1. BUS 475 - Internal analysis Context: SM process model Resources: tangible and intangible Capabilities: combined resources Distinctive competences: Combined capabilities Distinctive competencies determine strategic choice, and feedback!

2. Example: Disney 1984 Parks = $186MM revenue Movies = $2.42mm Market cap = $2B 1994 $787 mm $845 mm Market cap = $28B !!! Increased admissions prices, reinvested in parks Released movie library on VHS Created Touchstone Movies Partnered with Pixar Diversified: ABC, hotels, retail stores, sports teams, cruise lines, character licensing, Disney Channel, etc.

3. Internal Analysis What resources do YOU own, control, or can easily access? Consider tangible and intangible resources When combined with two other people, what business/charity/recreational possibilities emerge?

4. Porter’s Value Chain (from McKinsey)

5. Your Turn…Burberry versus Zara Think resources  capabilities  advantages Compare/contrast value chains Consider imitability Predict the future Critical thinking: reasoned, logical discernment, not just reactions

6. Applications of Internal Analysis How does this apply to Starbucks? How does this apply to Herman Miller?

7. 5 card Poker hands Royal Flush: AKQJ10 of same suit Straight flush: 5 consecutive cards, same suit Four of a kind Full house: three of one rank, two of another Flush: five cards of same suit Straight: consecutive cards, any suit Three of a kind Two pair

8. From resources to strategy… How well do my resources and capabilities support: – Customer responsiveness – Quality as “excellence” – Product /service innovation – Process/manufacturing innovation – Quality as reliability – Efficiency and productivity Strategies: Low cost, Differentiation, or Focus

9. Durability of Competitive Advantage? – Intangibles: culture, brand/reputation, teamwork, supplier/distributor relationships – Inimitability comes from… – Causal ambiguity – Time dependence – Path dependence – Absorbtive (learning) capacity of competitors – Industry dynamism

10. VRIO Analysis Are my resources/capabilities/distinctive competences… – VALUABLE…they create value for my customer and/or my organization? – RARE…few competitors have them? – INIMITABLE…can’t be copied/duplicated at low cost by competitors? – ORGANIZED…is my firm structured, cultured, and controlled to optimally deploy the resources? UTC closing case…APPLY!

11. For next week… Assignment for next week: – Read chapters five! (skip chapter four for now) – Prepare to discuss (write up?) TomTom, c180 – 1 page, single spaced, internal /external/ strategic analysis. I am available for extra help! – Office hours (BK 308), M-Th 11:45-12:45 – Email: sbrowne@chapman.edusbrowne@chapman.edu

12. I am available for extra help! Email: sbrowne@chapman.edusbrowne@chapman.edu Office: BK 308C, Monday/Wednesday 4-5pm; TuTh By appointment between classes (11:30, 2:30, 5:30)