Notes Module II SM

Prof.
Rupali Gawande
Introduction
 An internal environmental analysis is an extensive review of all aspects of a company's
operations, internal guidance and mission.
 Aspects of operations typically reviewed are marketing strategy, production capacity, and the
company's vision and leadership.
 Nonprofit organizations may also conduct a similar analysis.
 The value chain analysis describes the activities the organization performs and links them to
the organizations competitive position.
 Organizational Capability focuses on internal processes and systems for meeting customer
needs and creates organization-specific competencies that provide competitive advantage
since they are unique.
 Portfolio analysis is a systematic way to analyze the products and services that make up an
association's business portfolio.
2.1 Company’s Internal Environment
Internal environments refer to the quantity and quality of an organization's physical and
human resources including finances, managerial talents and expertise in marketing
production, research and development. If a company possesses competitive advantage to
compete in its markets and industries it would be imperative to scan its internal
environment. Scanning and analyzing the external and competitive environment does not
throw light on competitive advantage of the company. Contrary to the assertions of Michael
Porter, Rumelt argues that the defining factor in differential firm performance is not the
industry structure within which the company finds itself rather it is more with factors at the
individual company level such as its resources that determine if the company will be able to
take mileage of opportunities while avoiding threats.
A) Meaning:
Scanning internal environment, also known as organisational analysis, internal capability
analysis, profiling the organisation or resource audit, is the process of assessing at company`s
posture relative to its current position, competition within and outside the industry, overall
performance and its capability in terms of strengths and weaknesses.
2.2 Resource Based View of a Frame
A) Meaning:
The Resource Based View framework combines the internal (core competence) and external
(industry structure) perspectives on strategy. Competitive advantage is ultimately attributed to
the ownership of a valuable resource. Resources are more broadly defined to be physical (e.g.
property rights, capital), intangible (e.g. brand names, technological knowhow), or
organizational (e.g. routines or processes like lean manufacturing).
B) Types of Resources:
Resources refer to the assets of a company. A company`s resources can be divided into two
types: tangible and intangible resources. Tangible resources are physical entities, such as land,
buildings, manufacturing plants, equipment, inventory, and money. Intangible resources are
nonphysical entities that are created by managers and other employees, such as brand names,
the reputation of the company, the knowledge that employees have gained through
experience, and the intellectual property of the company, including patents, copyrights, and
trademarks. Resources are of two types. They are as follows:
1) Financial
Resources : 1) Human
2) Organisational Resources :
Resources : 2) Innovation
3) Physical Resources :
Resources : 3) Reputational
4) Technological Resources
Resources:
Tangible Intangible
resources Resources
Types of
Resources
1) Tangible Resources :
Tangible resources are assets that can be seen and qualified. Production equipment,
manufacturing plants and formal reporting structures are examples of tangible resources.
There are four types of tangible resources. They are as follows:
a) Financial Resources :
i) The firm’s borrowing capacity
ii) The firm’s ability to generate internal funds
b) Organisational Resources :
The firm’s formal reporting structure and its formal planning, controlling coordinating
systems.
c) Physical Resources :
i) Sophistication and location of a firm’s plant and equipment
ii) Access to raw material
d) Technological Resources :
Stock of technology, such as patents, trademarks, copyrights and trade secrets. As tangible
resources, a firm’s borrowing capacity and the status of its plant and equipment are visible to
all. The value of many tangible resources can be established through financial statements.
2) Intangible Resources :
Intangible resources include assets that are rooted deeply in the firm’s history and that have
accumulated over time. There are three types of intangible resources. They are as follows:
a) Human Resources :
i) Knowledge
ii) Trust
iii) Managerial Capabilities
iv) Organisational Routines
b) Innovation Resources :
i) Ideas
ii) Scientific Capabilities
iii) Innovation Capacity
c) Reputational Resources :
i) Reputation with Customers:
Brand Names, Perception of Product Quality, Durability and Reliability
ii)Reputation with Suppliers:
For efficient, effective, supportive and mutually beneficial interactions and relationships
C) Analyzing Company’s Resources and Competitive Position:

Resources are inputs into a firm’s production process. Capital equipment, the skills of
individual employees, patents, finances and talented managers are all resources. In broad
sense, resources cover a spectrum of individual, social and organisational phenomena.
Analysis of company’s resources is important in formulation of strategy. When effective brand
names inform customers about a product’s performance, characteristics, attributes and value
then Resources are the source of a firm’s capabilities. A firm's competitive advantage is a
function of (a) the company resources and capabilities. (b) Its ability to mobilize these
resources and capabilities in creating strategic assets, and(c) sustained market performance. It
can be explained with the following figure:
Strategic
C) Analyzing Company’s Resources and Competitive Position: Competitiveness
Competitive
Advantage
Outsource
Valuable Rare Costly to Imitate
Non-substitable Fig: Resources of company

1) Firm’s Capabilities:
Compared to tangible resources intangible resources are a superior and more potent source
of core competencies. As a source of capabilities tangible and intangible resources are a
critical part of the pathway to the development of competitive advantage.
2) Analysis of Company’s Competitive Position:
Although companies regularly confirm that customers and competitors have the biggest
influence on their profitability, they do not undertake any systematic analysis of their
activities; consequently information about them is rarely collected and documented. Such
study is essential before taking strategic decisions.

