically has two elements: (1) attending to the ongoing modification of existing competitive assets, and (2) casting a watchful eye for opportunities to develop totally new kinds of capabilities. CORE CONCEPT A dynamic capability is an ongoing capacity of a company to modify its existing resources and capabilities or create new ones. The Role of Dynamic Capabilities Companies that know the importance of recalibrating and upgrading their most valuable resources and capabilities ensure that these activities are done on a continual basis. By incorporating these activities into their routine managerial functions, they gain the experience necessary to be able to do them consistently well. At that point, their ability to freshen and renew their competitive assets becomes a capability in itself—a dynamic capability. A dynamic capability is the ability to modify, deepen, or augment the company’s existing resources and capabilities.8 This includes the capacity to improve existing resources and capabilities incrementally, in the way that Toyota aggressively upgrades the company’s capabilities in fuel-efficient hybrid engine technology and constantly fine-tunes its famed Toyota production system. Likewise, management at BMW developed new organizational capabilities in hybrid engine design that allowed the company to launch its highly touted i3 and i8 plug-in 94 A dynamic capability also includes the capacity to add new resources and capabilities to the company’s competitive asset portfolio. One way to do this is through alliances and acquisitions. An example is Bristol-Meyers Squibb’s famed “string of pearls” acquisition capabilities, which have enabled it to replace degraded resources such as expiring patents with new patents and newly acquired capabilities in drug discovery for new disease domains. QUESTION 3: WHAT ARE THE COMPANY’S STRENGTHS AND WEAKNESSES IN RELATION TO THE MARKET OPPORTUNITIES AND EXTERNAL THREATS? LO 3 How to assess the company’s strengths and weaknesses in light of market opportunities and external threats. In evaluating a company’s overall situation, a key question is whether the company is in a position to pursue attractive market opportunities and defend against external threats to its future well-being. The simplest and most easily applied tool for conducting this examination is widely known as SWOT analysis, so named because it zeros in on a company’s internal Strengths and Weaknesses, market Opportunities, and external Threats. A first-rate SWOT analysis provides the basis for crafting a strategy that capitalizes on the company’s strengths, overcomes its weaknesses, aims squarely at capturing the company’s best opportunities, and defends against competitive and macro-environmental threats. SWOT analysis is a simple but powerful tool for sizing up a company’s strengths and weaknesses, its market opportunities, and the external threats to its future well-being. Identifying a Company’s Internal Strengths A strength is something a company is good at doing or an attribute that enhances its competitiveness in the marketplace. A company’s strengths depend on the quality of its resources and capabilities. Resource and capability analysis provides a way for managers to assess the quality objectively. While resources and capabilities that pass the VRIN tests of sustainable competitive advantage are among the company’s greatest strengths, other types can be counted among the company’s strengths as well. A capability that is not potent enough to produce a sustainable advantage over rivals may yet enable a series of temporary advantages if used as a basis for entry into a new market or market segment. A resource bundle that fails to match those of top-tier competitors may still allow a company to compete successfully against the second tier. Basing a company’s strategy on its most competitively valuable strengths gives the company its best chance for market success. Assessing a Company’s Competencies—What Activities Does It Perform Well? One way to appraise the degree of a company’s strengths has to do with the company’s skill level in performing key pieces of its business—such as supply chain management, R&D, production, distribution, sales and marketing, and customer service. A company’s skill or proficiency in performing different facets of its operations can range from the extreme of having minimal ability to perform an activity (perhaps having just struggled to do it the first time) to the other extreme of being able to perform the activity better than any other company in the industry. When a company’s proficiency rises from that of mere ability to perform an activity to the point of being able to perform it consistently well and at acceptable cost, it is page 95said to have a competence—a true capability, in other words. If a company’s competence level in some activity domain is superior to that of its rivals it is known as a distinctive competence. A core competence is a proficiently performed internal activity that is central to a company’s strategy and is typically distinctive as well. A core competence is a more competitively valuable strength than a competence because of the activity’s key role in the company’s strategy and the contribution it makes to the company’s market success and profitability. Often, core competencies can be leveraged to create new markets or new product demand, as the engine behind a company’s growth. Procter and Gamble has a core competence in brand management, which has led to an ever increasing portfolio of market-leading consumer products, including Charmin, Tide, Crest, Tampax, Olay, Febreze, Luvs, Pampers, and Swiffer. Nike has a core competence in designing and marketing innovative athletic footwear and sports apparel. Kellogg has a core competence in developing, producing, and marketing breakfast cereals. CORE CONCEPT A competence is an activity that a company has learned to perform with proficiency. A distinctive competence is a capability that enables a company to perform a particular set of activities better than its rivals. CORE CONCEPT A core competence is an activity that a company performs proficiently and that is also central to its strategy and competitive success. Identifying Company Weaknesses and Competitive Deficiencies A weakness, or competitive deficiency, is something a company lacks or does poorly (in comparison to others) or a condition that puts it at a disadvantage in the marketplace. A company’s internal weaknesses can relate to (1) inferior or unproven skills, expertise, or intellectual capital in competitively important areas of the business; (2) deficiencies in competitively important physical, organizational, or intangible assets; or (3) missing or competitively inferior capabilities in key areas. Company weaknesses are thus internal shortcomings that constitute competitive liabilities. Nearly all companies have competitive liabilities of one kind or another. Whether a company’s internal weaknesses make it competitively vulnerable depends on how much they matter in the marketplace and whether they are offset by the company’s strengths. CORE CONCEPT A company’s strengths represent its competitive assets; its weaknesses are shortcomings that constitute competitive liabilities. Table 4.3 lists many of the things to consider in compiling a company’s strengths and weaknesses. Sizing up a company’s complement of strengths and deficiencies is akin to constructing a strategic balance sheet, where strengths represent competitive assets and weaknesses represent competitive liabilities. Obviously, the ideal condition is for the company’s competitive assets to outweigh its competitive liabilities by an ample margin—a 50–50 balance is definitely not the desired condition! page 96 Table 4.3 What to Look for in Identifying a Company’s Strengths, Weaknesses, Opportunities, and Threats Potential Strengths and Competitive Assets Potential Weaknesses and Competitive Deficiencies Competencies that are well matched to industry key success factors Ample financial resources to grow the business Strong brand-name image and/or company reputation Economies of scale and/or learning- and experience-curve advantages over rivals Other cost advantages over rivals Attractive customer base Proprietary technology, superior technological skills, important patents Strong bargaining power over suppliers or buyers Resources and capabilities that are valuable and rare Resources and capabilities that are hard to copy and for which there are no good substitutes Superior product quality Wide geographic coverage and/or strong global distribution capability Alliances and/or joint ventures that provide access to valuable technology, competencies, and/or attractive geographic markets No clear strategic vision No well-developed or proven core competencies No distinctive competencies or competitively superior resources Lack of attention to customer needs A product or service with features and attributes that are inferior to those of rivals Weak balance sheet, insufficient financial resources to grow the firm Too much debt Higher overall unit costs relative to those of key competitors Too narrow a product line relative to rivals Weak brand image or reputation Weaker dealer network than key