Transcript No Slide Title

Key Points:
Chapter 3: Internal Analysis
• Understand the following key concepts:
• Resources, Capabilities, Core Competencies,
Sustainable Competitive Advantage, Strategic
Competitiveness
• Understand how to determine if a capability is a core
competency
• Four criteria of sustainable advantage
• rare, valuable, costly to imitate, nonsubstitutable
• Value chain analysis
• SWOT Analysis
• Financial Analysis
Norman, BUS 4385
Internal Analysis
• Resource-Based Model: a firm possesses
heterogeneous resources, capabilities, and core
competencies that allow it to create a unique market
position
• Internal analysis should be used in concert with an
analysis of a firm’s external environment to
develop a firm’s strategic intent and strategic
mission
• Internal analysis, external analysis, strategic intent, and
strategic mission are combined to formulate and
implement strategy
Norman, BUS 4385
Figure 3.2
Components of
Internal Analysis
Strategic
Competitiveness
Above-average
returns
Competitive
Advantage
Discovering
Core
Competencies
Core
Competencies
Capabilities
Teams of
resources
Resources
* Tangible
* Intangible
Four Criteria
of Sustainable
Advantages
• Rare
• Valuable
• Costly to Imitate
• Nonsubstitutable
Value
Chain
Analysis
• What to do in-house
• What to outsource
Norman, BUS 4385
Core Competencies
• What a firm does that distinguishes it from its
competitors and is, therefore, strategically valuable
• An integration of capabilities
•
•
•
•
•
Examples: customer service, engine technology
Not a product or a single skill
Emerge over time–may take 5-10 years to develop
Become more valuable with use
Often learning and knowledge based
• Firms should focus on 3-4 core competencies
• Can become core rigidities if they are no longer
competitively relevant
Norman, BUS 4385
Key Questions for Managers
• How do we assemble bundles of resources,
capabilities, and competencies to create value for
customers?
• Will environmental changes make our core
competencies obsolete?
• Are substitutes available for our core
competencies?
• Are our core competencies easily imitated?
Norman, BUS 4385
Four Criteria of Sustainable Advantages
• Rare
• Valuable: help a firm exploit opportunities or neutralize
threats
• Costly to Imitate
• Unique historical conditions
• Casual ambiguity
• Social complexity
• Nonsubstitutable: no strategic equivalent (cannot achieve
same outcome or strategy using different capabilities)
Norman, BUS 4385
Outcomes from Combinations of the Criteria
for Sustainable Competitive Advantage
Valuable
Rare
Costly to
Imitate
Nonsubstitutable
Competitive Performance
Consequences Implications
Below
Average
Returns
NO
NO
NO
NO
Competitive
Disadvantage
YES
NO
NO
YES/NO
Competitive
Parity
Average
Returns
YES/NO
Temporary
Competitive
Advantage
Aver./Above
Average
Returns
YES
Sustainable
Competitive
Advantage
Above
Average
Returns
YES
YES
YES
YES
NO
YES
Norman, BUS 4385
Value Chain Analysis: Figure 3.6
Firm Infrastructure
Human Resource Management
Technological Development
Primary Activities
Service
Marketing
& Sales
Outbound
Logistics
Operations
Procurement
Inbound
Logistics
Support
Activities
Norman, BUS 4385
Value Chain Analysis
• Identify which resources and capabilities add value
• Goal: add as much value as cheaply as possible
• To be a source of competitive advantage, a firm
must either perform an activity:
• In a manner that is superior to other firms
• That other firms cannot perform
Norman, BUS 4385
SWOT Analysis
STRENGTH: something a firm is good at doing
or a characteristic that gives it an important
capability (skills, expertise, resource, capability, or
achievement)
• Determine which strengths are most important
in determining performance, in competing
successfully, and in forming a powerful
strategy.
• Form the basis for competitive advantage and
the cornerstone of strategy
Norman, BUS 4385
SWOT Analysis
WEAKNESS: something a company lacks or
does poorly (in comparison to others) or a
condition that puts it at a disadvantage
• Determine which weaknesses may be fatal,
which are inconsequential, and which can be
easily remedied
• Strategy must take into account weaknesses
Norman, BUS 4385
SWOT Analysis
OPPORTUNITY: something in the environment
that may be exploited to the firm’s advantage
• Range from very attractive to marginally
attractive
• Most relevant ones are those that offer:
• avenues for profitable growth
• most potential for competitive advantage
• firm has the financial resources to pursue
Norman, BUS 4385
SWOT Analysis
THREAT: something in the environment that has
the potential to reduce a firm’s performance or
destroy its competitive advantage
Norman, BUS 4385
SWOT Analysis
• Strategy must match firm’s situation
• More than just making lists; must evaluate and
draw conclusions
Norman, BUS 4385
SWOT Questions
• Is the industry attractive?
• Where do the most important threats and
opportunities exist?
• How attractive is the firm’s situation?
• What strategic actions need to be taken?
Norman, BUS 4385
SWOT Questions
• What opportunities does the company have
the skills and resources to pursue with a real
chance of success? Which opportunities are
“best” from the company’s standpoint?
• What external threats should management
be worried most about and what strategic
moves should be considered to counter
these threats?
Norman, BUS 4385