1. S W O T Analysis Internal Analysis of: Strengths and Weaknesses
Resources and Capabilities
Competitive Competencies 1

2. The Aim of Strategy is .... to find a position in the industry
where the company can best defend
itself against competitive forces or
can influence them in its favour.
Porter 1980 2

3. Fit between Firm Strategy and its Environment
Creates a New
Environment
where there is
a New Fit between
Strategy and the
Re-shape
Environment by
Choice of
Strategy
Competitive
Success
Requires
The Degree of
Fit of the Strategy
with the Existing
Environment

4. Internal Analysis
The SW part of the SWOT analysis that often forms the first part of any strategic assessment of a company. This analysis feeds into the development of strategic options that a company is considering
The internal analysis is related to how the firm develops and leverages its competitive advantage. 4

5. Internal Analysis When we conduct an Internal Analysis we
are trying to assess:
The competitive strengths of the firm
The competitive weaknesses of the firm
Its resources
Its capabilities 5

6. Internal Analysis
The firm must build on its strengths and use them to leverage any competitive advantage it has
Minimise or neutralise any weaknesses and ensure that the firm does not rely on these elements to build its strategy around 6

7. Strategy built around SW
Identify - Key Success Factors (KSFs) ie what factors are necessary to create success in an industry
Identify - Resources & Capabilities (R&C) the firm can call upon
Analyse & Evaluate - the gap between the KSFs and the R&C 7

8. Key Success Factors Key Success YES - High Factors Performance
Technology & MATCH ?
Market Context
Resources & NO - Poor
Capabilities Performance
of the Firm

9. Typically we Define the Strengths and Weaknesses
Assign the priorities to close the gap
Develop a strategy to enhance the strengths and reduce the weaknesses
This assumes that we can identify such KSFs and make sense of
what is happening. Frequently we can’t, and when we can it is
probably too late as the game has moved on. 8

10. Analysing Resources Providing the Data Base
Identify the attributes
Measure its effectiveness
Measure its efficiency
Drawing Comparisons Assessing the Balance
Historical analysis Company portfolio
Industry norms Internal skills
Normative criteria Key success factors
Costs... etc
Identification of Capabilities
Distinctive competencies
Resource assessment
Evaluation of gap between success factors & SW profile 9

11. Typical SW Items Financial Aspects Marketing Aspects
Production Aspects
Personnel Aspects
Cost Base 10

12. SW Profile Identify Strengths and Weaknesses
Rank them in importance in leveraging Competitive Advantage
Score them against desired criteria
Total and assess 11

13. Quest for Competitiveness in the 1990s
Restructuring/ Process Re-inventing
Downsizing Re-engineering the Business
Re-evaluating Continual
the Portfolio Improvement
Smaller Better Different
Hamel & Prahalad 1994

14. T O W S Matrix Internal Factors External Factors Strengths Weaknesses
Opportunities
Leverage Constraint
OS OW
External
Factors
Vulnerability Problematic
TS TW
Threats
Source: adapted from- Weihrich, H (1982) 13

15. SWOT Profile and Possible Strategies
Reconfiguration
Strategy
Aggressive Strategy S W
Turnaround
Strategy
Diversification
Strategy T 14

16. Resources & Skills Resources and skills can erode over time
Need to continually invest
Need to continue to be innovative
Need to continue to renew the skills base
Examples of firms that
“took their eye off the ball “ 15

17. Resources as the basis for corporate profitability
Conventional approaches to competitive advantage focus upon the “generic” sources (cost, differentiation)
Resource-based view concentrates upon the resources and capabilities that underlie these advantages.
Indeed, we can go further.
A closer look at monopoly profits and the market power that gives rise to them suggest that they too have their source in the resources of firms.
Barriers to entry, for example, have their basis in scale economies, patents, experience economies, brand awareness, or some other resource that incumbent firms possess, but that entrants can acquire only slowly or at disproportionate expense. 16

18. RBV approach to strategy analysis - (R M Grant)
Competitive
Advantage
Capabilities
Resources
Identify Gaps
Invest and Augment
Resource Base
We see this later in this presentation

