Internal

Scanning:
Organizational
Analysis
Chapter 5
 Learning Objectives

 Apply the resource-based view of the firm to

determine core and distinctive competencies
 Use the VRIO framework and the value chain to
assess an organization’s competitive advantage
and how it can be sustained
 Understand a company’s business model and
how it could be imitated

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 Learning Objectives

 Assess a company’s corporate culture and how it

might affect a proposed strategy
 Scan functional resources to determine their fit
with a firm’s strategy
 Construct an IFAS Table that summarizes internal
factors

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 A Resource-Based Approach
to Organizational Analysis
Organizational analysis
 concerned with identifying and developing an
organization’s resources and competencies

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Core and Distinctive Competencies

Resources
 an organization’s assets and are thus the basic
building blocks of the organization
 tangible, intangible
Capabilities
 refer to a corporation’s ability to exploit its
resources
 consist of business processes and routines that
manage the interaction among resources to turn
inputs into outputs
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Core and Distinctive Competencies

Core competency
 a collection of competencies that cross divisional
boundaries, is wide-spread throughout the
corporation and is something the corporation
does exceedingly well
Distinctive competency
 core competencies that are superior to those of
the competition

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 VRIO Framework of Analysis

1. Value: Does it provide customer value and

competitive advantage?
2. Rareness: Do no other competitors possess
it?
3. Imitability: Is it costly for others to imitate?
4. Organization: Is the firm organized to exploit
the resource?

5-7
 Using Resources to Gain Competitive
Advantage
1. Identify and classify resources in terms of strengths
and weaknesses
2. Combine the firm’s strengths into specific
capabilities and core competencies
3. Appraise profit potential—Are there any distinctive
competencies?
4. Select the strategy that best exploits the firm’s
capabilities and competencies relative to external
opportunities
5. Identify resource gaps and invest in upgrading
weaknesses

5-8
Access to a Distinctive Competency

Asset endowment
Acquired from someone else
Shared with another business
Built and accumulated within the company

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Access to a Distinctive Competency

Clusters
 geographic concentrations of interconnected
companies and industries
Access to:
 Employees
 Suppliers
 Specialized information
 Complementary products

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 Determining the Sustainability
of an Advantage
Durability
 the rate at which a firm’s underlying resources,
capabilities or core competencies depreciate or
become obsolete

Imitability
 the rate at which a firm’s underlying resources,
capabilities or core competencies can be
duplicated by others

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 Determining the Sustainability
of an Advantage
 Transparency
 the speed at which other firms under the relationship
of resources and capabilities support a successful
strategy
 Transferability
 the ability of competitors to gather the resources and
capabilities necessary to support a competitive
challenge
 Replicability
 the ability of competitors to use duplicated resources
and capabilities to imitate the other firm’s success

5-12
 Determining the Sustainability
of an Advantage
Explicit knowledge
 knowledge that can be easily articulated and
communicated

Tacit knowledge
 knowledge that is not easily communicated
because it is deeply rooted in employee
experience or in the company’s culture

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 Business Models

Business model
 a company’s method for making money in the
current business environment
 includes the key structural and operational
characteristics of a firm—how it earns revenue
and makes a profit

5-14
 Business Models

A business model is usually composed of five

elements:
 Who it serves
 What it provides
 How it makes money
 How it differentiates and sustains competitive
advantage
 How it provides its product/service

5-15
 Business Models

Some of the many possible business models are:

 Customer solutions model
 Profit pyramid model
 Multi-component system/installed model
 Advertising model
 Switchboard model

5-16
 Business Models

Some other possible business models are:

 Efficiency model
 Blockbuster model
 Profit multiplier model
 Entrepreneurial model
 De Facto industry standard model

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 Value-Chain Analysis

Value chain
 a linked set of value-creating activities that begin
with basic raw materials coming from suppliers,
moving on to a series of value-added activities
involved in producing and marketing a product or
service and ending with distributors getting the
final goods into the hands of the ultimate consumer

Figure 5-1

5-18
 Industry Value Chain Analysis

Value chain segments include:

Upstream
Downstream
Center of gravity
 the part of the chain that is most important to the
company and the point where its core
competencies lie

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Corporate Value Chain Analysis

Primary activities Support activities

 Inbound logistics Procurement
 Operations Technology
 Outbound logistics development
Human resource
management
Firm infrastructure

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A Corporation’s Value Chain

5-21
 Corporate Value Chain Analysis

1. Examine each product line’s value chain in terms

of the various activities involved in producing
the product or service
2. Examine the linkages within each product line’s
value chain
3. Examine the potential synergies among the
value chains of different product lines or
business units

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Basic Organizational Structures

Simple Functional Divisional

Strategic
Business Conglomerate
Units

5-23
Basic Organizational Structures

5-24
 Corporate Culture:
The Company Way
Corporate culture
 the collection of beliefs, expectations and values
learned and shared by a corporation’s members
and transmitted from one generation of
employees to another.

