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Chapter 3 The Internal Environment : Chapter 3 The Internal Environment 598 Fall 2007 Karen M.

Ross, SPHR, MBA Objectives: Objectives Understanding how and why we analyze the internal environment The concept of “value” & Value Chain Analysis A firm‟s capabilities – how they are developed Distinguishing Core Competencies ( 4 criteria) When does a firm outsource? What‟s next - Class Chapter Reviews Why we analyze the internal environment: Why we analyze the internal environment The internal environment affects the probability a firm has to sustain their competitive advantage But first, identifying the structure, culture, and unique resources/capabilities + core competencies so that their strategies can be implemented (where are you now?) All competitive advantages have a limited life; companies like GE, Nokia, PetsMart have continued to innovate to stay ahead (will the companies you research?) Why we analyze…continued: Why we analyze…continued Global economy, technological changes & continuing growth of information have taken over the traditional factors used to analyze a companies future A global mind-set is needed: this allows for the ability to study your internal environment in ways that are not dependent on assumptions of a single country, culture or context How do we do this… concept of Value: How do we do this… concept of Value Exploiting core competencies, competitive advantages to meet or exceed basic standards (create value) How is value measured? By performance (service, product) By attributes (for which customers are willing to pay) Where do you shop for value and why? Foundation of Competitive Advantage: Foundation of Competitive Advantage Resources Tangible & Intangible (Table 3.1, pg 80) Special mention „human capital‟ (Strategic Focus, page 82) Capabilities Evolve over time, integration of products, human resources (knowledge most significant; 3.3 pg 84) Core Competencies Come from analyzing your capabilities 4 Criteria of Sustainable Competitive Advantage: 4 Criteria of Sustainable Competitive Advantage Capabilities must meet 4 criteria (think about SWA where they combine human capital, culture & strategy) Valuable Rare Costly to imitate Nonsubstitutable Exercise: List the core competencies for at least 4 below; do they meet the criteria?: Exercise: List the core competencies for at least 4 below; do they meet the criteria? Point of analysis…value chain: Point of analysis…value chain Application of models that help identify the position of your firm (tangible, intangible, competencies and „cost‟) Value Chain Analysis…includes the physical creation of what a company makes & sells; and the activities that take place to make it happen ($$) You can study this at a macro or micro level Think about FedEx or the Internet (where did they create value for us?) Outsourcing…: Outsourcing… What do you think? When can this be effective? It includes purchasing a value-creating activity from an external supplier Think about the concept of „superiority‟ and how often a firm can meet that (can they?) What is key to making this work – what strengths internally must a company have? What’s next (Class Chapter Reviews): What‟s next (Class Chapter Reviews) Peer Evaluations will occur Please include sending me slides ahead of time to post Feel free to include an interactive portion Project Plan – who/what/how? Questions?