3
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.
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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
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The Value Chain
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.
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Resource-Based View of the Firm
• Basic Assumption
• Types of resources
-
Tangible resources
Intangible resources
Organizational capabilities
Organizational competencies
Dynamic Capabilities
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Intangible Resources
• Human
• Innovation and creativity
• Reputation
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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. 99-120.
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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)
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Diamond – E Model
Management
preferences
Organization
Strategy
Resources
External
Environment