4/9/2015
ATHENS UNIVERSITY OF ECONOMICS AND BUSINESS
BUSINESS POLICY AND STRATEGY:
EXTERNAL AND INTERNAL ANALYSIS
Helen Salavou
Assistant Professor, Department of Business Administration
76 Patission Str., 104 34 Athens, Greece
tel./fax: 0030 210 8203425
e-mail: esalav@aueb.gr
http://www.aueb.gr
STRATEGIC MANAGEMENT MODEL
EXTERNAL ANALYSIS
INTERNAL ANALYSIS
STRATEGY FORMULATION
 Mission statement
Long-term goals
gy
Strategy
WHEELEN &
HUNGER (1995)
STRATEGY IMPLEMENTATION
 Programs
Budgets
Processes
ASSESSMENT & EVALUATION
Performance
CONTENTS


External environment analysis
Internal environment analysis
y
3
1
4/9/2015
External
environment
Internal environment:
Firm
INTERACTION
4
STRATEGIC MANAGEMENT MODEL
EXTERNAL ANALYSIS
INTERNAL ANALYSIS
STRATEGY FORMULATION
 Mission statement
Long-term goals
gy
Strategy
WHEELEN &
HUNGER (1995)
STRATEGY IMPLEMENTATION
 Programs
Budgets
Processes
ASSESSMENT & EVALUATION
Performance

Environmental Analysis (2 levels)

Macro-environmental analysis
 Analysis
of macro-factors (PEST) at the
national or/and international level

Micro-environmental analysis
 Analysis
of competitive forces at the industry
level
 Analysis of strategic groups
6
2
4/9/2015
MACROTechnological
Politicalg
legal
MICRONewcomers
Competitors
Firm
Sociocultural
Customers
Substitutes
Suppliers
Economic
7
ANALYSIS OF MACRO-FACTORS
Political-legal Environment (P)
E
Economic
i E
Environment
i
t (E)
Socio-cultural Environment (S)
Technological Environment (T)
8
Objectives of PEST Analysis

p
p
Select factors with the most important
impact
on the
firm
Assess the consequences of these factors to the
firm’s activities in terms of Opportunities and Threats

9
3
4/9/2015

MAIN QUESTIONS FOR THE MACRO-ENVIRONMENT:

Which elements comprise the political-legal environment at a national
or/and international level;



Governmental stability? (opportunity)
Frequent changes in law? (threat)
Tax allowances? (opportunity)

Which elements comprise the financial environment at a national
or/and international level;

Which elements comprise the socio-cultural environment at a national
or/and international level;

Which elements comprise the technological environment at a national
or/and international level;






High level of unemployment? (opportunity)
High level of inflation? (threat)
Adherence to tradition? (threat)
High level of education? (opportunity)
Rapid technological changes? (threat)
Patent protection? (opportunity)
10
MICRO-ENVIRONMENT: The industry refers to a group of firms
implementing similar production processes and similar tactics
for selling products.
Suppliers
Potential entrants
Competitive
rivalry
Complementary
products
Substitute products
Customers
The five forces framework of competition (Porter, 1980)
11

MAIN QUESTIONS FOR THE MICRO-ENVIRONMENT:

What is the intensity of competition?


High = threat
Low = opportunity

What is the bargaining power of suppliers?

What is the bargaining power of customers?

Are there many potential entrants (newcomers);

Are there many substitute (or/and complementary) products;








High = threat
Low = opportunity
High = threat
Low = opportunity
Many = threat
Few = opportunity
Many substitute = threat, many complementary = opportunity
Few substitute = opportunity, few complementary = threat
12
4
4/9/2015
ANALYSIS OF STRATEGIC GROUPS
Form groups of firms with similar strategic
characteristics and strategy.
CRITERIA






Geographical coverage
Number of market segments
Distribution channels
Cost structure
Pricing policy
R&D Capabilities
Strategic Map: Automobile Industry
Large
GM, Ford, Toyota,
Nissan, Honda, VW,
Daimler Chrysler
Fiat,
Renault,
Product
Portfolio
Volvo, Subaru,
Isuzu, Suzuki,
Saab, Hyundai
Kia
Morgan
Jaguar, Rolls
Royce, BMW
Porsche, Maserati,
Lotus
Small
National
Geographical Coverage
Global
5
4/9/2015
BASIC POINTS




Basic competitors are those inside the same
strategic group
Different strategic groups may have different
opportunities and threats based on the 5 forces
competitive model
Some strategic groups are more attractive and
some are less attractive
Blank spaces may provide opportunities for
creating new strategic groups
STRATEGIC MANAGEMENT MODEL
EXTERNAL ANALYSIS
INTERNAL ANALYSIS
STRATEGY FORMULATION
 Mission statement
Long-term goals
gy
Strategy
WHEELEN &
HUNGER (1995)
STRATEGY IMPLEMENTATION
 Programs
Budgets
Processes
ASSESSMENT & EVALUATION
Performance


Resources and Capabilities Model
Value Chain Model
18
6
4/9/2015
RESOURCES AND CAPABILITIES MODEL

