Tutor: Neihana Jacob
Due Date: 4/4/12
Word Count: 1234
In 1979, Michael Hill started Michael Hill Jewellers (MHJ) after 20 years of working in his uncle’s jewellery store. Doing away with the usual giftware items and the more formal atmosphere, his strategy was to make shopping for jewellery more accessible to the public. One strength of the company is the strict use of the Friedman Group’s sales techniques. This allows the staff to maximise conversion rates and increase sales. One threat to MHJ is that another company can easily enter the market that may be able to overtake Michael Hill as one of the leading jewellers in New Zealand. Through an internal environmental analysis, the strengths and weaknesses of the company can be identified and acted upon. The strengths can be perfected or improved on and weaknesses can be remedied. Resources, Capabilities and Core Competencies
A tangible resource is “an asset that can be seen or quantified”. (Hanson, Hitt, Ireland, & Hoskisson, 2011, p. 76) One tangible resource belonging to Michael Hill is the equipment used to manufacture the jewellery. An intangible resource can’t be seen or touched but is usually more important in developing core competencies as it is harder for competitors to understand and replicate. One intangible resource belonging to Michael Hill is their comprehensive salesperson training. (Clark, 1998, p. 41) A capability is when “resources have been integrated to achieve a specific task.” (Hanson, Hitt, Ireland, & Hoskisson, 2011, p. 79) One such capability is the ability to create jewellery that is durable. Michael Hill uses their experience, knowledge, equipment, access to raw materials, etc. To create items of jeweller that will last. Another example is the motivation of its employees through various incentives and rewards. This uses the resources of staff, training, and capital to help improve the performance of its salespeople. (Clark, 1998, p. 43) A core competency is a capability that creates competitive advantage over the competition. (Hanson, Hitt, Ireland, & Hoskisson, 2011, p. 79) Michael Hill’s stringent use of the Freidman Group’s sales training has created a competitive advantage over other jewellers and is therefore a core competency. Even though the implementation was expensive, the company understands that the sales encounter is their only source of income and uses every opportunity to turn shoppers into buyers. (Clark, 1998, p. 41) Another core competency of the company is the fact that Michael Hill has an international distribution network. This means that, unlike other New Zealand jewellers, the company has the ability to sell its products into multiple markets and exploiting opportunities that are not available to other jewellers. (Michael Hill Company History) VRIO Framework
The VRIO framework looks at a company as a bundle of resources some of which are rare or costly to produce. If some resources in this bundle create value, are rare, and costly to produce then as long as the company is set up to exploit this, a sustained competitive advantage will be created. (Barney, 1997, p. 142) The VRIO framework analyses the competencies of an organisation and ask the following questions: Value - Does the competency provide customer value? A valuable capability exploited by Michael Hill is the experience of its manufacturing department. They have the knowledge and abilities that allow them to create high quality jewellery that can be sold for reasonable prices to the customer, therefore delivering value. Rarity - Can other competitors possess the competency? Michael Hill does not necessarily possess any distinctly rare capabilities. Instead they rely on capabilities that are valuable but common in other retail stores (like experienced staff, or quality product) or costly to imitate (like Friedman training, or information systems). It is actually the successful integration of these capabilities that...