1. EVALUATING FIRM’S RESOURCES AND COMPETITIVE CAPABILITIES
Company Situation Analysis

2. “Understand what really makes a company click” Charles R. Scott
Bijay KC, Ph.D., SAIM
“Understand what really makes a company click” Charles R. Scott
“If a company is not ‘best in world’ at a critical activity, it is sacrificing competitive advantage by performing that activity with its existing technique.”
James Brian Quinn

3. 3 | 3
Internal Analysis
Bijay KC, Ph.D., SAIM
The purpose of internal analysis is to pinpoint the strengths and weaknesses of the organization.
Strengths lead to superior performance. Weaknesses lead to inferior performance.
Internal Analysis includes an assessment of:
Quantity and quality of a company’s resources and capabilities
Ways of building unique skills and
company-specific or distinctive competencies
Building and sustaining a competitive advantage requires a company to achieve superior:
Efficiency
Quality
Innovations
Responsiveness to customers

4. Internal Analysis: Strengths and Weaknesses
Bijay KC, Ph.D., SAIM
Internal analysis - along with the external analysis of the company’s environment - gives managers the information to choose the strategies and business model to attain a sustained competitive advantage.
Strengths
Of the enterprise are assets that boost profitability
Weaknesses
Of the enterprise are liabilities that lead to lower profitability

5. Internal Analysis: A Three-Step Process
Bijay KC, Ph.D., SAIM
Understand the process by which companies create value for customers and profit for themselves.
Resources
Capabilities
Distinctive competencies
Understand the importance of superiority in creating value and generating high profitability.
Efficiency
Quality
Analyze the sources of the company’s competitive advantage.
Strengths – that are driving profitability
Weaknesses – opportunities for improvement
Innovation
Responsiveness to Customers

6. Competitive Advantage
Bijay KC, Ph.D., SAIM
Competitive Advantage
A firm’s profitability is greater than the average profitability for all firms in its industry.
Sustained Competitive Advantage
A firm maintains above average and superior profitability and profit growth for a number of years.
The Primary Objective of Strategy
is to achieve a Sustained Competitive Advantage
which in turn results in Superior Profit and Profit Growth.

7. Profitability in the Computer Industry, 1998-2003
Bijay KC, Ph.D., SAIM
Dell has achieved a sustained competitive advantage over its rivals.
Data Source: Value Line Investment Survey

8. WHAT ARE FIRM’S RESOURCES?
“ all assets, capabilities, competencies, organizational processes, firm’s attributes, knowledge etc. controlled by a firm which uses them to improve its efficiency and effectiveness”
Bijay KC, Ph.D., SAIM

9. CATAGORIES OF RESOURCES
Financial capital
Physical capital: ( including location, access to raw materials)
Human capital: (including training, experience, judgment, relationship)
Organizational capital: Firms formal reporting structure, planning and control system, coordination system, culture, working style
Bijay KC, Ph.D., SAIM

10. Barney’s VRIO framework
To evaluate a firm’s key resource
Value: Does it provide competitive advantage?
Rareness: Do other competitors lack it?
Imitability: Is it costly for others to imitate?
Organisation: Is the firm organised to exploit the resources?
Bijay KC, Ph.D., SAIM

11. VALUABLE
Does the resource help the firm to exploit environmental opportunities or neutralize threats? Does it help the firm to gain competitive advantage? If ‘no’, the resource is not valuable. Organizing to exploit the resource will increase firm’s cost or decrease its revenues It leads to competitive disadvantage. These types of resources are firm’s weaknesses.
Bijay KC, Ph.D., SAIM

12. VALUABLE BUT NOT RARE
Such resources help the firm to exploit environmental opportunities or neutralize environmental threats but are possessed by rivals too. Such resources lead to competitive parity and result in normal economic performance. However, failure to exploit them put the firm in competitive disadvantage. It cannot be considered firm’s strength
Bijay KC, Ph.D., SAIM

13. VALUABLE AND RARE BUT NOT COSTLY TO IMITATE
These resources are valuable and rare but rivals can imitate and possess them. Such resources generate a temporary competitive advantage and lead to above normal performance. Such resources help firm to gain first mover’s advantage but once other firms imitate it, the competitive advantage disappears. It is a firm’s strength and distinctive competence.
Bijay KC, Ph.D., SAIM

14. VALUABLE, RARE, COSTLY TO IMITATE BUT NOT EXPLOITED BY ORGANIZATION
Such resources are valuable and can help the organization to gain competitive advantage. Competitive advantage cannot be sustained because the organization simply waste them
Bijay KC, Ph.D., SAIM

15. QUALITY OF RESOURCES
Valuable Rare Costly to imitate Exploited Competitive Economic Resource Implication Performance Quality No Disadvantage Below Weakness Yes No - - Parity Normal Strength Yes Yes No - Advantage Above Strength but Normal and temporary distinctive competence Yes Yes Yes Yes Sustained Above Strength competitive Normal and advantage sustainable distinct
Bijay KC, Ph.D., SAIM