This document discusses tools for analyzing a firm's strategic position, including Porter's five forces model and stakeholder analysis for external analysis. It also discusses analyzing a firm's internal strengths and weaknesses. Core competencies are abilities a firm excels at that differentiate it strategically. While core competencies can help a firm, overreliance on them can also make a firm rigid and unable to change. A firm's strategic intent guides how it creates value for customers, employees and shareholders.

1. Defining the Organization’s
Strategic Direction
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Chapter Six
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2. 2
ASSESSING THE FIRM’S CURRENT POSITION
To assess the firm’s current position in the marketplace, it is
useful to begin with some standard tools of strategic analysis
for analyzing the external and internal environment of the firm.
External Analysis
The two most commonly used tools for
analyzing the external environment of the
firm include Porter’s five-force model and
stakeholder analysis.

3. WHY DOMINANT DESIGNS ARE SELECTED
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The five forces are:
1. The degree of existing rivalry.
2. Threat of potential entrants.
3. Bargaining power of suppliers.
4. Bargaining power of buyers.
5. threat of substitutes. Substitutes

4. 4
Stakeholder Analysis
Stakeholder models are often used for both strategic and
normative purposes.
A strategic stakeholder analysis emphasizes the
stakeholder management issues that are likely to
impact the firm’s financial performance, while a
normative stakeholder analysis emphasizes the
stakeholder management issues the firm ought to
attend to due to their ethical or moral implications.

5. 5
Internal Analysis
The analysis of the internal environment of the
firm most often begins with identifying the firm’s
strengths and weaknesses.
Sometimes this task is organized by
examining each of the activities of the
value chain (see Figure 6.3).7 In Michael
Porter’s model of a value chain, activities
are divided into primary activities and
support activities.

6. 6
IDENTIFYING CORE COMPETENCIES
AND DYNAMIC CAPABILITIES
Core Competencies
A company’s core competencies are typically considered to be
those that differentiate it strategically. A core competency is
more than just a core technology.
A core competency arises from a firm’s ability to
combine and harmonize multiple primary abilities
in which the firm excels into a few key building
blocks of specialized expertise.

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MULTIPLE DIMENSIONS OF VALUE
The Risk of Core Rigidities
Sometimes the very things that a firm excels at
can enslave it, making the firm rigid and overly
committed to inappropriate skills and resources.14
Incentive systems may
evolve that favor activities that reinforce
the firm’s core competencies. The
organizational culture may reward
employees who are most closely
connected to core competencies with
higher status and better access to other
organizational resources.

8. 8
Competing for Design Dominance in
Markets with Network Externalities
STRATEGIC INTENT
A firm’s purpose is to create value. This entails
more than just improving operations or cutting
costs; it means leveraging corporate resources to
create more performance for customers, more well-
being for employees, and more returns for
shareholders.
This is accomplished through developing
new businesses and markets, and
leveraging corporate resources, all guided
by the firm’s strategic intent.

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