rivals and/or lack of adequate distribution capability Lack of management depth A plague of internal operating problems or obsolete facilities Too much underutilized plant capacity Resources that are readily copied or for which there are good substitutes Potential Market Opportunities Potential External Threats to a Company’s Future Profitability Meeting sharply rising buyer demand for the industry’s product Serving additional customer groups or market segments Expanding into new geographic markets Expanding the company’s product line to meet a broader range of customer needs Utilizing existing company skills or technological know-how to enter new product lines or new businesses Taking advantage of falling trade barriers in attractive foreign markets Taking advantage of an adverse change in the fortunes of rival firms Acquiring rival firms or companies with attractive technological expertise or capabilities Taking advantage of emerging technological developments to innovate Entering into alliances or joint ventures to expand the firm’s market coverage or boost its competitive capability Increased intensity of competition among industry rivals–may squeeze profit margins Slowdowns in market growth Likely entry of potent new competitors Growing bargaining power of customers or suppliers A shift in buyer needs and tastes away from the industry’s product Adverse demographic changes that threaten to curtail demand for the industry’s product Adverse economic conditions that threaten critical suppliers or distributors Changes in technology–particularly disruptive technology that can undermine the company’s distinctive competencies Restrictive foreign trade policies Costly new regulatory requirements Tight credit conditions Rising prices on energy or other key inputs Identifying a Company’s Market Opportunities Market opportunity is a big factor in shaping a company’s strategy. Indeed, managers can’t properly tailor strategy to the company’s situation without first identifying its market opportunities and appraising the growth and profit potential each one holds. Depending on the prevailing circumstances, a company’s opportunities can be plentiful or scarce, fleeting or lasting, and can range from wildly attractive to marginally interesting to unsuitable. Table 4.3 displays a sampling of potential market opportunities. Newly emerging and fast-changing markets sometimes present stunningly big or “golden” opportunities, but it is typically hard for managers at one company to peer into “the fog of the future” and spot them far ahead of managers at other companies.9 page 97But as the fog begins to clear, golden opportunities are nearly always seized rapidly—and the companies that seize them are usually those that have been actively waiting, staying alert with diligent market reconnaissance, and preparing themselves to capitalize on shifting market conditions by patiently assembling an arsenal of resources to enable aggressive action when the time comes. In mature markets, unusually attractive market opportunities emerge sporadically, often after long periods of relative calm—but future market conditions may be more predictable, making emerging opportunities easier for industry members to detect. A company is well advised to pass on a particular market opportunity unless it has or can acquire the resources and capabilities needed to capture it. In evaluating a company’s market opportunities and ranking their attractiveness, managers have to guard against viewing every industry opportunity as a company opportunity. Rarely does a company have the resource depth to pursue all available market opportunities simultaneously without spreading itself too thin. Some companies have resources and capabilities better-suited for pursuing some opportunities, and a few companies may be hopelessly outclassed in competing for any of an industry’s attractive opportunities. The market opportunities most relevant to a company are those that match up well with the company’s competitive assets, offer the best prospects for growth and profitability, and present the most potential for competitive advantage. Identifying the Threats to a Company’s Future Profitability Often, certain factors in a company’s external environment pose threats to its profitability and competitive well-being. Threats can stem from such factors as the emergence of cheaper or better technologies, the entry of lower-cost foreign competitors into a company’s market stronghold, new regulations that are more burdensome to a company than to its competitors, unfavorable demographic shifts, and political upheaval in a foreign country where the company has facilities. Table 4.3 shows a representative list of potential threats. Simply making lists of a company’s strengths, weaknesses, opportunities, and threats is not enough; the payoff from SWOT analysis comes from the conclusions about a company’s situation and the implications for strategy improvement that flow from the four lists. External threats may pose no more than a moderate degree of adversity (all companies confront some threatening elements in the course of doing business), or they may be imposing enough to make a company’s situation look tenuous. On rare occasions, market shocks can give birth to a sudden-death threat that throws a company into an immediate crisis and a battle to survive. Many of the world’s major financial institutions were plunged into unprecedented crisis in 2008–2009 by the aftereffects of high-risk mortgage lending, inflated credit ratings on subprime mortgage securities, the collapse of housing prices, and a market flooded with mortgage-related investments (collateralized debt obligations) whose values suddenly evaporated. It is management’s job to identify the threats to the company’s future prospects and to evaluate what strategic actions can be taken to neutralize or lessen their impact. What Do the SWOT Listings Reveal? SWOT analysis involves more than making four lists. The two most important parts of SWOT analysis are drawing conclusions from the SWOT listings about the company’s overall situation and translating these conclusions into strategic actions to better match the company’s strategy to its internal strengths and market opportunities, to correct important weaknesses, and to defend against external threats. Figure 4.2 shows the steps involved in gleaning insights from SWOT analysis. page 98 FIGURE 4.2 The Steps Involved in SWOT Analysis: Identify the Four Components of SWOT, Draw Conclusions, Translate Implications into Strategic Actions The final piece of SWOT analysis is to translate the diagnosis of the company’s situation into actions for improving the company’s strategy and business prospects. A company’s internal strengths should always serve as the basis of its strategy—-placing heavy reliance on a company’s best competitive assets is the soundest route to attracting customers and competing successfully against rivals.10 As a rule, strategies that place heavy demands on areas where the company is weakest or has unproven competencies should be avoided. Plainly, managers must look toward correcting competitive weaknesses that make the company vulnerable, hold down profitability, or disqualify it from pursuing an attractive opportunity. Furthermore, a company’s strategy should be aimed squarely at capturing attractive market opportunities that are suited to the company’s collection of capabilities. How much attention to devote to defending against external threats to the company’s future performance hinges on how vulnerable the company is, whether defensive moves can be taken to lessen their impact, and whether the costs of undertaking such moves represent the best use of company resources. page 99 QUESTION 4: HOW DO A COMPANY’S VALUE CHAIN ACTIVITIES IMPACT ITS COST STRUCTURE AND CUSTOMER VALUE PROPOSITION? LO 4 How a company’s value chain activities can affect the company’s cost structure and customer value proposition. Company managers are often stunned when a competitor cuts its prices to “unbelievably low” levels or when a new market entrant introduces a great new product at a surprisingly low price. While less common, new entrants can also storm the market with a product that ratchets the quality level up so high that customers will abandon competing sellers even if they have to pay more for the new product. This is what seems to have happened with Apple’s iPhone 6 and iMac computers; it is what Apple is betting on with the Apple Watch. Regardless of where on the quality spectrum a company competes, it must remain competitive in terms of its customer value proposition in order to stay in the game. Patagonia’s value proposition, for example, remains attractive to customers who value quality, wide selection, and corporate environmental responsibility over cheaper outerwear alternatives. Since its inception in 1925, the New Yorker’s customer value proposition has withstood the test of time by providing readers with an amalgam of well-crafted, rigorously fact-checked, and topical writing. The higher a company’s costs are above those of close rivals, the more competitively vulnerable the company becomes. The value provided to the customer depends on how well a customer’s needs are met