Internal Analysis

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Internal Analysis

• Evaluating a Companys Resources and Competitive
  Position
• Pages 94 - 131

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Profitability in the U.S. Retailing Industry,
1996-2001
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Why Internal Analysis?

• Early strategy theory rooted in industry
  structural analysis - external focus
• This approach has lost its appeal because
• internationalization deregulation has all but
  removed safe havens
• technology and changes in demand have blurred
  industry lines

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Internal Analysis

• Tools and Concepts
• Sustainable Competitive Advantage
• Value Chain
• SWOT Analysis

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The Role of Resources and Capabilities in the
Creation of Profit and Sustainable Competitive
Advantage
Resources
Build
Shape
Competitive Advantages
Distinctive Competencies
Core Competencies
Strategies
Build
Capabilities
Competitiveness Profit
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Resources Capabilities

• Resources are what you have Capabilities are
  what you can do
• Physical asset
• Human assets or intellectual capital
• Organizational asset
• Intangible assets
• Competitive achievement
• Alliance or cooperative venture

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Core Competencies

• central to the firms competitiveness
• rewarded in market place
• combination of skills knowledge, not products
  or functions
• flexible, long term platforms
• embedded in the organizations systems
• distinctive competencies are those the firm
  performs better than rivals
• All core competencies have the potential to
  become core rigidities

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Sustainable Competitive Advantage

• Must be valuable, rare, inimitable, and
  non-substitutable
• Sustainability is a function of
• Durability - how long will it last?
• Technology? Reputation? Fixed Assets?
• Imitability - how quickly can it be copied?
• Transparent - easy to see?
• Transferable - can it be done elsewhere?
• Replicable - can we do it here?

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Another Tool to Consider

• Porters Value Chain

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Relative costs and prices

• Where do cost/price differences come from?
• raw materials and components
• differences in technology, plant, equipment
• efficiencies, learning, experience, wages,
  productivity
• marketing, sales, promotion, warehousing,
  distribution, administration costs
• distribution
• inflation, exchange and tax rates

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Value Creation per Unit
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Comparing Toyota and General Motors
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Porters Value Chain

• Views the organization as a series (chain) of
  activities, which may or may not create value

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Porters Value Chain (cont.)

• Primary Activities
• Inbound logistics Supply Chain Management
• Operations
• Outbound logistics - Distribution
• Marketing and sales
• Customer service
• Contribute to the physical creation of the
  product/service, its sale and transfer to the
  buyer, and its service after the sale

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Porters Value Chain (cont)

• Support Activities
• Company infrastructure General Admin
• Human resource management
• RD, Technology and Systems Development
• Procurement

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The Value Chain
S u p p o r t
Company Infrastructure
HRM
RD, Technology Systems Development
Margin
Procurement
Service
Primary
Marketing Sales
Inbound Logistics
Outbound Logistics
Operations
Margin
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A low cost strategy..
Company Infrastructure
HRM
Margin
RD, Technology Systems Development
Procurement
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
Operations
Margin
tries to pull the arrow back..
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Low Cost - Support Activity examples...
Fewer layers of management
Policies to reduce turnover
WalMarts inventory system
Margin
Monitor supplier performance
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
Operations
Margin
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Low cost - Primary Activity examples.

• Inbound -
• Operations -
• Outbound -
• Marketing/Sales -
• Customer Service -

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A differentiation strategy..
Company Infrastructure
HRM
RD, Technology Systems Development
Margin
Procurement
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
Operations
Margin
.tries to pull the arrow forward...
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Differentiation - Support Activity examples...
Commitment to quality
Compensation rewarding innovation
Amazon recommendations
Margin
Purchasing high-quality components
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
Operations
Margin
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Differentiation - Primary Activity examples...

• Inbound -
• Operations -
• Outbound -
• Market/Sales -
• Customer Service -

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Your Firm
Buyers
Suppliers
Your Rivals
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SWOT Analysis

• Strengths
• Weaknesses
• Opportunities
• Threats
• Maximize Strengths and Opportunities
• Minimize Weaknesses and Threats

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Evaluation of Resources

• Strength or Weakness
• relative to competitors
• basic business requirements
• key vulnerabilities

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