2. Learning Outline
Understand organizational strengths and
weaknesses
Understand the relationship between
organizational resources, organizational
capabilities, core competencies, and distinctive
organizational capabilities
Understand the Value Chain
Outsourcing
How to do an Internal Analysis
How to evaluate S&Ws
2
4. What is an Internal Analysis
Identifies and evaluates resources,
capabilities, and core competencies
As such organizations need to understand
their
Strengths are resources that an organization
possesses and capabilities that an organization has
developed that can be exploited and developed into a
sustainable competitive advantage
Weaknesses are resources and capabilities that are
lacking or deficient and prevents an organization from
developing a sustainable competitive advantage
4
5. The Road to Competitive
Advantage
Performance Results
Competitive Advantage
DistinctiveOrganizational
Capabilities
Organizational Organizational Core
Resources Capabilities Competencies
Financial assets Organizational processes
Physical assets and routines
Human resources Accumulated knowledge
Intangible assets Actual work activities
5
Structural-cultural assets
6. The road to distinctive
organizational capabilities
Distinctive Organizational
Capabilities
Organizational Core
Capabilities Competencies
Organizational Capabilities
Resources • Fundamental building block for
Tangible developing core competencies
Intangible •Organizational processes and
routines to get the work done
6
7. The road to distinctive
organizational capabilities
Distinctive Organizational
Capabilities
Organizational Core
Capabilities Competencies
Organizational Capabilities Core Competencies
•Fundamental building block for •Fundamental skills and capabilities
developing core competencies
• Organizational processes and •Exploitable by organization
routines to get the work done •Major value-creating capabilities
•Not a source of competitive advantage
7
8. Types of Core
Competencies
After-sale service capability
Skills in manufacturing a high quality
product (BMW)
System to fill customer orders
accurately and swiftly (Amazon;
Dell,Flipkart)
Expertise in integrating multiple
technologies to create families of new
products (W.L. Gore)
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9. The road to distinctive
organizational capabilities
Distinctive Organizational
Capabilities Distinctive Organizational
Capabilities
• Special and unique capabilities
• Distinguish from competitors
• Sustainable competitive Organizational Core
advantage Capabilities Competencies
• Outperform competition
Core Competencies
• Not a source of competitive advantage
• Fundamental skills and capabilities
• Exploitable by organization
• Major value-creating capabilities
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11. Procter & Gamble’s
Distinctive Capabilities
Superb marketing-distribution
skills and R&D capabilities in five
core technologies - fats, oils, skin
chemistry, surfactants, emulsifiers
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12. From Distinctive capabilities
to competitive advantage
•Contributes to
Superior Customer
Value
•Is Difficult
Distinctive
for Competitors
•Can Be Used Organizational to Imitate
in a Variety Capabilities
of Ways
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13. Capabilities vs. Core Competencies
vs. Distinctive Capabilities
A company capability is the product of
organizational learning and experience and
represents real proficiency in performing an
internal activity
A core competence is a well-performed internal
activity that is central (not peripheral or
incidental) to a company’s competitiveness and
profitability
A distinctive Capability is a competitively
valuable activity that a company performs better
than its rivals
13
14. Value Chain Analysis
{
Firm Infrastructure
Human Resource Management
Support
Activities Technological Development
Procurement
Marketing and Sales
Outbound Logistics
Inbound Logistics
Operations
Service
{
14 Primary Activities
15. From Value Chain Analysis
to Competitive Advantage
Sustainable competitive advantage
can be created by
1.Managing value chain activities
better than rivals and/or
2.Developing distinctive value chain
capabilities to serve customers!
15
16. Other types of Internal
Analysis
Internal audit
Look at all functional areas and see
which are performing well
Capabilities assessment profile
Analyze capabilities to identify
potential sources of competitive
advantage
16
17. Appeal of Outsourcing
Outsourcing non-critical activities allows a firm to
concentrate its energies and resources on those
value-chain activities where it
Can create unique value
Can be best in the industry
Advantages to outsourcing
Decrease internal bureaucracies
Flatten organization structure
Provide firm with heightened strategic focus
17
18. Potential Advantages of Outsourcing
Non-Critical Activities
Outsourcing makes strategic sense
when outsiders can perform certain
activities at a lower cost and/or with
higher value-added.
18
19. How do you do an internal
analysis?
Step 1 Prepare current product-market profile.
Identify sources of competitive
Step 2 advantage and disadvantage in
the main product-market segments.
Describe all the organizational
Step 3 capabilities and competencies.
Sort the core capabilities and
Step 4 competencies according to
strategic importance.
Identify and agree on
Step 5 the key capabilities
19 and competencies.
20. Identify Strategy-Critical Activities
Which activities are strategy-critical depends
Particulars of a firm’s strategy
Value-chain make-up
Competitive requirements
External market conditions
Identify strategy-critical activities
What business processes have to be performed extra well
or in timely fashion to achieve competitive advantage?
In what value-chain activities would poor work performance
impair strategic success?
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21. Criteria to Judge Organizational
Strengths and Weaknesses
Past Performance Trends Comparison Against Competitors
Are organizational
resources and capabilities
strengths or weaknesses?
Specific Goals or Targets Personal Opinions of Strategic
Decision Makers or Consultants
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22. Difficulty in developing
competencies
Because these competencies are in
people
Hard to develop
Hard to identify
Hard to change / improve
Also hard to “steal”
• Social Complexity
• Historical
• Casually ambiguous
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23. Take Aways
Internal Analysis tells what a firm CAN do
Goal is to create core competencies and
distinctive capabilities
Without them, you will not be in business long
Creating distinctive capabilities takes time
Very hard to do…Even harder to “steal”
Value chain analysis a way to
Understand where the competencies lie
Think about outsourcing
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