Strategic ManagementSearching for strengths & weaknesses 1 Session 5: Searching for strengths & weaknesses  Development of Opportunities and Threats Environmental analysis  Areas of concern  Issues and priorities  O & T Industry analysis (Porter model)  Areas of concern  O & T  Development of Strengths & Weaknesses Resource-based analysis  S & W Value chain analysis  S & W  Business strategies

Strategic Management Searching for strengths & weaknesses 2 Searching for strengths and weaknesses: Internal Analysis  Conclusions from Porter industry analysis  Competencies & resource-based analysis  Value-chain analysis  Scanning internal resources

Strategic ManagementSearching for strengths & weaknesses 3 Environmental Scan Sociocultural Forces Political - Legal Forces Technological Forces Economic Forces Task Environment Shareholders Communities Governments Special Interest Groups Customers Creditors Trade Association Competitors Employees/ Labor Unions Suppliers Internal Environment Structures Culture Resources Which elements are most relevant? What are the implications for management?

Strategic ManagementSearching for strengths & weaknesses 4 Identifying Opportunities and Threats using Porter’s industry analysis model What opportunities & threats does Porter’s analysis lead to?  Buyers power  Suppliers power  Other stakeholders power  Substitutes—alternative ways to satisfy need  Rivalry among existing firms  Potential new entrants  Opportunities  Threats Wrapping up from last session

Strategic Management Searching for strengths & weaknesses 5 Switching our focus  From external analysis and a search for opportunities and threats  To internal analysis and a search for strengths and weaknesses

Strategic Management Searching for strengths & weaknesses 6 Three approaches to internal analysis  Focus on competencies & resources  Focus on the value chain  Scanning internal resources

Strategic ManagementSearching for strengths & weaknesses 7 Competencies—a path to competitive advantage  Core competencies: things the organization can do exceedingly well  Distinctive competencies: core competencies that are superior to the competition  Sustainability of distinctive competencies depends on Durability Imitability: transparency, transferability, and replicability

Strategic ManagementSearching for strengths & weaknesses 8 Resource-based analysis  Identify resources/capabilities in terms of strengths & weaknesses  Identify core competencies, things they can do very well  Identify distinctive competencies, things they do better than competition (competitive edge) Assess sustainability:  durability  imitability (transparency, transferability, replicability) Identify capability/resource gaps  Define strategies  Define plans to address resource/capability gaps Apply the resource-based approach to determine the firm’s competitive advantage. What strengths and weaknesses are revealed by this analysis?

Strategic ManagementSearching for strengths & weaknesses 9 Firm’s value chain  Shows how inputs are converted to outputs  Processes by which the firm adds value ”Differences among competitor value chains are a key source of competitive advantage.” Porter

Strategic ManagementSearching for strengths & weaknesses 10 Value chain analysis of the firm  Examines internal operations to understand which parts add value  Only value-adding parts contribute to above average returns (profits)  Seeks to identify multiple means to implement chosen business strategy See Nordstrom’s example

Strategic ManagementSearching for strengths & weaknesses 11 Margin The internal value chain Primary Activities Support Activities Procurement Serv- ice Technology Development Human resource management Firm infrastructure Inbound Logistics Opera- tions Out- bound Logistics Market- ing and sales Which cells are strong? Which are weak? Which offer competitive opportunities? Which cells are strong? Which are weak? Which offer competitive opportunities? What strengths and weaknesses are revealed by this analysis?

Strategic ManagementSearching for strengths & weaknesses 12 STRENGTHS – SWEAKNESSES - W OPPORTUNITIES – O SO STRATEGIES WO STRATEGIES THREATS - T ST STRATEGIESWT STRATEGIES

Strategic ManagementSearching for strengths & weaknesses 13 Scanning internal resources— explanation and approach  An internal search for S&W weaknesses--See Appendix 11C Financial, physical, human assets Ability to use these assets effectively Particular knowledge and expertise  Evaluate internal resources Against past performance Against competitors Against industry What strengths and weaknesses are revealed by this analysis?

Strategic ManagementSearching for strengths & weaknesses 14 Functional strategy  Approach a function takes to support and achieve business strategies &objectives  The path chosen to define and assure effectiveness of the function

Strategic ManagementSearching for strengths & weaknesses 15 I: Assignment for Session 6  For Dell  I: Illustrate the development of one strategy cell, e.g., SO, WO, ST, or WT. Identify the relevant internal (S or W) and external (O & T) conditions State a strategy that builds on the internal and external condition Use the TOWS form & submit a copy at beginning of class. Keep a copy.  Individuals: be prepared to use the value chain model and distinctive competency concepts to justify the strategy stated.

Strategic ManagementSearching for strengths & weaknesses 16 Generating strategic alternatives  Analyze your S W O T  To set strategies SO WO ST WT S STRENGTHS W WEAKNESSES O OPPORTU- NITIIES SO STRATEGIES WO STRATEGIES T THREATS ST STRATEGIES WT STRATEGIES

Strategic ManagementSearching for strengths & weaknesses 17 Developing alternate strategies  Illustrate the development of each strategy cell, e.g., SO, WO, ST, WT.  State S and O  State SO strategy that evolved from the S and O  Include results in copy of the following slide  Repeat above steps for WO, ST, and WT. A different firm can be used for each, but be sure to identify the firm.  Submit paper copy  Be prepared to use the value chain model and distinctive competency concepts to justify each strategy presented.