1. Assessing the Internal Environment of the Firm3
Assessing the Internal Environment of the Firm
McGraw-Hill/Irwin
Strategic Management: Text and Cases, 4e
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

2. The Limitations of SWOT Analysis
Strengths may not lead to an advantage
SWOT’s focus on the external environment is too narrow
SWOT gives a one-shot view of a moving target
SWOT overemphasizes a single dimension of strategy

3. The Value Chain Sequential process of value-creating activities
The amount that buyers are willing to pay for what a firm provides them
Value is measured by total revenue
Firm is profitable to the extent the value it receives exceeds the total costs involved in creating its product or service
The benefits of streamlining a business with value chain management include:
Lower infrastructure costs associated with collaboration.
Create commonality in parts and suppliers.
Control inventory by getting the supply chain talking to the demand chain.
Cut transaction costs by integrating with public and private exchanges.
Deliver products to market faster while minimizing risk and capital investment.
Adapted from Exhibit 3.1 The Value Chain: Primary and Support Activities
Source: Adapted with permission of The Free Press, a division of Simon & Schuster, Inc., from Competitive Advantage:
Creating and Sustaining Superior Performance by Michael E. Porter.

4. Resource-Based View of the Firm
Basic Assumption
Types of resources
Tangible resources
Intangible resources
Organizational capabilities
Organizational competencies
Dynamic Capabilities
Firms consist of a heterogeneous resource base

5. Innovation and creativity
Intangible Resources
Human
Innovation and creativity
Reputation
Intangible Resources are difficult for competitors (and the firm itself) to account for or imitate, typically embedded in unique routines and practices that have evolved over time
Human
Experience and capabilities of employees
Trust
Managerial skills
Firm-specific practices and procedures
Innovation and creativity
Technical and scientific skills
Innovation capacities
Reputation
Brand name
Reputation with customers
Reputation with suppliers

6. Criteria for Sustainable Competitive Advantage and Strategic Implications
Exhibit 3.8 Criteria for Sustainable Competitive Advantage and Strategic Implications
Source; Adapted from J. Barney, “Firm Resources a Sustained Competitive Advantage, ‘ Journal of Management 17 (1991), pp

7. Evaluating Firm Performance Balanced Score Card
Provides a meaningful integration of many issues that come into evaluating a firm’s performance
Four key perspectives
How do customers see us? (customer perspective)
What must we excel at? (internal perspective)
Can we continue to improve and create value? (innovation and learning perspective)
How do we look to shareholders? (financial perspective)
How do customers see us? (customer perspective)
Time
Quality
Performance and service
Cost
What must we excel at? (internal perspective)
Processes
Cycle time
Employee Skills
Productivity
Decisions
Actions
Coordination
Resources and capabilities
Can we continue to improve and create value? (innovation and learning perspective)
Introduction of new products and services
Greater value for customers
Increased operating efficiencies\
How do we look to shareholders? (financial perspective)
Profitability
Growth
Shareholder value
Increased market share
Reduced operating expenses
Higher asset turnover
Problems with the Balanced Score Card
Lack of a clear strategy
Limited or ineffective executive sponsorship
Too much emphasis on financial measures rather than nonfinancial measures
Poor data on actual performance
Inappropriate links to scorecard measures to compensation
Inconsistent or inappropriate Terminology

8. Management preferences
Diamond – E Model
Management preferences
Organization
Resources
Strategy
External Environment