INTERNAL ANALYSIS  How can we assess the resource capabilities? –Resource Based View  Each firm has three basic kinds of resources  Tangible assets –Ford’s Cash Reserves –3 Ms Patents –Georgia Pacific Land holdings –Coca’s cola’s formula  Intangible assets –Nike - Brand Name –Dell – Reputation –GE- Welch’s Leadership  Organizational capabilities –Dell’s customer Service –Sony’s Product Development –3 Ms Innovation

How resources become valuable –Competitively Superior  Walmart’s Logistics – Allowed better pricing –Resource Scarcity  OPEC’s Oil Reserves – Finite oil reserves –Appropriability  Who profits from a resource? –“Mickey Mouse does not have an agent”

How resources become valuable –Inimitability  Priceline’s pricing for air tickets  Wendy’s Drive Through –Path dependency - Steinway with Pianos –Causal ambiguity – South West Airlines –Economic Deterrence –Durability  How long will the competitive advantage last? –Patentable products – longer durabilitiy

Evaluation of resources  Disaggregate resources –Marketing  Advertising, promotion, Better Celebrities  Utilize a functional perspective –Examine different Functional Areas  Look at organizational processes  Use the Value Chain Approach  SWOT Analysis

SWOT Analysis  Strength: Resource Advantage or a Distinctive competence –Value Chains –Functional Areas –Financials –Organizational capabilities  Weakness: Resource Limitation or deficiency  Opportunities: Market or Product opportunity –Product Extensions –Market Extensions –Geographic Expansion –Diversification using existing skills, resources  Threat: Unfavorable situation in the market –Regulatory –General Environment –Industry and Operating Environment

How to use SWOT as a Technique Env. Opportunities Major Threats Internal Weakness Internal Strength Aggressive Strategy Turnaround Strategy Defensive Strategy Diversification

Value Chain Analysis  Disaggregates a business into sets of activities –Primary Activities – Inbound logistics --- Operations ---- Outbound logistics ---- marketing and Sales and service –Support activities – General Administration, HRM, R&D, Systems Development  How to do a VCA –Identify key activities –Allocate costs to each activity –Identify the activities that differentiate the firm –Examine the Value Chain  Different activities may be important – industry and strategy  Importance of activities can vary based on a company position in a larger scheme of activities

Making meaningful comparisons  Comparison with past performance –Trend analysis – Where are you relative to the past. –Stages of Industry Evolution  Emergence, Growth, Maturity and Decline  Strengths or competencies needed at each stage are different –Benchmarking with the competitors  Key competitors  Best practices irrespective of industry

Stages of Product Life Cycle Emergence phase of the industry – Minimal sales growth – Rapid technological growth and uncertainty – Many companies with operating losses  Growth phase of the industry – Rapid market expansion – Need to build brands and a marketing set up – Financial resources for expansion  Maturity phase of the industry – Competition becomes more intense – Shakeout in the industry – Emphasis on cost reduction through process innovations