for the price paid. How well customer needs are met depends on the perceived quality of a product or service as well as on other, more tangible attributes. The greater the amount of customer value that the company can offer profitably compared to its rivals, the less vulnerable it will be to competitive attack. For managers, the key is to keep close track of how cost-effectively the company can deliver value to customers relative to its competitors. If it can deliver the same amount of value with lower expenditures (or more value at the same cost), it will maintain a competitive edge. The greater the amount of customer value that a company can offer profitably relative to close rivals, the less competitively vulnerable the company becomes. Two analytic tools are particularly useful in determining whether a company’s costs and customer value proposition are competitive: value chain analysis and benchmarking. The Concept of a Company Value Chain Every company’s business consists of a collection of activities undertaken in the course of producing, marketing, delivering, and supporting its product or service. All the various activities that a company performs internally combine to form a value chain—so called because the underlying intent of a company’s activities is ultimately to create value for buyers. CORE CONCEPT A company’s value chain identifies the primary activities and related support activities that create customer value. As shown in Figure 4.3, a company’s value chain consists of two broad categories of activities: the primary activities foremost in creating value for customers and the requisite support activities that facilitate and enhance the performance of the primary activities.11 The kinds of primary and secondary activities that constitute a company’s value chain vary according to the specifics of a company’s business; hence, the listing of the primary and support activities in Figure 4.3 is illustrative rather than definitive. For example, the primary activities at a hotel operator like Starwood Hotels and Resorts mainly consist of site selection and construction, reservations, and hotel operations (check-in and check-out, maintenance and housekeeping, dining and room service, and conventions and meetings); principal support activities that drive costs and impact customer value include hiring and training hotel staff and handling general administration. Supply chain management is a crucial activity for J.Crew and Boeing but is not a value chain component at Facebook, LinkedIn, or Goldman Sachs. Sales and marketing are dominant activities at GAP and but have only minor roles at oil-drilling companies and natural gas pipeline companies. Customer delivery is a crucial activity at Domino’s Pizza but insignificant at Starbucks. page 100 FIGURE 4.3 A Representative Company Value Chain Source: Based on the discussion in Michael E. Porter, Competitive Advantage (New York: Free Press, 1985), pp. 37–43. page 101 With its focus on value-creating activities, the value chain is an ideal tool for examining the workings of a company’s customer value proposition and business model. It permits a deep look at the company’s cost structure and ability to offer low prices. It reveals the emphasis that a company places on activities that enhance differentiation and support higher prices, such as service and marketing. It also includes a profit margin component, since profits are necessary to compensate the company’s owners and investors, who bear risks and provide capital. Tracking the profit margin along with the value-creating activities is critical because unless an enterprise succeeds in delivering customer value profitably (with a sufficient return on invested capital), it can’t survive for long. Attention to a company’s profit formula in addition to its customer value proposition is the essence of a sound business model, as described in Chapter 1. Illustration Capsule 4.1 shows representative costs for various value chain activities performed by Boll & Branch, a maker of luxury linens and bedding sold directly to consumers online. Comparing the Value Chains of Rival Companies Value chain analysis facilitates a comparison of how rivals, activity by activity, deliver value to customers. Even rivals in the same industry may differ significantly in terms of the activities they perform. For instance, the “operations” component of the value chain for a manufacturer that makes all of its own parts and components and assembles them into a finished product differs from the “operations” of a rival producer that buys the needed parts and components from outside suppliers and performs only assembly operations. How each activity is performed may affect a company’s relative cost position as well as its capacity for differentiation. Thus, even a simple comparison of how the activities of rivals’ value chains differ can reveal competitive differences. A Company’s Primary and Secondary Activities Identify the Major Components of Its Internal Cost Structure The combined costs of all the various primary and support activities constituting a company’s value chain define its internal cost structure. Further, the cost of each activity contributes to whether the company’s overall cost position relative to rivals is favorable or unfavorable. The roles of value chain analysis and benchmarking are to develop the data for comparing a company’s costs activity by activity against the costs of key rivals and to learn which internal activities are a source of cost advantage or disadvantage. A company’s cost-competitiveness depends not only on the costs of internally performed activities (its own value chain) but also on costs in the value chains of its suppliers and distribution-channel allies. Evaluating a company’s cost-competitiveness involves using what accountants call activity-based costing to determine the costs of performing each value chain activity.12 The degree to which a company’s total costs should be broken down into costs for specific activities depends on how valuable it is to know the costs of specific activities versus broadly defined activities. At the very least, cost estimates are needed for each broad category of primary and support activities, but cost estimates for more specific activities within each broad category may be needed if a company discovers that it has a cost disadvantage vis-à-vis rivals and wants to pin down the exact source or activity causing the cost disadvantage. However, a company’s own internal costs may be insufficient to assess whether its product offering and customer value proposition are competitive with those of rivals. Cost and price differences among competing companies can have their origins in activities performed by suppliers or by distribution allies involved in getting the product to the final customers or end users of the product, in which case the company’s entire value chain system becomes relevant. page 102 © belchonock/iStock/Getty Images A king-size set of sheets from Boll & Branch is made from 6 meters of fabric, requiring 11 kilograms of raw cotton. Raw Cotton $ 28.16 Spinning/Weaving/Dyeing 12.00 Cutting/Sewing/Finishing 9.50 Material Transportation 3.00 Factory Fee 15.80 Cost of Goods $ 68.46 Inspection Fees 5.48 Ocean Freight/Insurance 4.55 Import Duties 8.22 Warehouse/Packing 8.50 Packaging 15.15 Customer Shipping 14.00 Promotions/Donations* 30.00 Total Cost $154.38 Boll & Brand Markup About 60% Boll & Brand Retail Price $250.00 Gross Margin** $ 95.62 Source: Adapted from Christina Brinkley, “What Goes into the Price of Luxury Sheets?” The Wall Street ­Journal, March 29, 2014, (accessed February 16, 2016). page 103 The Value Chain System A company’s value chain is embedded in a larger system of activities that includes the value chains of its suppliers and the value chains of whatever wholesale distributors and retailers it utilizes in getting its product or service to end users. This value chain system (sometimes called a vertical chain) has implications that extend far beyond the company’s costs. It can affect attributes like product quality that enhance differentiation and have importance for the company’s customer value proposition, as well as its profitability.13 Suppliers’ value chains are relevant because suppliers perform activities and incur costs in creating and delivering the purchased inputs utilized in a company’s own value-creating activities. The costs, performance features, and quality of these inputs influence a company’s own costs and product differentiation capabilities. Anything a company can do to help its suppliers drive down the costs of their value chain activities or improve the quality and performance of the items being supplied can enhance its own competitiveness—a powerful reason for working collaboratively with suppliers in managing supply chain activities.14 For example, automakers have encouraged their automotive parts suppliers to build plants near the auto assembly plants to facilitate just-in-time deliveries, reduce warehousing and shipping costs, and promote close collaboration on parts design and production scheduling. Similarly, the value chains of a company’s distribution-channel partners are relevant because (1) the costs and margins of a