1. College of Business

2. Internal Analysis

3. Profitability in the U.S. Retailing Industry, 1996- 2001

4. 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

5. Internal Analysis Tools and Concepts  Sustainable Competitive Advantage  Value Chain  SWOT Analysis

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

7. 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

8. Core Competencies  central to the firm’s competitiveness  rewarded in market place  combination of skills & knowledge, not products or functions  flexible, long term platforms  embedded in the organization’s systems  distinctive competencies are those the firm performs better than rivals  All core competencies have the potential to become core rigidities

11. Sony

13. 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?

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

15. Another Tool to Consider Porter’s Value Chain

16. 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

17. Value Creation per Unit

18. Comparing Toyota and General Motors

19. What are some of Detroit’s Problem?  America’s largest purchaser of Viagra – GM  524,000 – the number of hourly retirees for GM, Chrysler, and Ford  Over $1,500 per car wrapped up in healthcare

20. Passengers per Employee  United – 938  Delta – 1,493  Alaska Air – 1,518  Southwest Air – 2,424

21. Porter’s Value Chain Views the organization as a series (chain) of activities, which may or may not create value

22. Porter’s 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

23. Porter’s Value Chain (cont)  Support Activities  Company infrastructure – General Admin  Human resource management  R&D, Technology and Systems Development  Procurement

24. Company Infrastructure HRM R&D, Technology & Systems Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Margin The Value Chain SupportSupport Primar y

25. A low cost strategy….. Company Infrastructure HRM Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Margin …tries to pull the arrow back….. R&D, Technology & Systems Development

26. Fewer layers of management Policies to reduce turnover WalMart’s inventory system Monitor supplier performance Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Margin Low Cost - Support Activity examples…...

27. Low cost - Primary Activity examples….  Inbound - Toyota  Operations - Subway  Outbound - Campbell Soup’ Continuous Replenishment  Marketing/Sales - WalMart  Customer Service - Federal Express

28. A differentiation strategy….. Company Infrastructure HRM Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Margin ….tries to pull the arrow forward... R&D, Technology & Systems Development

29. Commitment to quality Compensation rewarding innovation Amazon recommendations Purchasing high-quality components Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Margin Differentiation - Support Activity examples…...

30.  Inbound - Dell  Operations - Marriott  Outbound - WebVan  Market/Sales - Nordstrom’s  Customer Service - Pirtek Differentiation - Primary Activity examples…...

31. Suppliers Buyers Your Firm Your Rivals

32. Suppliers Buyers Your Firm Your Rivals Opportunities for Advantage

33. Think back to the Southwest example… Single aircraft Short hauls No meals, transfers, seat assignments Secondary airports No use to travel agents…..

34. For your own firm… …refer to the list of suggested questions in the Worksheet section of your folder, as these will prompt you to the kind of questions you need to ask yourself when using the value chain tool. Helps to identify where you are adding value, and areas where you are value deficient.

35. Suppliers Buyers Your Firm Your Rivals Opportunities for Adding Value Opportunities for Adding Value

37. SWOT Analysis Strengths Weaknesses Opportunities Threats Maximize Strengths and Opportunities Minimize Weaknesses and Threats

38. Evaluation of Resources Strength or Weakness  relative to competitors  basic business requirements  key vulnerabilities