1. Prentice Hall, Inc. © 20065-1 STRATEGIC MANAGEMENT & BUSINESS POLICY 10 TH EDITION THOMAS L. WHEELEN J. DAVID HUNGER CHAPTER 5 Internal Scanning: Organizational Analysis

2. Prentice Hall, Inc. © 20065-2 Resource-Based Approach to Organizational Analysis Internal strategic factors -- –Critical strengths and weaknesses that are likely to determine if the firm will be able to take advantage of opportunities while avoiding threats

3. Prentice Hall, Inc. © 20065-3 Resource-Based Approach to Organizational Analysis Resources Physical assets: plant, equipment, location, etc … Human assets: employees and their skills … Organizational assets: culture, reputation etc … Capabilities (a corporation’s ability to exploit its resources) Marketing capabilities Manufacturing capabilities HRM capabilities Competency A cross-functional integration and coordination of capabilities Core competency (primary expertise) Something that a corporation can do exceedingly well Distinctive competency When core competition is superior of the competition

4. Prentice Hall, Inc. © 20065-4 Core and Distinctive Competencies VRIO Framework -- –Value Does it provide customer value and competitive advantage ? –Rareness Do other competitors possess it ? –Imitability Is it costly for others to imitate ? –Organization Is the firm organized to exploit the resource ?

5. Prentice Hall, Inc. © 20065-5 Core and Distinctive Competencies Even though a distinctive competency is certainly considered to be a corporation’s key strength, a key strength may not always be a distinctive competency. As competitors attempt to imitate other companies competencies; what was once a distinctive competency becomes a minimum requirement to compete in the industry. Even though the competency may still be a core competency, and thus a strength, it is no longer unique. It is no longer a distinctive competency.

6. Prentice Hall, Inc. © 20065-6 Resource-Based Approach to Organizational Analysis 5-Step Approach Strategy Analysis -- 1.Identify and classify resources 2.Combine strengths into capabilities 3.Appraise profit potential of capabilities 4.Select strategy that best exploits 5.Identify resource gaps invest in weaknesses

7. Prentice Hall, Inc. © 20065-7 Continuum of Sustainability

8. Prentice Hall, Inc. © 20065-8 Sustainability of Advantage Durability -- –Rate at which a firm’s underlying resources and capabilities depreciate or become obsolete Tacit knowledge -- …is knowledge that is not easily communicated because it is deeply rooted in employee experience or in a corporation’s culture… …CAN BE BOTH AN ADVANTAGE AND A DİSADVANTAGE…

9. Prentice Hall, Inc. © 20065-9 Sustainability of Advantage Imitability -- –Rate at which a firm’s underlying resources and capabilities can be duplicated by others –Transparency (ability to understand) –Transferability (ability to gather resources and capabilities) –Replicability (imitability)

10. Prentice Hall, Inc. © 20065-10 Business Models BUSINESS MODEL Company’s method for making money in the current business environment. Is a strategic design for how a company intends to profit from its strategies, work processes, and work activities. Focuses on two things:  Whether customers will value what the company is providing.  Whether the company can make any money doing that.

11. Prentice Hall, Inc. © 20065-11 Business Models Types of Models -- –Customer Solutions Model –Profit Pyramid Model –Multi-Component System/Installed Base Model –Advertising Model –Switchboard Model –Time Model –Efficiency Model –Blockbuster Model –Profit Multiplier Model –Entrepreneurial Model –De Facto Standard Model

12. Prentice Hall, Inc. © 20065-12 Value-Chain Analysis Typical Value Chain for a Manufactured Product Linked set of value-creating activities beginning with basic raw material and ending with distributors getting final goods into hands of customers

13. Prentice Hall, Inc. © 20065-13 Corporate Value-Chain Analysis A company’s center of gravity is the part of the chain that is most important to the company and the point where its greatest expertise and capabilities lie – its core competencies. (This does not mean that the center of gravity is where company makes most of the profits)

14. Prentice Hall, Inc. © 20065-14 Corporation’s Value Chain

15. Prentice Hall, Inc. © 20065-15 Scanning Functional Resources & Capabilities Basic Organizational Structures -- –Simple structure –Functional structure –Divisional structure –Strategic business units (SBU’s) –Conglomerate structure

16. Prentice Hall, Inc. © 20065-16 Basic Organizational Structures

17. Prentice Hall, Inc. © 20065-17 Corporate Culture Collection of beliefs, expectations, and values learned and shared by a corporation’s members and transmitted from one generation of employees to another -Intensity -Integration Be careful; if the company culture is not compatible with the proposed strategy, it is a serious weakness.

18. Prentice Hall, Inc. © 20065-18 Strategic Marketing Issues STRATEGIC MARKETING ISSUES –Market Position & Segmentation –Marketing Mix ( 4P:Product, Place, Price, Promotion ) –Product Life Cycle –Brand & Corporate Reputation

19. Prentice Hall, Inc. © 20065-19 Product Life Cycle

20. Prentice Hall, Inc. © 20065-20 Strategic Financial Issues STRATEGIC FINANCIAL ISSUES –Financial leverage The ratio of total debt to total assets –Capital budgeting Check against the accepted criteria of “hurdle rate” (required rate of return)

21. Prentice Hall, Inc. © 20065-21 Strategic Research & Development Issues STRATEGIC R&D ISSUES –R&D Intensity Spending on R&D as a percentage of sales revenue –Technological Competence A company’s R&D unit should be evaluated for technical competence in both the development and the use of innovative technology –Technology Transfer The process of taking a new technology from the laboratory to the marketplace

22. Prentice Hall, Inc. © 20065-22 Strategic Research & Development Issues STRATEGIC R&D ISSUES R&D Mix : –Basic R&D Patents and research publications –Product R&D Product and product-packing innovations and improvements –Process R&D (Engineering R&D) Innovation and improvements on processes, production equipment and quality control THIS MIX VARIES BY INDUSTRY, COMPANY, AND PRODUCT LINE

23. Prentice Hall, Inc. © 20065-23 Technological Discontinuity

24. Prentice Hall, Inc. © 20065-24 Strategic Operations Issues STRATEGIC OPERATIONS ISSUES - Operating leverage; reaping the benefits of “economies of scale” - Flexible manufacturing for mass customization From economies of scale to economies of scope

25. Prentice Hall, Inc. © 20065-25 Strategic Human Resource Management Issues HRM – –Increasing use of teams –Union relations –Temporary workers –Quality of work life –Human diversity