company’s distributors and retail dealers are part of the price the ultimate consumer pays and (2) the activities that distribution allies perform affect sales volumes and customer satisfaction. For these reasons, companies normally work closely with their distribution allies (who are their direct customers) to perform value chain activities in mutually beneficial ways. For instance, motor vehicle manufacturers have a competitive interest in working closely with their automobile dealers to promote higher sales volumes and better customer satisfaction with dealers’ repair and maintenance services. Producers of kitchen cabinets are heavily dependent on the sales and promotional activities of their distributors and building supply retailers and on whether distributors and retailers operate cost-effectively enough to be able to sell at prices that lead to attractive sales volumes. As a consequence, accurately assessing a company’s competitiveness entails scrutinizing the nature and costs of value chain activities throughout the entire value chain system for delivering its products or services to end-use customers. A typical value chain system that incorporates the value chains of suppliers and forward-channel allies (if any) is shown in Figure 4.4. As was the case with company value chains, the specific activities constituting value chain systems vary significantly from industry to industry. The primary value chain system activities in the pulp and paper industry (timber farming, logging, pulp mills, and papermaking) differ from the primary value page 104chain system activities in the home appliance industry (parts and components manufacture, assembly, wholesale distribution, retail sales) and yet again from the computer software industry (programming, disk loading, marketing, distribution). FIGURE 4.4 A Representative Value Chain System Source: Based in part on the single-industry value chain displayed in Michael E. Porter, Competitive Advantage (New York: Free Press, 1985), p. 35. Benchmarking: A Tool for Assessing Whether the Costs and Effectiveness of a Company’s Value Chain Activities Are in Line CORE CONCEPT Benchmarking is a potent tool for improving a company’s own internal activities that is based on learning how other companies perform them and borrowing their “best practices.” Benchmarking entails comparing how different companies (both inside and outside the industry) perform various value chain activities—how materials are purchased, how inventories are managed, how products are assembled, how fast the company can get new products to market, how customer orders are filled and shipped—and then making cross-company comparisons of the costs and effectiveness of these activities.15 The objectives of benchmarking are to identify the best means of performing an activity and to emulate those best practices. CORE CONCEPT A best practice is a method of performing an activity that consistently delivers superior results compared to other approaches. A best practice is a method of performing an activity or business process that consistently delivers superior results compared to other approaches.16 To qualify as a legitimate best practice, the method must have been employed by at least one enterprise and shown to be consistently more effective in lowering costs, improving quality or performance, shortening time requirements, enhancing safety, or achieving some other highly positive operating outcome. Best practices thus identify a path to operating excellence with respect to value chain activities. Xerox pioneered the use of benchmarking to become more cost-competitive, quickly deciding not to restrict its benchmarking efforts to its office equipment rivals but to extend them to any company regarded as “world class” in performing any activity relevant to Xerox’s business. Other companies quickly picked up on Xerox’s approach. Toyota managers got their idea for just-in-time inventory deliveries by studying how U.S. supermarkets replenished their shelves. Southwest Airlines reduced the turnaround time of its aircraft at each scheduled stop by studying pit crews on the auto racing circuit. More than 80 percent of Fortune 500 companies reportedly page 105use benchmarking for comparing themselves against rivals on cost and other competitively important measures. The tough part of benchmarking is not whether to do it but, rather, how to gain access to information about other companies’ practices and costs. Sometimes benchmarking can be accomplished by collecting information from published reports, trade groups, and industry research firms or by talking to knowledgeable industry analysts, customers, and suppliers. Sometimes field trips to the facilities of competing or noncompeting companies can be arranged to observe how things are done, compare practices and processes, and perhaps exchange data on productivity and other cost components. However, such companies, even if they agree to host facilities tours and answer questions, are unlikely to share competitively sensitive cost information. Furthermore, comparing two companies’ costs may not involve comparing apples to apples if the two companies employ different cost accounting principles to calculate the costs of particular activities. Benchmarking the costs of company activities against those of rivals provides hard evidence of whether a company is cost-competitive. However, a third and fairly reliable source of benchmarking information has emerged. The explosive interest of companies in benchmarking costs and identifying best practices has prompted consulting organizations (e.g., Accenture, A. T. Kearney, Benchnet—The Benchmarking Exchange, and Best Practices, LLC) and several associations (e.g., the QualServe Benchmarking Clearinghouse, and the Strategic Planning Institute’s Council on Benchmarking) to gather benchmarking data, distribute information about best practices, and provide comparative cost data without identifying the names of particular companies. Having an independent group gather the information and report it in a manner that disguises the names of individual companies protects competitively sensitive data and lessens the potential for unethical behavior on the part of company personnel in gathering their own data about competitors. Illustration Capsule 4.2 describes benchmarking practices in the cement industry. Strategic Options for Remedying a Cost or Value Disadvantage The results of value chain analysis and benchmarking may disclose cost or value disadvantages relative to key rivals. Such information is vital in crafting strategic actions to eliminate any such disadvantages and improve profitability. Information of this nature can also help a company find new avenues for enhancing its competitiveness through lower costs or a more attractive customer value proposition. There are three main areas in a company’s total value chain system where company managers can try to improve its efficiency and effectiveness in delivering customer value: (1) a company’s own internal activities, (2) suppliers’ part of the value chain system, and (3) the forward-channel portion of the value chain system. Improving Internally Performed Value Chain Activities Managers can pursue any of several strategic approaches to reduce the costs of internally performed value chain activities and improve a company’s cost-competitiveness. They can implement best practices throughout the company, particularly for high-cost activities. They can redesign the product and/or some of its components to eliminate high-cost components or facilitate speedier and more economical manufacture or assembly. They can relocate high-cost activities (such as manufacturing) to geographic areas where they can be performed more cheaply or outsource activities to lower-cost vendors or contractors. page 106 Cement is a dry powder that creates concrete when mixed with water and sand. People interact with concrete every day. It is often the building material of choice for sidewalks, curbs, basements, bridges, and municipal pipes. Cement is manufactured at billion-dollar continuous-process plants by mining limestone, crushing it, scorching it in a kiln, and then milling it again. About 24 companies (CEMEX, Holcim, and Lafarge are some of the biggest) manufacture cement at 90 U.S. plants with the capacity to produce 110 million tons per year. Plants serve tens of markets distributed across multiple states. Companies regularly benchmark “delivered costs” to understand whether their plants are cost leaders or laggards. Delivered-cost benchmarking studies typically subdivide manufacturing and logistics costs into five parts: fixed-bin, variable-bin, freight-to-terminal, terminal operating, and freight-to-customer costs. These cost components are estimated using different sources. Fixed- and variable-bin costs represent the cost of making a ton of cement and moving it to the plant’s storage silos. They are the hardest to estimate. Fortunately, the Portland Cement Association, or PCA (the cement industry’s association), publishes key data for every plant that features plant location, age, capacity, technology, and fuel. Companies combine the industry data, satellite imagery revealing quarry characteristics, and news