CHAPTER 5
Internal
Scanning:
Organizational
Analysis
STRATEGIC MANAGEMENT & BUSINESS POLICY
10TH EDITION
THOMAS L. WHEELEN
Prentice Hall, Inc. © 2006
J. DAVID HUNGER
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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
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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
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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 ?
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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.
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Resource-Based Approach to Organizational Analysis
5-Step Approach Strategy Analysis -1.
2.
3.
4.
5.
Identify and classify resources
Combine strengths into capabilities
Appraise profit potential of capabilities
Select strategy that best exploits
Identify resource gaps invest in weaknesses
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Continuum of Sustainability
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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…
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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)
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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.
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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
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Value-Chain Analysis
Linked set of value-creating activities
beginning with basic raw material and
ending with distributors getting final
goods into hands of customers
Typical Value Chain for
a Manufactured Product
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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)
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Corporation’s Value Chain
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Scanning Functional Resources & Capabilities
Basic Organizational Structures -–Simple structure
–Functional structure
–Divisional structure
–Strategic business units (SBU’s)
–Conglomerate structure
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Basic Organizational Structures
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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.
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Strategic Marketing Issues
STRATEGIC MARKETING ISSUES
–Market Position & Segmentation
–Marketing Mix (4P:Product, Place, Price, Promotion)
–Product Life Cycle
–Brand & Corporate Reputation
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Product Life Cycle
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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)
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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
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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
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Technological Discontinuity
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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
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Strategic Human Resource Management Issues
HRM –
–Increasing use of teams
–Union relations
–Temporary workers
–Quality of work life
–Human diversity
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