5-25
 Functions of Corporate Culture

1. Conveys a sense of identity for employees

2. Generates employee commitment
3. Adds to the stability of the organization as a
social system
4. Serves as a frame of reference for employees
to understand organizational activities and as
a guide for behavior

5-26
 Corporate Culture:
The Company Way
Cultural intensity
 the degree of which members of a unit accept the
norms, values and other cultural content associated
with the unit
 shows the culture’s depth
Cultural integration
 the extent of which units throughout the
organization share a common culture
 culture’s breadth

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 Strategic Marketing Issues

Market position
 refers to the selection of specific areas for
marketing concentration and can be expressed in
terms of market, product and geographic
locations
Marketing mix
 the particular combination of key variables under
a corporation’s control that can be used to affect
demand and to gain competitive advantage

5-28
Marketing Mix Variables

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 Product Life Cycle

 Product life cycle

 a graph showing time
plotted against the
sales of a product as
it moves from
introduction through
growth and maturity
to decline

5-30
 Brand and Corporate Reputation

Brand
 a name given to a company’s product which
identifies that item in the mind of the consumer

Corporate brand
 a type of brand in which the company’s name
serves as the brand

5-31
 Brand and Corporate Reputation

Corporate reputation
 a widely held perception of a company by the
general public
Consists of two attributes:
 Stakeholders’ perceptions of quality
 Corporation’s prominence in the minds of
stakeholders

5-32
 Strategic Financial Issues

Financial leverage
 ratio of total debt to total assets
 describes how debt is used to increase earnings
available to common shareholders
Capital budgeting
 the analyzing and ranking of possible investments
in fixed assets in terms of additional outlays and
receipts that will result from each investment
 Hurdle point
5-33
 Strategic Research and Development
Issues
R&D intensity
 spending on R&D as a percentage of sales
revenue
 principal means of gaining market share in global
competition
Technology transfer
 the process of taking new technology from the
laboratory to the marketplace

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 R&D Mix

 Basic R&D
 focuses on theoretical problems
 Product R&D
 concentrates on marketing and is concerned with
product or product packaging improvements
 Engineering R&D
 concerned with engineering, concentrating on quality
control and the development of design specifications
and improved production equipment

5-35
Impact of Technological Discontinuity
on Strategy
Technology discontinuity
 when a new technology cannot be used to
enhance current technology, but substitutes for
the technology to yield better performance

5-36
 Strategic Operations Issues
Intermittent systems
 item is normally processed sequentially, but the
work and sequence of the process vary
Continuous systems
 work is laid out in lines on which products can be
continuously assembled or processed
Operating leverage
 impact of a specific change in sales volume on net
operation income

5-37
 Experience Curve

Experience curve
 unit production costs decline by some fixed
percentage each time the total accumulated
volume of production units doubles

5-38
 Increasing Use of Teams
 Autonomous (self-managed)
 a group of people work together without a supervisor
to plan, coordinate and evaluate their work
 Cross-functional work teams
 various disciplines are involved in a project from the
beginning
 Concurrent engineering
 specialists work side-by-side and compare notes
constantly to design cost-effective products with
features customers want

5-39
 Increasing Use of Teams

Virtual teams
 groups of geographically and/or organizationally
dispersed co-workers that are assembled using a
combination of telecommunications and
information technologies to accomplish an
organizational task

5-40
 Trends Driving Virtual Teams

Flatter organizational structures

Turbulent environments
Increased employee autonomy
Higher knowledge requirements
Increased globalization

5-41
 Quality of Work Life and
Human Diversity
Quality of work life includes improvements in:
 Introducing participative problem solving
 Restructuring work
 Introducing innovative reward systems
 Improving the work environment

5-42
 Quality of Work Life and
Human Diversity
Human diversity
 the mix in the workplace of people from different
races, cultures and backgrounds
 provides a competitive advantage

5-43
 Strategic Information
Systems/Technology Issues
Information systems/technology contributions
to performance:
 Automation of back office processes
 Automation of individual tasks
 Enhancement of key business functions
 Development of a competitive advantage

5-44
 Strategic Information
Systems/Technology Issues
Web 2.0
 the use of wikis, blogs, RSS (Really Simple
Syndication), social networks (e.g., LinkedIn and
Facebook), podcasts and mash-ups through
company Web sites to forge tighter links with
customers and suppliers and to engage
employees more successfully

5-45
 Strategic Information
Systems/Technology Issues
Supply chain management
 the forming of networks for sourcing raw
materials, manufacturing products or creating
services, storing and distributing the goods and
delivering them to customers and consumers

5-46
Internal Factor Analysis Summary

5-47