reports with the company’s proprietary plant-level financial data to develop their estimates of competitors’ costs. The basic assumption is that plants of similar size utilizing similar technologies and raw-material inputs will have similar cost performance. Logistics costs (including freight-to-terminal, terminal operating, and freight-to-customer costs) are much easier to accurately estimate. Cement companies use common carriers to move their product by barge, train, and truck transit modes. Freight pricing is competitive on a per-mile basis by mode, meaning that the company’s per-ton-mile barge cost applies to the competition. By combining the per-ton-mile cost with origin-destination distances, freight costs are easily calculated. Terminal operating costs, the costs of operating barge or rail terminals that store cement and transfer it to trucks for local delivery, represent the smallest fraction of total supply chain cost and typically vary little within mode type. For example, most barge terminals cost $10 per ton to run, whereas rail terminals are less expensive and cost $5 per ton. © Ulrich Doering/Alamy Stock Photo By combining all five estimated cost elements, the company benchmarks its estimated relative cost position by market. Using these data, strategists can identify which of the company’s plants are most exposed to volume fluctuations, which are in greatest need of investment or closure, which markets the company should enter or exit, and which competitors are the most likely candidates for product or asset swaps. Note: Developed with Peter Jacobson. Source: (accessed January 25, 2014). To improve the effectiveness of the company’s customer value proposition and enhance differentiation, managers can take several approaches. They can adopt best practices for quality, marketing, and customer service. They can reallocate resources to activities that address buyers’ most important purchase criteria, which will have the biggest impact on the value delivered to the customer. They can adopt new technologies that spur innovation, improve design, and enhance creativity. Additional approaches to managing value chain activities to lower costs and/or enhance customer value are discussed in Chapter 5. page 107 Improving Supplier-Related Value Chain Activities Supplier-related cost disadvantages can be attacked by pressuring suppliers for lower prices, switching to lower-priced substitute inputs, and collaborating closely with suppliers to identify mutual cost-saving opportunities.17 For example, just-in-time deliveries from suppliers can lower a company’s inventory and internal logistics costs and may also allow suppliers to economize on their warehousing, shipping, and production scheduling costs—a win–win outcome for both. In a few instances, companies may find that it is cheaper to integrate backward into the business of high-cost suppliers and make the item in-house instead of buying it from outsiders. Similarly, a company can enhance its customer value proposition through its supplier relationships. Some approaches include selecting and retaining suppliers that meet higher-quality standards, providing quality-based incentives to suppliers, and integrating suppliers into the design process. Fewer defects in parts from suppliers not only improve quality throughout the value chain system but can lower costs as well since less waste and disruption occur in the production processes. Improving Value Chain Activities of Distribution Partners Any of three means can be used to achieve better cost-competitiveness in the forward portion of the industry value chain: Pressure distributors, dealers, and other forward-channel allies to reduce their costs and markups. Collaborate with them to identify win–win opportunities to reduce costs—for example, a chocolate manufacturer learned that by shipping its bulk chocolate in liquid form in tank cars instead of as 10-pound molded bars, it could not only save its candy bar manufacturing customers the costs associated with unpacking and melting but also eliminate its own costs of molding bars and packing them. Change to a more economical distribution strategy, including switching to cheaper distribution channels (selling direct via the Internet) or integrating forward into company-owned retail outlets. The means to enhancing differentiation through activities at the forward end of the value chain system include (1) engaging in cooperative advertising and promotions with forward allies (dealers, distributors, retailers, etc.), (2) creating exclusive arrangements with downstream sellers or utilizing other mechanisms that increase their incentives to enhance delivered customer value, and (3) creating and enforcing standards for downstream activities and assisting in training channel partners in business practices. Harley-Davidson, for example, enhances the shopping experience and perceptions of buyers by selling through retailers that sell Harley-Davidson motorcycles exclusively and meet Harley-Davidson standards. Translating Proficient Performance of Value Chain Activities into Competitive Advantage A company that does a first-rate job of managing its value chain activities relative to competitors stands a good chance of profiting from its competitive advantage. A company’s value-creating activities can offer a competitive advantage in one of two ways (or both): They can contribute to greater efficiency and lower costs relative to competitors. They can provide a basis for differentiation, so customers are willing to pay relatively more for the company’s goods and services. page 108 Achieving a cost-based competitive advantage requires determined management efforts to be cost-efficient in performing value chain activities. Such efforts have to be ongoing and persistent, and they have to involve each and every value chain activity. The goal must be continuous cost reduction, not a one-time or on-again–off-again effort. Companies like Dollar General, Nucor Steel, Irish airline Ryanair, T.J.Maxx, and French discount retailer Carrefour have been highly successful in managing their value chains in a low-cost manner. Ongoing and persistent efforts are also required for a competitive advantage based on differentiation. Superior reputations and brands are built up slowly over time, through continuous investment and activities that deliver consistent, reinforcing messages. Differentiation based on quality requires vigilant management of activities for quality assurance throughout the value chain. While the basis for differentiation (e.g., status, design, innovation, customer service, reliability, image) may vary widely among companies pursuing a differentiation advantage, companies that succeed do so on the basis of a commitment to coordinated value chain activities aimed purposefully at this objective. Examples include Cartier (status), Room and Board (craftsmanship), American Express (customer service), Dropbox (innovation), and FedEx (reliability). How Value Chain Activities Relate to Resources and Capabilities There is a close relationship between the value-creating activities that a company performs and its resources and capabilities. An organizational capability or competence implies a capacity for action; in contrast, a value-creating activity initiates the action. With respect to resources and capabilities, activities are “where the rubber hits the road.” When companies engage in a value-creating activity, they do so by drawing on specific company resources and capabilities that underlie and enable the activity. For example, brand-building activities depend on human resources, such as experienced brand managers (including their knowledge and expertise in this arena), as well as organizational capabilities in advertising and marketing. Cost-cutting activities may derive from organizational capabilities in inventory management, for example, and resources such as inventory tracking systems. Because of this correspondence between activities and supporting resources and capabilities, value chain analysis can complement resource and capability analysis as another tool for assessing a company’s competitive advantage. Resources and capabilities that are both valuable and rare provide a company with what it takes for competitive advantage. For a company with competitive assets of this sort, the potential is there. When these assets are deployed in the form of a value-creating activity, that potential is realized due to their competitive superiority. Resource analysis is one tool for identifying competitively superior resources and capabilities. But their value and the competitive superiority of that value can be assessed objectively only after they are deployed. Value chain analysis and benchmarking provide the type of data needed to make that objective assessment. Performing value chain activities with capabilities that permit the company to either outmatch rivals on differentiation or beat them on costs will give the company a competitive advantage. There is also a dynamic relationship between a company’s activities and its resources and capabilities. Value-creating activities are more than just the embodiment of a resource’s or capability’s potential. They also contribute to the formation