Internal Analysis:

1

• Internal Analysis
• Resources, Capabilities and
• Core Competencies

2
Key Questions

• What is a resource?
• What is a capability?
• Whats the difference
• Potential vs. Kinetic energy?
• How do resources and/or capabilities contribute
  to competitive advantage?

3
What a firm Has...
Resources
Resources
Resources represent inputs into a firms
production process...
such as capital equipment, skills of employees,
brand names, finances and talented managers
4
Capabilities
What a firm Does...
5
What a firm Does...
Core Competencies
that is Strategically Valuable
Core Competencies must be
Valuable
Capabilities that either help a firm to exploit
opportunities to create value for customers or to
neutralize threats in the environment
6
What a firm Does...
Core Competencies
that is Strategically Valuable
Core Competencies must be
Valuable
Capabilities that either help a firm to exploit
opportunities to create value for customers or to
neutralize threats in the environment
Rare
Capabilities that are possessed by few, if any,
current or potential competitors
7
What a firm Does...
Core Competencies
that is Strategically Valuable
Core Competencies must be
Valuable
Capabilities that either help a firm to exploit
opportunities to create value for customers or to
neutralize threats in the environment
Rare
Capabilities that are possessed by few, if any,
current or potential competitors
Costly to Imitate
Capabilities that other firms cannot develop
easily, usually due to unique historical
conditions, causal ambiguity or social complexity
8
What a firm Does...
Core Competencies
that is Strategically Valuable
Core Competencies must be
Valuable
Capabilities that either help a firm to exploit
opportunities to create value for customers or to
neutralize threats in the environment
Rare
Capabilities that are possessed by few, if any,
current or potential competitors
Costly to Imitate
Capabilities that other firms cannot develop
easily, usually due to unique historical
conditions, causal ambiguity or social complexity
Nonsubstitutable
Capabilities that do not have strategic
equivalents, such as firm-specific knowledge or
trust-based relationships
9
Value Chain Analysis
To identify which resources and capabilities can
add value
Support Activities
Primary Activities
10
Value Chain Analysis
helps to identify which resources and
capabilities can add value
Support Activities
Inbound Logistics
Primary Activities
11
Value Chain Analysis
helps to identify which resources and
capabilities can add value
Support Activities
Inbound Logistics
Operations
Primary Activities
12
Value Chain Analysis
helps to identify which resources and
capabilities can add value
Support Activities
Inbound Logistics
Outbound Logistics
Operations
Primary Activities
13
Value Chain Analysis
helps to identify which resources and
capabilities can add value
Support Activities
Outbound Logistics
Marketing Sales
Inbound Logistics
Operations
Primary Activities
14
Value Chain Analysis
helps to identify which resources and
capabilities can add value
Support Activities
Service
Inbound Logistics
Outbound Logistics
Marketing Sales
Operations
Primary Activities
15
Value Chain Analysis
helps to identify which resources and
capabilities can add value
Support Activities
Procurement
Service
Inbound Logistics
Outbound Logistics
Marketing Sales
Operations
Primary Activities
16
Value Chain Analysis
helps to identify which resources and
capabilities can add value
Support Activities
Technological Development
Procurement
Service
Inbound Logistics
Outbound Logistics
Marketing Sales
Operations
Primary Activities
17
Value Chain Analysis
helps to identify which resources and
capabilities can add value
Human Resource Management
Support Activities
Technological Development
Procurement
Service
Inbound Logistics
Marketing Sales
Outbound Logistics
Operations
Primary Activities
18
Value Chain Analysis
helps to identify which resources and
capabilities can add value
Firm Infrastructure
Human Resource Management
Support Activities
Technological Development
Procurement
Service
Inbound Logistics
Marketing Sales
Outbound Logistics
Operations
Primary Activities
19
Value Chain Analysis
helps to identify which resources and
capabilities can add value
Firm Infrastructure
Human Resource Management
Support Activities
MARGIN
Technological Development
Procurement
Service
Inbound Logistics
Marketing Sales
Outbound Logistics
MARGIN
Operations
Primary Activities
20
Examples

• What are key sources of competitive advantage for
  following companies
• Honda
• McDonalds
• ESPN
• Dell
• Procter Gamble
• Steinway Pianos
• Wal-Mart
• The Grateful Dead
• Toyota