M A R C U S
3 INTERNAL ANALYSIS
Chapter Objectives • To review the basics of management theory. • To provide a number of approaches for analyzing a firm’s internal strengths and weaknesses including the value chain, the 7Ss, and the resource based view (RBV). • To distinguish between resources, capabilities, and competencies. • To explain how RBV may be used to achieve sustained competitive advantage (SCA).
Internal Analysis • Internal analysis is the process of examining an organization’s strengths and weaknesses. Its purpose is to understand the degree to which the organization can deal with the external opportunities and threats that it confronts. • It focuses on two questions: • What can an organization do to enhance its position? • How can it put itself in a better position to compete against its foes?
Ex. 3.1Strategy Requires External Analysis and Internal Analysis • Internal Analysis • Management Principles • Seven Ss • Value Chain • Resources, Capabilities, and Competencies • External Analysis • Five Forces • Macroenvironment • Stakeholders Strategy The Strategy-Environment Interface The Firm-Strategy Interface
Attributes of Core Competencies • Provide access to new markets • Give customer benefits • Difficult for competitors to imitate
Classic Approach to Management Theory • The organization must have: • A well defined hierarchy • A division of labor to allow high degrees of specialization • Specific assignments of authority and responsibility • Unity of command and direction and subordination of individual interest to the common good
The Human Relations Approach to Management Theory • Informal coordination in groups should replace centralized controls • Communications between employees and managers should be two-way • Compensation should be based on performance, not on following orders • Management should foster an environment that is conducive to employees’ development and learning
Ex. 3.3 The Value Chain Administration A c t I v i t i e s S u p p o r t Human Resource Management Technology Development Resource Procurement Profit Inbound Logistics Outbound Logistics Service Operations Marketing and Sales Primary Activities
Ex. 3.4Value Chain Linkages Channel Value Chain Customer Value Chain Supplier Value Chain Firm Value Chain Customer Value Chain Supplier Value Chain Channel Value Chain
Resources and Capabilities • Resources are the organization’s basic financial, physical, and human capital • Capabilities allow the organization to exploit these resources
Competencies • Competencies allow managers to link key resources and capabilities and to combine, transfer, and channel them to satisfy customer needs
Types of Resources Resources • Physical capital • Plant • Equipment • Land • Natural resources • Raw materials • Manufacturing robots • Financial capital • Money from: • Entrepreneurs • Equity holders • Bonds • Banks • Retained earnings
Ex. 3.9Interaction of Resources and Capabilities • Resources • Relatively easy to imitate • Buy on open market if tangible • Develop if intangible • Capabilities • Hard to imitate • Invisible to outsiders • Deep in company • Not dependent on individuals • Team chemistry • Competencies • Rare: possessed by few, if any, of firm’s competitors • Costly to imitate: other firms cannot obtain, or must obtain at much higher cost • Valuable: allow firm to exploit opportunities or neutralize threats in environment • Nonsubstitutable: nothing else provides same value + =
Ex. 3.10Creation of Distinctive Competencies • Hardware • Ingredients • Paint, Easel Resources • Superior • Efficiency • Quality • Innovation • Customer Responsiveness Distinctive Competence • Software • Recipes • Artistic Sense Capabilities
Ex. 3.11From Capabilities to Competencies Constituent Capabilities Distinctive Competencies Behind every distinctive competence there is blend of many capabilities • Efficient production • Skilled people • Low-cost supply • Efficient delivery and ordering Low-cost Products and Services • Product dev. Teams • Timely customer info. • Market research • Sales force feedback Innovative Products and Services • Close supplier ties • Und. What is happening in field • Point-of-sale data from vendors • Rapid inv. change Quick Response and Flexibility