and development of capabilities. The road to competitive advantage begins with management efforts to build organizational expertise in performing certain competitively important value chain activities. With consistent practice and continuous investment of company resources, these activities rise to the level of a reliable organizational capability or a competence. To the extent that top management makes the growing capability a cornerstone of the company’s strategy, this capability becomes a core competence for the company. Later, with further organizational page 109learning and gains in proficiency, the core competence may evolve into a distinctive competence, giving the company superiority over rivals in performing an important value chain activity. Such superiority, if it gives the company significant competitive clout in the marketplace, can produce an attractive competitive edge over rivals. Whether the resulting competitive advantage is on the cost side or on the differentiation side (or both) will depend on the company’s choice of which types of competence-building activities to engage in over this time period. QUESTION 5: IS THE COMPANY COMPETITIVELY STRONGER OR WEAKER THAN KEY RIVALS? LO 5 How a comprehensive evaluation of a company’s competitive situation can assist managers in making critical decisions about their next strategic moves. Using resource analysis, value chain analysis, and benchmarking to determine a company’s competitiveness on value and cost is necessary but not sufficient. A more comprehensive assessment needs to be made of the company’s overall competitive strength. The answers to two questions are of particular interest: First, how does the company rank relative to competitors on each of the important factors that determine market success? Second, all things considered, does the company have a net competitive advantage or disadvantage versus major competitors? An easy-to-use method for answering these two questions involves developing quantitative strength ratings for the company and its key competitors on each industry key success factor and each competitively pivotal resource, capability, and value chain activity. Much of the information needed for doing a competitive strength assessment comes from previous analyses. Industry and competitive analyses reveal the key success factors and competitive forces that separate industry winners from losers. Benchmarking data and scouting key competitors provide a basis for judging the competitive strength of rivals on such factors as cost, key product attributes, customer service, image and reputation, financial strength, technological skills, distribution capability, and other factors. Resource and capability analysis reveals which of these are competitively important, given the external situation, and whether the company’s competitive advantages are sustainable. SWOT analysis provides a more comprehensive and forward-looking picture of the company’s overall situation. Step 1 in doing a competitive strength assessment is to make a list of the industry’s key success factors and other telling measures of competitive strength or weakness (6 to 10 measures usually suffice). Step 2 is to assign weights to each of the measures of competitive strength based on their perceived importance. (The sum of the weights for each measure must add up to 1.) Step 3 is to calculate weighted strength ratings by scoring each competitor on each strength measure (using a 1-to-10 rating scale, where 1 is very weak and 10 is very strong) and multiplying the assigned rating by the assigned weight. Step 4 is to sum the weighted strength ratings on each factor to get an overall measure of competitive strength for each company being rated. Step 5 is to use the overall strength ratings to draw conclusions about the size and extent of the company’s net competitive advantage or disadvantage and to take specific note of areas of strength and weakness. Table 4.4 provides an example of competitive strength assessment in which a hypothetical company (ABC Company) competes against two rivals. In the example, relative cost is the most telling measure of competitive strength, and the other strength measures are of lesser importance. The company with the highest rating on a given measure has an implied competitive edge on that measure, with the size of its edge reflected in the difference between its weighted rating and rivals’ weighted 110 For instance, Rival 1’s 3.00 weighted strength rating on relative cost signals a considerable cost advantage over ABC Company (with a 1.50 weighted score on relative cost) and an even bigger cost advantage over Rival 2 (with a weighted score of 0.30). The measure-by-measure ratings reveal the competitive areas in which a company is strongest and weakest, and against whom. Table 4.4 A Representative Weighted Competitive Strength Assessment High-weighted competitive strength ratings signal a strong competitive position and possession of competitive advantage; low ratings signal a weak position and competitive disadvantage. The overall competitive strength scores indicate how all the different strength measures add up—whether the company is at a net overall competitive advantage or disadvantage against each rival. The higher a company’s overall weighted strength rating, the stronger its overall competitiveness versus rivals. The bigger the differencepage 111 between a company’s overall weighted rating and the scores of lower-rated rivals, the greater is its implied net competitive advantage. Thus, Rival 1’s overall weighted score of 7.70 indicates a greater net competitive advantage over Rival 2 (with a score of 2.10) than over ABC Company (with a score of 5.95). Conversely, the bigger the difference between a company’s overall rating and the scores of higher-rated rivals, the greater its implied net competitive disadvantage. Rival 2’s score of 2.10 gives it a smaller net competitive disadvantage against ABC Company (with an overall score of 5.95) than against Rival 1 (with an overall score of 7.70). Strategic Implications of Competitive Strength Assessments A company’s competitive strength scores pinpoint its strengths and weaknesses against rivals and point directly to the kinds of offensive and defensive actions it can use to exploit its competitive strengths and reduce its competitive vulnerabilities. In addition to showing how competitively strong or weak a company is relative to rivals, the strength ratings provide guidelines for designing wise offensive and defensive strategies. For example, if ABC Company wants to go on the offensive to win additional sales and market share, such an offensive probably needs to be aimed directly at winning customers away from Rival 2 (which has a lower overall strength score) rather than Rival 1 (which has a higher overall strength score). Moreover, while ABC has high ratings for technological skills (a 10 rating), dealer network/distribution capability (a 9 rating), new product innovation capability (a 9 rating), quality/product performance (an 8 rating), and reputation/image (an 8 rating), these strength measures have low importance weights—meaning that ABC has strengths in areas that don’t translate into much competitive clout in the marketplace. Even so, it outclasses Rival 2 in all five areas, plus it enjoys substantially lower costs than Rival 2 (ABC has a 5 rating on relative cost position versus a 1 rating for Rival 2)—and relative cost position carries the highest importance weight of all the strength measures. ABC also has greater competitive strength than Rival 3 regarding customer service capabilities (which carries the second-highest importance weight). Hence, because ABC’s strengths are in the very areas where Rival 2 is weak, ABC is in a good position to attack Rival 2. Indeed, ABC may well be able to persuade a number of Rival 2’s customers to switch their purchases over to its product. But ABC should be cautious about cutting price aggressively to win customers away from Rival 2, because Rival 1 could interpret that as an attack by ABC to win away Rival 1’s customers as well. And Rival 1 is in far and away the best position to compete on the basis of low price, given its high rating on relative cost in an industry where low costs are competitively important (relative cost carries an importance weight of 0.30). Rival 1’s strong relative cost position vis-à-vis both ABC and Rival 2 arms it with the ability to use its lower-cost advantage to thwart any price cutting on ABC’s part. Clearly ABC is vulnerable to any retaliatory price cuts by Rival 1—Rival 1 can easily defeat both ABC and Rival 2 in a price-based battle for sales and market share. If ABC wants to defend against its vulnerability to potential price cutting by Rival 1, then it needs to aim a portion of its strategy at lowering its costs. The point here is that a competitively astute company should utilize the strength scores in deciding what strategic moves to make. When a company has important competitive strengths in areas where one or more rivals are weak, it makes sense to consider offensive moves to exploit rivals’ competitive weaknesses. When a company has important competitive weaknesses in areas where one or more rivals are