Teaching Note: Costin Paving Case Study
Overview:
This case study describes, examines, and analyzes the generational differences between the
founder and successor, the challenges faced throughout the decades and as the business grew,
and how strategies had to be implemented to survive the changing business landscape.
Effective management of strategic issues remains an ongoing concern for Costin Paving
management in the areas of supply chain management, the seasonal nature of the industry, gas
& oil prices, and pricing of customer jobs.
Intended Audience:
This case provides a general overview of a small business and is suitable for undergraduate
students in the final year of general business/management studies who would be expected to
draw upon a wide range of topics for a single case (i.e., human resources, marketing,
operations management, etc.). The case is also for value to the ERC, small business support
and policy organizations as an example of a small business successfully navigating
generational challenges, growth, and ongoing management.
Further and deeper analysis could be provided by students at the Masters and MBA level who
would be challenged to think strategically about next steps for the business as it pertains to
future directions and succession planning.
Teaching Activities
Below are three teaching exercises that could be facilitated by the lecturer and completed by
students who have read the case study. These exercises are intended as a guideline of sample
questions that could be asked by the instructor. Exercises pertaining to this case are not limited
to only those in this teaching note.
1) The VRINE model comes from the understanding that competitors in an industry will have
different capabilities and that changing these is not done easily or quickly. This approach
assesses the company’s resources and capabilities using their attributes to determine which
provide the basis for the company’s competitive advantage. The VRINE model has five basic
attributes: Value, Rarity, Inimitability, Non-substitutability, and Exploitability. These attributes
determine whether a resource or capability can help the company compete and achieve
superior performance by asking, is it valuable? Is it rare? Is it inimitable? Is it exploitable?
Arrange students into small groups and ask them to identify Costin Paving’s resources and
capabilities, and explain their role in the company’s performance using the VRINE model.
For example, resources might include: Liquid asphalt, The Natural Gas Asphalt Plant, etc … a
capability might include: the ability to recycle asphalt
Resource/Capability:
Is it valuable?
Costin’ Pavings Natural gas asphalt plant Answers
Explanation:
Natural gas plant provides numerous Yes.
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benefits to the company including
protection against fluctuating oil prices, a
constant supply of gas, and minimizing
risk to the environment
Is it rare?
It is rare in the local geographic area.
However firms with enough capital
should be able to invest in their own
natural gas plants.
Is
it Substitutes do exist to natural gas
inimitable/substitutes? however it is not easily imitated by
competitors without capital investment.
Is it exploitable?
Yes, Costin Paving exploits this resource
to gain competitive advantage in the
industry. For example, they are not
reliant on gasoline supply trucks to keep
their asphalt plant active, which gives
them advantage over competitors.
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No, but upfront capital
required for acquiring.
Yes.
Yes.
2) Value-chain analysis takes the view that the business’s margin or profit depends on the
activities it performs.
Value-chain analysis is complementary to the VRINE model because activities are performed
using the resources and capabilities of the company. The activities of the firm are important
because they determine, at the end of the day, what the customer receives and price they are
willing to pay. By performing activities, Costin Paving incurs cost. The difference between the
cost of all activities associated with the product, and the price paid for the product by the
customer, is the value or profit margin created by the company.
For example, the value created by company can be increased by getting the customer to pay
more by providing more desirable products and services at a lower cost.
Value chain analysis could be utilized by students to help Costin Paving in three different ways:
1) It can help determine how changing activities along the value chain can increase the
value created by the company,
2) It can help explain why competitors in the same industry and with the same activities
create different amounts of value,
3) It can help determine which activities Costin Paving may outsource.
The starting point of all value-chain analysis is identifying the activities and linkages between
them. Below is Michael Porter’s generic value-chain analysis diagram which identifies the
activities and the linkages between them.
Arrange students into small groups and ask them to identify explain how value-chain activities
are related to firm performance and competitive advantage.
For example,
The Instructor and Students may wish to focus on:
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How Costin Paving can outperform rivals by finding ways to perform some value-chain
activities better than its rivals, or to find different ways of performing activities altogether.
Whether outsourcing of some value-chain activities is appropriate or not for Costin
Paving.
Strategic reconfiguration of Costin Paving’s value-chain activities to deliver comparable
value at lower cost (than rivals).
3) Our analysis so far has focused on the attributes & resources of the firm and its ability to
produce value as it pertains to competitive advantage. Taking more of a macro view which
covers the larger political, economic, social, technical, environmental, and legal issues will allow
Costin Paving to analyze the external environment in which they are doing business.
PESTEL analysis is a type of analytical technique which can enable the company to structure
analysis of their external environment by looking at political, economic, social, technical,
environmental, and legal issues. When applying the analysis only factors that could have a
potential impact on the company in the future are considered.
Have the students complete a PESTEL analysis for Costin Paving to identify the macro
characteristics of the external environment, to help the company better understand the
opportunities and threats they face by articulating the future business landscape and how the
business might compete profitably.
For example,
By examining, by examining the political environment Costin Paving can gain a better
understanding of the political underpinnings of small business environment in Nova Scotia.
… environmental issues are increasingly a concern for NSRBA members, an understanding of
current and upcoming government policy and best practices pertaining to environmental matters
would be helpful to guide the sustainability of Costin Paving’s practices.
… by examining the social context may identify future human resource challenges due to
increasing outmigration of workers in manual labour and trades positions and an aging
population.
4 If there is time, the course instructor may also wish to ask students to apply Porters five
factors model to identify the major features of the industry and forces that affect industry
profitability.
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