Session 5
Internal Scanning: Organizational Analysis
A search for strengths & weaknesses
ETS Field test signups
Write a S, W, O, of T for Dell 2003 on the
board
One per student
Must be unique from others on the board
Three Approaches to internal scanning:
organizational analysis
Strategic
Management
Searching for strengths &
weaknesses
1
Industry Analysis (Porter)
Other
Stakeholders
Suppliers
Strategic Management
Relative
Power of
Unions,
Government,
Etc.
Potential
Entrants
Threat of
New Entrants
Industry
Competitors
Bargaining
Power
Of Buyers
Buyers
Bargaining Rivalry Among
Existing Firms
Power
Of Suppliers
Threat of Substitute
Products or Services
Searching
for strengths &
Substitutes
weaknesses
2
Wrapping up from last session
Identifying Opportunities and Threats
using Porter’s industry analysis model
What opportunities &
threats does relative
power of Porter’s forces
lead to?
 Buyers power
 Suppliers power
 Other stakeholders
power
 Substitutes—alternative
ways to satisfy need
 Rivalry among existing
firms
 Potential new entrants
Strategic Management
 Opportunities




 Threats




Searching for strengths &
weaknesses
3
Session 5:
Internal Scanning: Organizational Analysis
A search for strengths & weaknesses
 Development of Opportunities and Threats
 Environmental analysis  Areas of concern
Issues and priorities  O & T
 Industry analysis (Porter model)  Areas of
concern  O & T
 Development of Strengths & Weaknesses
 Competencies and resource-based analysis  S & W
 Value chain analysis  S & W
 Scanning internal resources & capabilities  S & W
 Analyzing strategic factors
 Generating alternative strategies
 Selecting & implementing chosen strategy
Strategic Management
Searching for strengths &
weaknesses
4
Competencies—a path to
competitive advantage
 Core competencies: things the organization
can do exceedingly well
 Distinctive competencies: core
competencies that are superior to the
competition
 Sustainability of distinctive competencies
depends on
 Durability
 Imitability: transparency, transferability, and
replicability
Strategic Management
Searching for strengths &
weaknesses
5
What strengths and weaknesses are
revealed by this analysis?
Resource-based analysis
 Identify resources/capabilities in terms of strengths &
weaknesses
 Identify core competencies, things they can do very
well
 Identify distinctive competencies, things they do better
than competition (competitive edge)
 Assess sustainability:
 durability
 imitability
(transparency, transferability, replicability)
 Identify capability/resource gaps
 Define strategies
 Define plans to address resource/capability gaps
Strategic Management
Searching for strengths &
weaknesses
Apply the resource-based
approach to determine the6
firm’s competitive advantage.
Value chains (external)
 Industry value chain (Fig. 4.2)—show
activity flow from raw materials to
consumer
 Corporate value chain—examines
 How inputs are converted to outputs
 Processes by which value is added
”Differences among competitor value chains are a
key source of competitive advantage.” Porter
Strategic Management
Searching for strengths &
weaknesses
7
Corporate value chain analysis
(internal)
 Examines internal operations to
understand which parts add value
 Only value-adding parts contribute to
above average returns (profits)
 Seeks to identify multiple means to
implement chosen business strategy
See Nordstrom’s example
Strategic Management
Searching for strengths &
weaknesses
8
Which cells are strong?
What issues, strengths, and weaknesses
are revealed by this analysis?
Which are weak?
Which offer competitive opportunities?
Support
Activities
The corporate (internal) value chain
Firm infrastructure
Human resource management
Technology Development
Procurement
MarketOutServing
Inbound Operabound
ice
Logistics tions
and
Logistics
sales
Strategic Management
Searching for strengths &
weaknesses
Primary Activities
9
Functional strategy
 The approach a function takes to
support business strategy & achieve
objectives
 The path chosen to define and assure
effectiveness of the function
Strategic Management
Searching for strengths &
weaknesses
10
SWOT analysis & Alternative Strategies
STRENGTHS – S
WEAKNESSES - W
Internal
See description of each cell in H&W Figure 5.2
External
OPPORTUNITIES – O
THREATS - T
SO STRATEGIES
ST STRATEGIES
WO STRATEGIES
WT STRATEGIES
Word and PowerPoint versions of this form are
available on Assignments and Forms web page
Strategic Management
Searching for strengths &
weaknesses
11
Assignment for next time:
Developing Strategic Alternatives

Study


H&W Ch 5, Section 5.4 Business Strategies
Readings in Vista on:



Netflix, Southwest Airlines, Dell 2003, Dell 2005, and Dell 2006
Value chain analysis
Illustrate the development of each strategy cell, e.g., SO, WO, ST,
WT (Reference H&W, Fig 5.2). (TOWS forms are available from the course
web site in Assignments and Forms section.) One entry per strategy cell is
sufficient.



a. State S and O
b. State SO strategy that follows from the S and O
c. Include results in a SWOT or TOWS slide
Repeat above steps for WO, ST, and WT. A different firm can be
used for each, but be sure to identify the firm.
Submit a paper copy at the beginning of class.
Be prepared to use the value chain model and distinctive
competency concepts to justify each strategy presented.
Strategic Management
Searching for strengths &
weaknesses
12
Checklist for stating alternative
strategies
 Begin with an action verb--which helps us
keep an present  future focus
 Build on intersecting internal/external
forces
 Apply learned concepts
 Assure strategy has value
 Consider if strategy is feasible and realistic
 Consider if strategy will give a good return
on resources required
Strategic Management
Searching for strengths &
weaknesses
13
Analysis concepts







Strategy: purpose, formulation vs. implementation & elements of each; generic types
Strategic Management: process & sub tasks, strategic decision making, top
management’s role
Hierarchy of strategy: corporate, business, functional
Organizational effectiveness: goal, RB, IP, stakeholders
Objectives vs. goals: criteria to distinguish; requirements of objectives
Analyzing external environment: societal & task; how to do it, Porter model,
Analyzing internal environment










Resource-based: core & distinctive competencies, elements of sustainability
Value chain
Scanning internal resources: structure, culture, functional capabilities
Strategic audit (appendix 11C)
SWOT and building a TOWS matrix of alternative strategies
Corporate strategy: directional (growth, stability, retrenchment), portfolio analysis,
parenting
Functional strategies: outsourcing, marketing, finance, R&D, operations, HR, IT
3 tests of distinctive competency
Financial performance and condition
Implementing strategy: role of programs, budgets, procedures
Strategic Management
Searching for strengths &
weaknesses
14
H&W Fig. 5.4 describes cell contents
Generating strategic alternatives
 Analyze your




S
W
O
T
 To set strategies




SO
WO
ST
WT
Strategic Management
O
OPPORTUNITIIES
S
W
STRENGTHS
WEAKNESSES
SO
WO
STRATEGIES
STRATEGIES
T
ST
WT
THREATS
STRATEGIES
STRATEGIES
Searching for strengths &
weaknesses
15