strong, it makes sense to consider defensive moves to curtail its vulnerability. page 112 QUESTION 6: WHAT STRATEGIC ISSUES AND PROBLEMS MERIT FRONT-BURNER MANAGERIAL ATTENTION? The final and most important analytic step is to zero in on exactly what strategic issues company managers need to address—and resolve—for the company to be more financially and competitively successful in the years ahead. This step involves drawing on the results of both industry analysis and the evaluations of the company’s internal situation. The task here is to get a clear fix on exactly what strategic and competitive challenges confront the company, which of the company’s competitive shortcomings need fixing, and what specific problems merit company managers’ front-burner attention. Pinpointing the specific issues that management needs to address sets the agenda for deciding what actions to take next to improve the company’s performance and business outlook. Compiling a “priority list” of problems creates an agenda of strategic issues that merit prompt managerial attention. The “priority list” of issues and problems that have to be wrestled with can include such things as how to stave off market challenges from new foreign competitors, how to combat the price discounting of rivals, how to reduce the company’s high costs, how to sustain the company’s present rate of growth in light of slowing buyer demand, whether to correct the company’s competitive deficiencies by acquiring a rival company with the missing strengths, whether to expand into foreign markets, whether to reposition the company and move to a different strategic group, what to do about growing buyer interest in substitute products, and what to do to combat the aging demographics of the company’s customer base. The priority list thus always centers on such concerns as “how to . . . ,” “what to do about . . . ,” and “whether to . . .” The purpose of the priority list is to identify the specific issues and problems that management needs to address, not to figure out what specific actions to take. Deciding what to do—which strategic actions to take and which strategic moves to make—comes later (when it is time to craft the strategy and choose among the various strategic alternatives). A good strategy must contain ways to deal with all the strategic issues and obstacles that stand in the way of the company’s financial and competitive success in the years ahead. If the items on the priority list are relatively minor—which suggests that the company’s strategy is mostly on track and reasonably well matched to the company’s overall situation—company managers seldom need to go much beyond fine-tuning the present strategy. If, however, the problems confronting the company are serious and indicate the present strategy is not well suited for the road ahead, the task of crafting a better strategy needs to be at the top of management’s action agenda. ILLUSTRATION CAPSULE 4.1 The Value Chain for Boll & Branch ILLUSTRATION CAPSULE 4.2 Delivered-Cost Benchmarking in the Cement Industry KEY POINTS There are six key questions to consider in evaluating a company’s ability to compete successfully against market rivals: How well is the present strategy working? This involves evaluating the strategy in terms of the company’s financial performance and market standing. The stronger a company’s current overall performance, the less likely the need for radical strategy changes. The weaker a company’s performance and/or the faster the page 113changes in its external situation (which can be gleaned from PESTEL and industry analysis), the more its current strategy must be questioned. What are the company’s most important resources and capabilities and can they give the company a sustainable advantage over competitors? A company’s resources can be identified using the tangible/intangible typology presented in this chapter. Its capabilities can be identified either by starting with its resources to look for related capabilities or looking for them within the company’s different functional domains. The answer to the second part of the question comes from conducting the four tests of a resource’s competitive power—the VRIN tests. If a company has resources and capabilities that are competitively valuable and rare, the firm will have a competitive advantage over market rivals. If its resources and capabilities are also hard to copy (inimitable), with no good substitutes (nonsubstitutable), then the firm may be able to sustain this advantage even in the face of active efforts by rivals to overcome it. Is the company able to seize market opportunities and overcome external threats to its future well-being? The answer to this question comes from performing a SWOT analysis. The two most important parts of SWOT analysis are (1) drawing conclusions about what strengths, weaknesses, opportunities, and threats tell about the company’s overall situation; and (2) acting on the conclusions to better match the company’s strategy to its internal strengths and market opportunities, to correct the important internal weaknesses, and to defend against external threats. A company’s strengths and competitive assets are strategically relevant because they are the most logical and appealing building blocks for strategy; internal weaknesses are important because they may represent vulnerabilities that need correction. External opportunities and threats come into play because a good strategy necessarily aims at capturing a company’s most attractive opportunities and at defending against threats to its well-being. Are the company’s cost structure and value proposition competitive? One telling sign of whether a company’s situation is strong or precarious is whether its costs are competitive with those of industry rivals. Another sign is how the company compares with rivals in terms of differentiation—how effectively it delivers on its customer value proposition. Value chain analysis and benchmarking are essential tools in determining whether the company is performing particular functions and activities well, whether its costs are in line with those of competitors, whether it is differentiating in ways that really enhance customer value, and whether particular internal activities and business processes need improvement. They complement resource and capability analysis by providing data at the level of individual activities that provide more objective evidence of whether individual resources and capabilities, or bundles of resources and linked activity sets, are competitively superior. On an overall basis, is the company competitively stronger or weaker than key rivals? The key appraisals here involve how the company matches up against key rivals on industry key success factors and other chief determinants of competitive success and whether and why the company has a net competitive advantage or disadvantage. Quantitative competitive strength assessments, using the method page 114presented in Table 4.4, indicate where a company is competitively strong and weak and provide insight into the company’s ability to defend or enhance its market position. As a rule, a company’s competitive strategy should be built around its competitive strengths and should aim at shoring up areas where it is competitively vulnerable. When a company has important competitive strengths in areas where one or more rivals are weak, it makes sense to consider offensive moves to exploit rivals’ competitive weaknesses. When a company has important competitive weaknesses in areas where one or more rivals are strong, it makes sense to consider defensive moves to curtail its vulnerability. What strategic issues and problems merit front-burner managerial attention? This analytic step zeros in on the strategic issues and problems that stand in the way of the company’s success. It involves using the results of industry analysis as well as resource and value chain analysis of the company’s competitive situation to identify a “priority list” of issues to be resolved for the company to be financially and competitively successful in the years ahead. Actually deciding on a strategy and what specific actions to take is what comes after developing the list of strategic issues and problems that merit front-burner management attention. Like good industry analysis, solid analysis of the company’s competitive situation vis-à-vis its key rivals is a valuable precondition for good strategy making. ASSURANCE OF LEARNING EXERCISES Using the financial ratios provided in Table 4.1 and the financial statement information presented below for Costco Wholesale Corporation, calculate the following ratios for Costco for both 2013 and 2014: Gross profit margin Operating profit margin Net profit margin Times-interest-earned (or coverage) ratio Return on stockholders’ equity Return on assets Debt-to-equity ratio Days of inventory Inventory turnover ratio Average collection period Based on these ratios, did Costco’s financial performance improve, weaken, or remain about the same from 2013 to 2014? LO 1 page 115 Consolidated Income Statements for Costco Wholesale Corporation, 2013–2014 (in millions, except per share data) 2014 2013 Net sales $110,212 $102,870 Membership fees 2,428 2,286 Total revenue 112,640 