1. STRATEGIC ANALYSIS Prof.univ.dr.dr.dr.h.c. Constantin Brătianu
Faculty of Business Administration
Academy of Economic Studies
Bucharest

2. Strategic management process
Intention
Strategic
Analysis
Strategies
Elaboration
Strategies
Implementation
Strategic management process

3. Internal Environment Analysis External Environment Analysis
Strategic Analysis
Internal Environment Analysis
SWOT Analysis
External Environment Analysis

4. Internal Environment Analysis
Finding
Core Competencies
Core Competencies
Strategic
Advantage
Capabilities
Unique
Rare
Valuable
Costly to immitate
Resources
Tangible
- Intangible
Value Chain Analysis

5. Resources Tangible resources - Financial (money, borrowing capacity)
- Physical objects (buildings, equipments)
- Human resources (as physical bodies)
Intangible resources:
- Human resources (experience, talent, intelligence)
- Explicit knowledge (documents)
- Structural capital
- Brands, symbols, company image

6. Market/Book values Company Market value ($ billions) Book value eBay
54.5
4.9
Intel
170.9
33.5
Microsoft
286.2
57.5
Nucor(Steel)
4.8
2.3
J.C.Penny
10.0
6.4
General Motors
27.3
25.3

7. Intellectual capital Human capital Structural capital Customer capital

8. Human capital Information and knowledge at individual level
Thinking models, as cognitive approximations of the real world in which we are living
Talent and creativity potential
Rational intelligence
Emotional intelligence

9. Socialization Externalization Internalization Combination
Tacit knowledge
Tacit knowledge
Externalization
Internalization
Explicit
knowledge
Explicit knowledge
Combination

10. Socialization
It is a process of exchange of tacit knowledge between two or more individuals.
The most difficult process since tacit knowledge is based on sharing feelings, emotions, and experiences.
Individual face-to-face interaction is the only way to capture the full range of physical sensations and emotional reactions that are necessary for transferring tacit knowledge.

11. Combination
This is the most used and practical mode for sharing explicit knowledge between two or several individuals
It is based on rational arguments and verbal language
Knowledge flows from the individual with a higher level of knowing toward the individual with a lower level of knowing
Sharing knowledge is different than sharing tangible things, since there is no law of conservation

12. Externalization
This is a process of transforming tacit knowledge into explicit knowledge
It is a transformation of knowledge taken from direct experience and from the non-rational mind and put it into a rational way able of being explained using the verbal language
For the Japanese companies this is a knowledge creation process, which contributes significatly to the innovation process

13. Internalization
It is the reverse process by which explicit knowledge is transformed into tacit knowledge
This is very helpful in developing different skills and in creating some control mechanisms
It is a process which goes from the organizational knowledge to the individual knowledge, in order to increase individual’s understanding
It is a very useful process in developing organizational culture and behavior

14. Capabilities
Capability = Managerial capacity of using efficiently given resources
Capabilities can be obtained by integrating in time human resources, organizational structure and organizational knowledge
Examples:
Microsoft – employees motivation capability
Walt Disney, 3M – innovation capability
Toyota – just in time process capability

15. Core Competencies
Core competency = any of the strengths that represent unique skills or resources that can determine the organization’s competitive edge
Core competency = an integration of resources and capabilities in a specific way in order to increase company’s competitiveness
Any core competency is base on resources and capabilities, but not any of these can become core competency
Finding core competencies: 4 criteria & chain value analysis

16. The 4 criteria
Uniqueness = A resource or capability which is not to be found in the other companies
Rarity = A resource or capability ob being rare (Walt Disney – talent and creativity)
Valuable = A resource or capability of being in itself very valuable (Harvard University – professors)
Imitation cost = the higher the imitation costs, the longer it takes to competitors to copy the core competency

17. VRINE Model
Value - Rarity - Inimitability – Nonsubstitutability – Exploitability
Value – A resource or capability is valuable if it enables a firm to take advantage of opportunities or to fend off threats in its environment.
Does the resource or capability allow the firm to meet a market demand or protect the firm from market uncertainty?
If it is true, it satisfies the value requirement. Valuable resources are needed in an industry, but value in itself does not convey an advantage.
Union Pacific (UP) Railroad, for example, maintains an extensive network of rails and equipment on the US Golf Coast (S-E). It has a great value in any competition with others carriers.

18. VRINE Model
Rarity – Rarity is defined as scarcity relative to demand. An otherwise valuable resource that isn’t rare won’t necessarily contribute to competitive advantage.
Assuming that a resource or capability is valuable, is it scarce relative to demand or is it widely possessed by competitors?
Valuable resources that are also rare contribute to a competitive advantage, but that advantage may be only temporary.
When McDonald’s signs an agreement to build a restaurant inside a Wal-Mart store, it has an intangible location advantage over Burger King and Wendy’s that is not only valuable but also rare because it has an exclusive right to that geographic space.

19. VRINE Model Inimitability and Nonsubstitutability
A valuable and rare resource or capability will grant an advantage only so long as competitors don’t gain possession of it or find a close substitute.
The criterion of inimitability is satisfied if competitors cannot find a way to imitate or copy the product, or if there is a cost barrier to do it.
The criterion of nonsubstitutability is satisfied if a competitor cannot achieve the same benefits using different combinations or resources and capabilities.

20. VRINE Model Exploitability
The possession and control of a resource or capability is necessary but not sufficient to gain a competitive advantage. A firm must have the organizational capability to exploit it.
Although the issue is quite broad, the point is for the firm to have the ability to get value out of any resource or capability that it may generate.

21. Chain value analysis Activities for support Basic Activities
Information systems & technologies
Energy systems
General administration
Human resources management
Input logistics
Production processes
Output logistics
Marketing
Basic Activities

22. External environment analysis
Company
Competitional external environment
Strategic Groups
General external environment

23. General external environment
Generic forces:
- demography
- politics
- legislation
- economics
- culture
- education
These forces have a slow/very slow variation in time, but integrating any of them over a long period of time (i.e yrs) there could be significant effects

24. Competitive intelligence
Anticipation
Scanning
Events anticipation
Monitoring
Competitive intelligence

25. Rivalry among existing firms Bargaining power of suppliers
Porter’s 5 forces model
New entrants
Threat of new
entrants
Rivalry among existing firms
Suppliers
Buyers
Bargaining power of suppliers
Threat of substitutes
Bargaining power of buyers
Substitutes

26. Strategic groups
Strategic group = a group of companies being on the same market with same types of products and services, and developing similar strategies
A strategic group is a kind of reference system for strategy analysis since any change in any companies belonging to the same group induce changes in the other companies
The competition pressure is highest within a strategic group

27. SWOT Analysis max min Weaknesses Strenghts Internal environment W S O
External environment
Opportunities
Threats
max
min

28. Strategies matrix Internal environment S W O External environment T
max - max
max - min O
External environment
min - max
min - min T