North South University

School of Business & Economics (SBE)

EMB 690 Strategic Management

Spring Semester, 2021
Week 4
 ❑External Environment:
❑The Macro-environment;
❑Industry Structure;
❑Strategic Group Mapping;
❑Competitors Analysis;
❑Driving Forces;
❑Critical Success Factors;
Today’s Lecture outline

❑Internal Environment:
oResources;
oCapabilities;
oCore Competencies;
oCompetitive Advantage;
oValue Chain Analysis;
oSWOT Analysis;
 Internal Environment Analysis

❑Importance?
❑What to focus?
❑How to assess competitive advantage?
Components of Internal Analysis

Figure 3.2
 Definitions
Resources...are inputs into a firm’s production
process. They cover a spectrum of individual, social
& organizational phenomena, such as capital,
equipment, the skill of individual employees,
patents, finance & talented managers.
Capabilities...refer to ‘an organisation’s skills in
co-ordinating its resources & putting them to
productive use’ OR ‘Are the capacities for a set of
resources to integratively perform a task or activity’.
❑ Types of activity that a company performs to create value.
Core Competencies: Resources & capabilities that serve as
a source of competitive advantage for a firm over its rivals.
 Definitions
Competitive Advantage: A sustained /sustainable
competitive advantage occurs when a firm
implements a value-creating strategy of which other
companies are unable to duplicate the benefits or
find it too costly to imitate.
❑ Typically, resources alone do not yield a
competitive advantage.
❑ Competitive advantage is created through the
unique bundling of resources.
Strategic Competitiveness: When a firm successfully
formulates and implements a value creating
strategy.
Four criteria of sustainable advantage

Core
Valuable
competencies

Competitive
Rare
advantage

Costly to imitate Value creation

Above-average
Non-substitutable
returns
 Outcomes from Combinations of the Criteria
for Sustainable Competitive Advantage
Costly to Non-sub- Competitive Performance
Valuable Rare
Imitate stitutable Consequences Implications
Below
Competitive
NO NO NO NO Average
Disadvantage
Returns

Competitive Average
YES NO NO YES/NO Parity Returns

Temporary Aver./Above
YES YES NO YES/NO Competitive Average
Advantage Returns

Sustainable Above
YE YE YE YE Competitive Average
S S S S Advantage Returns
5-10
 Definitions
Above-average Returns: Returns in excess of what an
investor expects to earn from other investments
with a similar amount of risk.
Superior Returns: Earning of above-average returns
Risk: An investor’s uncertainty about the economic
gain or losses that will result from other investment
with a similar amount of risk.
Strategic flexibility: Is a set of capabilities firms use to
respond to various demands & opportunities that
are part of dynamic & uncertain competitive
environments.
 The challenge of internal analysis
Managers’ strategic decisions about resources,
capabilities and core competencies are non-routine
and have ethical and competitive implications.
Managers must have:
❑Courage;
❑Self-confidence;
❑Integrity;
❑The capacity to deal with uncertainty and
complexity;
❑Willingness to hold themselves and other people
accountable for their work;
 Resources
❑ Tangible resources: (physical entities)-
land, buildings, equipment, inventory, &
money.
❑ Intangible resources: (nonphysical
entities created by managers & other
employees)- brand names, company
reputation, employee knowledge &
experience, intellectual property.
 Resources
Tangible Resources Examples
Financial resources The firm’s borrowing capacity;
The firm’s ability to generate internal funds;
Organisational The firm’s formal reporting structure & its formal planning,
resources controlling & coordinating systems;
Physical resources Sophistication & location and a firm’s plant & equipment
Access to raw materials;
Technological Stock of technology, such as patents, trademarks,
resources copyrights & trade secrets;

Intangible Resources Examples

Human resources Knowledge, Trust, Managerial Capabilities, Organizational
routines;
Innovation resources Ideas, Scientific capabilities, Capability to innovate;
Reputational resources Reputation with customer [brand name, perceptions of
product quality, durability & reliability], Reputation with
suppliers [for efficient, effective, supportive & mutually
beneficial interactions & relationships];
 Capabilities
Functional areas Capabilities Examples of firms
Distribution Effective use of logistics management Dell
techniques;
Human resources Motivation, Empowering & retaining Microsoft, Dell
employees;
Management Effective & efficient control of inventories Wal-Mart, Dell
information through point-of-purchase data collection
systems methods;
Marketing Effective promotion of brand-name GIORGIO ARMANI, CK
products, Effective customer service,
Innovative merchandising;
Management Ability to envision the future of clothing, BHP Billiton, Nucor Steel
Effective organizational structure;
Manufacturing Design & production skills yielding reliable Komatsu, Sony
products, Product & design quality,
Miniaturisation of components & products;
Research & Innovation technology, Rapid Apple computers,
development transformation of technology into new Caterpillar, Samsung
products & processes;
 Typical Company Value Chain
The sequence of activities that a firm undertakes to create value, including the various steps of
the supply chain but also additional activities, such as marketing, sales, and service.

Primary Activities and Costs

Distribution Profit
Research
Production/ and Customer Market share
and Marketing
Operations Outbound Service Brand name
Development Logistics
and Sales

Company Infrastructure, Information Systems

Support
Human Resources Management Activities
and Costs

Materials Management
 SWOT Analysis -What to Look For
Potential Resource Potential Resource Potential Company
Potential External Threats
Strengths Weaknesses Opportunities

Powerful strategy No clear strategic Serving additional Entry of potent new

Strong financial direction customer groups competitors
condition Obsolete facilities Expanding to new Loss of sales to
Strong brand name Weak balance geographic areas substitutes
image/reputation sheet; excess debt Expanding product Slowing market
Widely recognized Higher overall costs line growth
market leader than rivals Transferring skills Adverse shifts in
Proprietary Missing some key to new products exchange rates &
technology skills/competencies Vertical integration trade policies
Cost advantages Internal operating Take market share Costly new regulations
Strong advertising problems . . . from rivals Vulnerability to
Product innovation Falling behind in Acquisition of rivals business cycle
skills R&D Alliances or JVs to Growing leverage of
Good customer Too narrow expand coverage customers or suppliers
service product line Openings to exploit Reduced buyer needs
Better product Weak marketing new technologies for product
quality skills Openings to extend Demographic changes
Alliances or JVs brand name/image