105,156 Merchandise costs 98,458 $ 91,948 Selling, general, and administrative 10,899 10,155 Operating income 3,220 3,053 Other income (expense) Interest expense (113) (99) Interest income and other, net 90 97 Income before income taxes 3,197 3,051 Provision for income taxes 1,109 990 Net income including noncontrolling interests 2,088 2,061 Net income attributable to noncontrolling interests (30) (22) Net income $ 2,058 $ 2,039 Basic earnings per share $ 4.69 $ 4.68 Diluted earnings per share $ 4.65 $ 4.63 Source: Costco Wholesale Corporation 2014 10-K. Consolidated Balance Sheets for Costco Wholesale Corporation, 2013–2014 (in millions, except per share data) August 31,2014 September 1, 2013 Assets Current Assets Cash and cash equivalents $ 5,738 $ 4,644 Short-term investments 1,577 1,480 Receivables, net 1,148 1,026 Merchandise inventories 8,456 7,894 page 116Deferred income taxes and other current assets 669 621 Total current assets 17,588 $ 15,840 Property and Equipment Land $ 4,716 $ 4,409 Buildings and improvements 12,522 11,556 Equipment and fixtures 4,845 4,472 Construction in progress 592 585 22,675 21,022 Less accumulated depreciation and amortization (7,845) (7,141) Net property and equipment 14,830 13,881 Other assets 606 562 Total assets $ 33,024 $ 30,283 Liabilities and Equity Current Liabilities Accounts payable $ 8,491 $ 7,872 Accrued salaries and benefits 2,231 2,037 Accrued member rewards 773 710 Accrued sales and other taxes 442 382 Deferred membership fees 1,254 1,167 Other current liabilities 1,221 1,089 Total current liabilities 14,412 13,257 Long-term debt, excluding current portion 5,093 4,998 Deferred income taxes and other liabilities 1,004 1,016 Total liabilities 20,509 $ 19,271 Commitments and Contingencies Equity Preferred stock $0.005 par value; 100,000,000 shares authorized; no shares issued and outstanding 0 0 Common stock $0.005 par value; 900,000,000 shares authorized; 436,839,000 and 432,350,000 shares issued and outstanding 2 2 Additional paid-in capital $ 4,919 $ 4,670 Accumulated other comprehensive (loss) income (76) (122) Retained earnings 7,458 6,283 Total Costco stockholders’ equity 12,303 10,833 Noncontrolling interests 212 179 Total equity 12,515 11,012 Total Liabilities and Equity $ 33,024 $ 30,283 Source: Costco Wholesale Corporation 2014 10-K. page 117Panera Bread operates more than 1,900 bakery-cafés in more than 45 states and Canada. How many of the four tests of the competitive power of a resource does the store network pass? Using your general knowledge of this industry, perform a SWOT analysis. Explain your answers. LO 2, LO 3 Review the information in Illustration Capsule 4.1 concerning Boll & Branch’s average costs of producing and selling a king-size sheet set, and compare this with the representative value chain depicted in Figure 4.3. Then answer the following questions: Which of the company’s costs correspond to the primary value chain activities depicted in Figure 4.3? Which of the company’s costs correspond to the support activities described in Figure 4.3? What value chain activities might be important in securing or maintaining Boll & Branch’s competitive advantage? Explain your answer. LO 4 Using the methodology illustrated in Table 4.3 and your knowledge as an automobile owner, prepare a competitive strength assessment for General Motors and its rivals Ford, Chrysler, Toyota, and Honda. Each of the five automobile manufacturers should be evaluated on the key success factors and strength measures of cost-competitiveness, product-line breadth, product quality and reliability, financial resources and profitability, and customer service. What does your competitive strength assessment disclose about the overall competitiveness of each automobile manufacturer? What factors account most for Toyota’s competitive success? Does Toyota have competitive weaknesses that were disclosed by your analysis? Explain. LO 5 EXERCISE FOR SIMULATION PARTICIPANTS Using the formulas in Table 4.1 and the data in your company’s latest financial statements, calculate the following measures of financial performance for your company: Operating profit margin Total return on total assets page 118Current ratio Working capital Long-term debt-to-capital ratio Price-to-earnings ratio LO 1 On the basis of your company’s latest financial statements and all the other available data regarding your company’s performance that appear in the industry report, list the three measures of financial performance on which your company did best and the three measures on which your company’s financial performance was worst. LO 1 What hard evidence can you cite that indicates your company’s strategy is working fairly well (or perhaps not working so well, if your company’s performance is lagging that of rival companies)? LO 1 What internal strengths and weaknesses does your company have? What external market opportunities for growth and increased profitability exist for your company? What external threats to your company’s future well-being and profitability do you and your co-managers see? What does the preceding SWOT analysis indicate about your company’s present situation and future prospects—where on the scale from “exceptionally strong” to “alarmingly weak” does the attractiveness of your company’s situation rank? LO 2, LO 3 Does your company have any core competencies? If so, what are they? LO 2, LO 3 What are the key elements of your company’s value chain? Refer to Figure 4.3 in developing your answer. LO 4 Using the methodology presented in Table 4.4, do a weighted competitive strength assessment for your company and two other companies that you and your co-managers consider to be very close competitors. LO 5 ENDNOTES 1 Birger Wernerfelt, “A Resource-Based View of the Firm,” Strategic Management Journal 5, no. 5 (September–October 1984), pp. 171–180; Jay Barney, “Firm Resources and Sustained Competitive Advantage,” Journal of Management 17, no. 1 (1991), pp. 99–120. 2 R. Amit and P. Schoemaker, “Strategic Assets and Organizational Rent,” Strategic Management Journal 14 (1993). 3 Jay B. Barney, “Looking Inside for Competitive Advantage,” Academy of Management Executive 9, no. 4 (November 1995), pp. 49–61; Christopher A. Bartlett and Sumantra Ghoshal, “Building Competitive Advantage through People,” MIT Sloan Management Review 43, no. 2 (Winter 2002), pp. 34–41; Danny Miller, Russell Eisenstat, and Nathaniel Foote, “Strategy from the Inside Out: Building Capability-Creating Organizations,” California Management Review 44, no. 3 (Spring 2002), pp. 37–54. 4 M. Peteraf and J. Barney, “Unraveling the Resource-Based Tangle,” Managerial and Decision Economics 24, no. 4 (June–July 2003), pp. 309–323. 5 Margaret A. Peteraf and Mark E. Bergen, “Scanning Dynamic Competitive Landscapes: A Market-Based and Resource-Based Framework,” Strategic Management Journal 24 (2003), pp. 1027–1042. 6 C. Montgomery, “Of Diamonds and Rust: A New Look at Resources,” in C. Montgomery (ed.), Resource-Based and Evolutionary ­Theories of the Firm (Boston: Kluwer ­Academic, 1995), pp. 251–268. 7 Constance E. Helfat and Margaret A. Peteraf, “The Dynamic Resource-Based View: Capability Lifecycles,” Strategic Management Journal 24, no. 10 (2003). 8 D. Teece, G. Pisano, and A. Shuen, “Dynamic Capabilities and Strategic Management,” Strategic Management Journal 18, no. 7 (1997), pp. 509–533; K. Eisenhardt and J. Martin, “Dynamic Capabilities: What Are They?” Strategic Management Journal 21, no. 10–11 (2000), pp. 1105–1121; M. Zollo and S. Winter, “Deliberate Learning and the Evolution of Dynamic Capabilities,” Organization Science 13 (2002), pp. 339–351; C. Helfat et al., Dynamic Capabilities: Understanding Strategic Change in Organizations (Malden, MA: Blackwell, 2007). 9 Donald Sull, “Strategy as Active Waiting,” Harvard Business Review 83, no. 9 ­(September 2005), pp. 121–126. page 119 10 M. Peteraf, “The Cornerstones of Competitive Advantage: A Resource-Based View,” Strategic Management Journal, March 1993, pp. 179–191. 11 Michael Porter in his 1985 best seller Competitive Advantage (New York: Free Press). 12 John K. Shank and Vijay Govindarajan, Strategic Cost Management (New York: Free Press, 1993), especially chaps. 2–6, 10, and 11; Robin Cooper and Robert S. Kaplan, “Measure Costs Right: Make the Right Decisions,” Harvard Business Review 66, no. 5 (September–October, 1988), pp. 96–103; Joseph A. Ness and Thomas G. Cucuzza, “Tapping the Full Potential of ABC,” Harvard Business Review 73, no. 4 (July–August 1995), pp. 130–138. 13 Porter, Competitive Advantage, p. 34. 14 Hau L. Lee, “The Triple-A Supply Chain,” Harvard Business Review 82, no. 10 (October 2004), pp. 102–112. 15 Gregory H. Watson, Strategic Benchmarking: How to Rate Your Company’s Performance against the World’s Best (New York: Wiley, 1993); Robert C. Camp, Benchmarking: The Search for Industry Best Practices That Lead to Superior Performance (Milwaukee: ASQC Quality Press, 1989); Dawn Iacobucci and Christie Nordhielm, “Creative Benchmarking,” Harvard Business Review 78 no. 6 (November–December 2000), pp. 24–25. 16 (accessed December 2, 2009). 17 Reuben E. Stone, “Leading a Supply Chain Turnaround,” Harvard Business Review 82, no. 10 (October 2004), pp. 114–121.