Step 1. Resources

What is available to an organization
 Tangible:
physical, human, financial
intellectual,
intellectual reputation,
reputation know-how
 Intangible:

Practice: Write down the resources…
19
RESOURCES AND CAPABILITIES MODEL

Step 2. Capabilities/competences

What an organization is able to do
 Threshold:
 Core:

available or can be copied
not available or cannot be copied
Practice: Write down which of the
resources suggest capabilities (1-5 scale)
20
Capabilities
Unique/Core
Threshold
Not available to
competitors or
difficult to imitate
(i.e., working
climate, culture)
Available to
competitors or
easy to imitate
(i.e., technology)
7
4/9/2015
CORE CAPABILITES: MAXIMUM
PERFORMANCE
Durability
Transparency
Duplicability
Transferability
RESOURCES AND CAPABILITIES MODEL

Step 3. Focus on Core Capabilities

Check whether core capabilities are
 Durable
 Non
transparent
transferrable
 Non duplicable
 Non
Practice: Put on a table the 4 characteristics,
check and conclude
24
8
4/9/2015
RESOURCES AND CAPABILITIES MODEL
(HITT, IRELAND AND HOSKISSON, 1997)
Resources
Tangible
Intangible
Competences
Core Competences
Sources of competitive
advantage
Sustainable
Competitive
Advantage
Strategic Competitiveness
Superior Performance
RESOURCES AND CAPABILITIES MODEL

Based on this model
 Where
are the strengths?
 Where are the weaknesses?
26
RESOURCES AND CAPABILITIES MODEL
(GRAND, 1991)
4. Select strategy that
exploits the
competences in maximum
3. Recognizing the maximum
performance of competences
2. Recognizing
Competences
1. Recognizing
Resources
Strategy
Possibility of Achieving
Competitive Advantage
Competences
5. Recognizing
resources
that need to
be developed
Resources
9
4/9/2015
QUERIES THE VALUE OF RBV FOR TOP MANAGERS
NEW
CORE
COMPETENCES
EXISTING
EXISTING
NEW
MARKETS
DISADVANTAGES OF THE MODEL


Difficult to identify
If competitors realize that the core competences
are high-performing
g p
g theyy copy
py
CONCLUSIONS
1. The characteristics of the core competences
can be put by priority
2. If you cannot see the core competence you
cannot copy or transfer
3. If the core competence is nondurable, no other
criterion is met
4. If you copy the core competence the other
characteristics do not matter
10
4/9/2015
VALUE CHAIN
(PORTER, 1985)
SUPPORT
ACTIVITIES
A
FIRM INFRASTRUCTURE
MARGIN
HUMAN RESOURCE MANAGEMENT
RESEARCH & DEVELOPMENT
PROCUREMENT
INBOUND
LOGISTICS
OPERATIONS
OUTBOUND
LOGISTICS
MARKETING &
SALES
SERVICE
MARGIN
PRIMARY ACTIVITIES

Where are the weaknesses?
 Everywhere
in the primary activity
in the primary activity
 In some primary activities
 In all the primary activities
 Somewhere

DO NOT FORGET
 COMBINE
THE SECONDARY ACTIVITIES WITH EVERY
PRIMARY ACTIVITY
 IF THE INFORMATION IS NOT ENOUGH FOCUS ON
THE PRIMARY ACTIVITY
 IF THE INFORMATION IS ENOUGH BE MORE
SPECIFIC
 WHICH
 WHICH
SECONDARY ACTIVITIES ARE WEAK?
SECONDARY ACTIVITIES ARE STRONG?
11
4/9/2015
VALUE CHAIN MODEL: BASIC ELEMENTS


The competitive advantage is the result of
activities that are implemented either with lower
cost or better than competitors
Differences in value chains of organizations
can become the main source of competitive
advantage
d
t
EXAMPLES





Nokia delays 1 month to fix the problem in your
mobile
The buttons of the Samsung mobile are not
working properly
Benetton salespeople are not polite when the
customers enter the shop
Carrefour does not offer many brands in
cleaning stuff
Adidas salespeople do not know the
characteristics of their products’portfolio
THE VALUE SYSTEM (PORTER, 1985)
Suppliers’ value
chains
Firm’s
Firm
s value chain
Channels’ value
chains
Customers’ value
chains
12
4/9/2015
VIRTUAL VALUE CHAIN
(Dess, Rasheed, McLauglhin & Priem, 1995)
OUTSOURCING
SUPPORT
ACTIVITIES
A
FIRM INFRASTRUCTURE
MARGIN
HUMAN RESOURCE MANAGEMENT
RESEARCH & DEVELOPMENT
PROCUREMENT
INBOUND
LOGISTICS
OUTSCOURCING
OPERATIONS
SERVICE
OUTBOUND
LOGISTICS
OUTSCOURCING
MARKETING &
SALES
OUTSOURCING
OUTSOURCING
MARGIN
OUTSCOURCING
PRIMARY ACTIVITIES
13