19. The Role of Resources and Capabilities in Strategy Formulation
The analysis of industry and competition has been closely associated with the work of Michael Porter at Harvard.
The analysis of competitive positioning was pioneered by consulting companies, notably, the Boston Consulting Group’s use of the experience curve to analyse relative costs and the Strategic Planning Institute’s PIMS project, which linked market share, quality, and other position variables with profitability.
By contrast, strategic analysis of the firm’s internal environment remained underdeveloped. 18

20. Two Important Points:
Individual resources; items of capital equipment, the skills of individual employees, patents, brand names, etc.
How the resources work together to create capabilities and competitive advantage 19

21. Link between R&C and Strategy
Shape
Build
Resources &
Capabilities Strategies
(Competencies) 20

22. Elements in Distinctive Competencies
Superior Efficiency
Superior Quality
Superior Innovation
Superior Customer
Responsiveness
Distinctive
Competencies 21

23. Competitive Advantage Simplified
Superior
Quality
Competitive
Advantage
Low-cost
Differentiation
Superior
Customer
Responsiveness
Superior
Efficiency
Superior
Innovation 22

24. Day & Wenley’s Model of Comp Adv
Superior Resources
Superior Skills
Positional Advantage
Differentiation
Low-cost
Niche
Performance
Outcomes
Satisfactory
Premium
Invest to maintain comp adv
Day & Wensley 1988 23

25. Durability of Comp Advantage
Durability of a Firm’s
Competitive Advantage
Barriers to Capability Industry
Imitation of Competitors Dynamism
Lets expand on this a little more 24

26. Sustainability of Com Adv depends on:
Durability
Transparency
Replicability
Transferability 25

27. Resources & Skills of a Firm
Are central when considering strategy
They are primary constructs around which the firm can
establish its identity
frame its strategy
Fundamental to leveraging advantage
Primary sources of the firm’s profitability. 26

28. Resources as the Basis of Superior Profitability
Patents
Brands
Retaliatory capacity
Barriers to Entry
Industry
Attractiveness
Monopoly
Market share
Firm size
Financial Resources
Vertical
Bargaining Power
Rate of Profit
in Excess of the
Competitive Level
Process Tech
Size of plants
Access to low-cost inputs
Cost
Advantage
Competitive
Advantage
Brands
Product technology
Marketing, distribution,
service capabilities
Differentiation
Advantage
Source: R M Grant(1991) 27

29. Issues surrounding Resources &Capabilities
Resources and Capabilities can be often be:
Transferable
Replicable
Transparent
If so, then sustaining comp adv is difficult, but firms can use these factors to their own advantage in their own strategies
Examples ... 28

30. Examples
Industries where Resources & Skills are easily transferable or imitated:
Retailing
Financial services
Fashion
Toys
Firms have brief windows of opportunity to
exploit their strengths before imitators erode it
away. 29

31. However
Firm can exploit these issues in developing their own strategies when they expand or diversify their interests:
Geographic expansion
Product expansion
Mergers
Alliances 30

32. BUT
Can success in the home market lead to success in the foreign market ?
Marks & Spencer Plc
Sainsburys
Bass
Dixons
Laura Ashley etc..
The evidence is mixed for these firms 31

33. WHY is this difficult ? Barriers.
Barriers to Transferability
Barriers to Replicability
Barriers to Durability
Transparency 32

34. But can we actually ‘see’ into other firms ?
Success factors are ‘difficult to identify never mind observe
Firms are entrepreneurial and change is a way of life
The game moves on
Identify the success factors now and act, may be too late, firm need ‘foresight’
Entrepreneurial view of Strategy …. Austrian School

35. And Finally
A Model to show how Resources & Capabilities are Linked to Strategy Formulation 34

36. STRATEGY RESOURCES Tangible Intangible Human INDUSTRY COMPETITIVE KEY
SUCCESS
FACTORS
COMPETITIVE
ADVANTAGE
STRATEGY
ORGANIZATIONAL
CAPABILITIES
This slide shows the relationship between resources, capabilities, and competitive advantage.
Drawing up an inventory of a firms resources can be surprisingly difficult.
No such document exists within the accounting or management information systems of most corporation.
The corporate balance sheet provides a partial and distorted picture of a firms assets.
A useful starting point is a simple classification of the principal types of resource into tangible, intangible, and human resources .
The following tables show the principal categories.
RESOURCES
Tangible Intangible Human 35