Saturday, April 4, 2015

Evaluating Cessna's Resources

I have been a bit lax in updating this blog, mostly due to things picking up substantially at work.  As the semester is getting close to ending, I will be updating much more often and probably putting in some late nights.  Please accept my sincerest apologies if some things don't make sense, as sleep deprivation can be a wild ride.

In this installment, I want to take a look at a resource-based analysis of Cessna and its internal strengths and weaknesses.  This can easily be done with the VRIO framework.  Below, we will look at Value, Rarity, Imitability, and Organization to determine how strong or weak the company is looking.

Value - The main question to ask here is Do Cessna's resources and capabilities enable it to respond to environmental threats or opportunities?  Cessna is has significant capabilities and experience in the aircraft manufacturing business and can easily respond to a changing environment.  The company has longstanding relationships with organizations, and has recently negotiated with the Civil Air Patrol to provide them with 21 new aircraft.  Agreements such as this will help provide a baseline number of aircraft sales even if the economy puts many individual buyers out of the market.

Rarity - Is a resource currently controlled by a small number of firms? I don't see Cessna as controlling many resources in the raw materials sense.  The company may be able to negotiate lower prices due to its sheer size.

Imitability - Do firms without a resource face a cost-disadvantage in obtaining or developing it?  I see Cessna as having somewhat of an advantage in this area.  Cessna does have a subsidy, McCauley Propellers, which gives the company a cost advantage in producing a key component to many of its aircraft.

Organization - Are Cessna's other policies and procedures organized to support the exploitation of its valuable, rare, and costly-to-imitate resources?  I think that Cessna is certainly able to exploit its resources.  Being a division of much larger Textron gives the company significantly more power as both a buyer and a supplier of resources and finished products.  Cessna can offer many products at competitive prices and still maintain a high quality product.

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