Strategy 3
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The document discusses how to conduct an internal analysis to assess a company's strengths and weaknesses. It explains that an internal analysis identifies organizational resources, capabilities, core competencies, and distinctive capabilities. It provides guidance on evaluating strengths and weaknesses, conducting a SWOT analysis, understanding the value chain and potential for outsourcing, and performing an internal analysis through a multi-step process to identify key capabilities.
Strategy 3
- 1. Strategic Management Internal Analysis: Assessing Strengths and Weaknesses
- 2. Learning Outline Understand organizational strengths and weaknesses Understand the relationship between organizational resources, organizational capabilities, core competencies, and distinctive organizational capabilities Understand the Value Chain Outsourcing How to do an Internal Analysis How to evaluate S&Ws 2
- 3. SWOT Analysis Threats Weaknesses Strengths Organization 3 Opportunities
- 4. What is an Internal Analysis Identifies and evaluates resources, capabilities, and core competencies As such organizations need to understand their Strengths are resources that an organization possesses and capabilities that an organization has developed that can be exploited and developed into a sustainable competitive advantage Weaknesses are resources and capabilities that are lacking or deficient and prevents an organization from developing a sustainable competitive advantage 4
- 5. The Road to Competitive Advantage Performance Results Competitive Advantage DistinctiveOrganizational Capabilities Organizational Organizational Core Resources Capabilities Competencies Financial assets Organizational processes Physical assets and routines Human resources Accumulated knowledge Intangible assets Actual work activities 5 Structural-cultural assets
- 6. The road to distinctive organizational capabilities Distinctive Organizational Capabilities Organizational Core Capabilities Competencies Organizational Capabilities Resources • Fundamental building block for Tangible developing core competencies Intangible •Organizational processes and routines to get the work done 6
- 7. The road to distinctive organizational capabilities Distinctive Organizational Capabilities Organizational Core Capabilities Competencies Organizational Capabilities Core Competencies •Fundamental building block for •Fundamental skills and capabilities developing core competencies • Organizational processes and •Exploitable by organization routines to get the work done •Major value-creating capabilities •Not a source of competitive advantage 7
- 8. Types of Core Competencies After-sale service capability Skills in manufacturing a high quality product (BMW) System to fill customer orders accurately and swiftly (Amazon; Dell,Flipkart) Expertise in integrating multiple technologies to create families of new products (W.L. Gore) 8
- 9. The road to distinctive organizational capabilities Distinctive Organizational Capabilities Distinctive Organizational Capabilities • Special and unique capabilities • Distinguish from competitors • Sustainable competitive Organizational Core advantage Capabilities Competencies • Outperform competition Core Competencies • Not a source of competitive advantage • Fundamental skills and capabilities • Exploitable by organization • Major value-creating capabilities 9
- 10. Honda’s Distinctive Capability Expertise in gasoline engine technology and small engine design 10
- 11. Procter & Gamble’s Distinctive Capabilities Superb marketing-distribution skills and R&D capabilities in five core technologies - fats, oils, skin chemistry, surfactants, emulsifiers 11
- 12. From Distinctive capabilities to competitive advantage •Contributes to Superior Customer Value •Is Difficult Distinctive for Competitors •Can Be Used Organizational to Imitate in a Variety Capabilities of Ways 12
- 13. Capabilities vs. Core Competencies vs. Distinctive Capabilities A company capability is the product of organizational learning and experience and represents real proficiency in performing an internal activity A core competence is a well-performed internal activity that is central (not peripheral or incidental) to a company’s competitiveness and profitability A distinctive Capability is a competitively valuable activity that a company performs better than its rivals 13
- 14. Value Chain Analysis { Firm Infrastructure Human Resource Management Support Activities Technological Development Procurement Marketing and Sales Outbound Logistics Inbound Logistics Operations Service { 14 Primary Activities
- 15. From Value Chain Analysis to Competitive Advantage Sustainable competitive advantage can be created by 1.Managing value chain activities better than rivals and/or 2.Developing distinctive value chain capabilities to serve customers! 15
- 16. Other types of Internal Analysis Internal audit Look at all functional areas and see which are performing well Capabilities assessment profile Analyze capabilities to identify potential sources of competitive advantage 16
- 17. Appeal of Outsourcing Outsourcing non-critical activities allows a firm to concentrate its energies and resources on those value-chain activities where it Can create unique value Can be best in the industry Advantages to outsourcing Decrease internal bureaucracies Flatten organization structure Provide firm with heightened strategic focus 17
- 18. Potential Advantages of Outsourcing Non-Critical Activities Outsourcing makes strategic sense when outsiders can perform certain activities at a lower cost and/or with higher value-added. 18
- 19. How do you do an internal analysis? Step 1 Prepare current product-market profile. Identify sources of competitive Step 2 advantage and disadvantage in the main product-market segments. Describe all the organizational Step 3 capabilities and competencies. Sort the core capabilities and Step 4 competencies according to strategic importance. Identify and agree on Step 5 the key capabilities 19 and competencies.
- 20. Identify Strategy-Critical Activities Which activities are strategy-critical depends Particulars of a firm’s strategy Value-chain make-up Competitive requirements External market conditions Identify strategy-critical activities What business processes have to be performed extra well or in timely fashion to achieve competitive advantage? In what value-chain activities would poor work performance impair strategic success? 20
- 21. Criteria to Judge Organizational Strengths and Weaknesses Past Performance Trends Comparison Against Competitors Are organizational resources and capabilities strengths or weaknesses? Specific Goals or Targets Personal Opinions of Strategic Decision Makers or Consultants 21
- 22. Difficulty in developing competencies Because these competencies are in people Hard to develop Hard to identify Hard to change / improve Also hard to “steal” • Social Complexity • Historical • Casually ambiguous 22
- 23. Take Aways Internal Analysis tells what a firm CAN do Goal is to create core competencies and distinctive capabilities Without them, you will not be in business long Creating distinctive capabilities takes time Very hard to do…Even harder to “steal” Value chain analysis a way to Understand where the competencies lie Think about outsourcing 23