Types of Forces that Affect Competitive Strength: Relative
Market
Profit Share
Margins Ability to
Relative to Compete
Competitors on Cost
Match the Ability to

Company’s Match
Resources Rivals
Influence
Branded and
Image Bargaining
Technology Power
and
Innovation

a) Relative Market Share:
This is the ratio of a company’s market share by volume to its nearest rival. E.g. if a company
has a 25 percent share and its nearest rival has 50 percent the relative market share is 0.5. If
the relative market share is higher, then the competitive strength is greater compare to its
rivals. Such an analysis is helpful in deciding the strategy with respect to marketing of the
products of the company.
b) Ability to Compete on Cost :
This provides a strong competitive advantage over rivals. If companies can achieve cost parity,
then the time involved in achieving cost parity must be allowed for.
c) Ability to Match Rivals :
Ability to match rivals on key product and/or service attributes is another force which affects
the strategy formulation. Quality, technology, reputation, etc. can affect customer demand
and competitive advantage.
d) Influence and Bargaining Power :
Influence and bargaining power over buyers and suppliers affect the strategic decisions of the
company. This can lower competition in the market place and provide competitive advantage.

e) Technology and Innovation :
Being first to market with technologically advanced and innovative products can lead to
competitive advantage.
f) Branded Image :
Strong brand names can command premium prices.
g) Match the Company’s Resources :
The important competitive force is matching the company’s resources to key success factors
in the industry. When a company’s strengths match industry key success factors a competitive
advantage can be gained.
h) Profit Margins Relative to Competitors :
It is normally a direct result of successful cost competition; this is also an important
competitive force of company’s strength.
D) Competitive Advantage:
Differentiation
1) Sources of Competitive Advantages:
Low Costs
Niche Marketing
High Performance or Technology
Sources Quality
Service
Vertical Integration
Synergy
Culture, Leadership and Style of an
Organization
1) Sources of Competitive Advantages:
In seeking the advantages that competitors cannot easily copy; it is appropriate to identify
some possible sources of advantage:
a) Differentiation:
Differentiation enables the firm to gain competitive advantage. This is the development of
unique features or attributes in a product or service to appeal especially to a part of the total
market. Branding is an example of this source.
b) Low Costs:
The development of low-cost products enables the firm to advantage over its competitors.
For example, the labor costs in some South East Asian countries like India and China cannot
be matched in the West.
c) Niche Marketing:
A company may select a small market segment and concentrate all its efforts on achieving
advantages in that segment. Such a focus on a small segment of the market enables the firm
to gain advantage over competitors Dunhill is an example.
d) High Performance or Technology:
A company may develop special levels of performance or service that simply cannot be
matched by other companies. Patented products or recruitment of specially talented
individuals are examples.
e) Quality:
Some companies offer a high level of quality that others are unable to match. For example,
some Japanese cars have provided levels of reliability that Western companies have had
difficulty in reaching.
f) Service:
Some companies provide superior levels of service that others are unable or unwilling to
match. For example, Mc DonaId`s has set new levels of service in its fast food restaurants that
have been unmatched by others for many years.
g) Vertical Integration:
The backward acquisition of raw material suppliers and/or forward acquisition of distributors
may provide advantages that others cannot match. The purchase of iron ore mines by some
steel companies has given them an advantage over others who lack raw materials.
h) Synergy:
Some multi-business organizations achieve synergy by sharing fixed overheads, transferring
technology or sharing the sales three, among its businesses, so that the whole is greater than
the sum of the parts.
i) Culture, Leadership and Style of an Organization:
The way that an organization leads trains and supports its members may be a source of
advantage that others cannot match. It will lead to innovative products, exceptional levels of
service, and fast responses to new market developments and so on.
E) VRIO Framework:
The VRIO framework, in a wider
scope, is part of a much larger
strategic scheme of a firm. The basic
strategic process that any firm goes
through begins with a vision
statement, and continues on through
objectives, internal & external
analysis, strategic choices (both
business-level and corporate-level),
and strategic implementation.
E) VRIO Framework:
1) Value:
The first question the VRIO analysis asks about a resource or capability is if it is valuable. A
valuable resource enables a company to adequately react to risks and chances provided by the
environment, exploiting opportunities and neutralizing threats the VRIO framework parallels
the SWOT analysis here, connecting the value of internal resources to external risks and
opportunities. Furthermore, a valuable resource or capability is defined as being able to
contribute to the costumer’s needs, at a price the customer is willing to pay. Again, external
factors such as available alternatives on the market, industry structure or customer
preferences, contribute to determining the value of a resource.
2) Rareness:
The second question the VRIO framework tries to answer about a resource or capability is
whether it is rare. The question of rareness is a question of possession of resources and
capabilities in competing firms. While it is important that resources and capabilities are
valuable, a company should also aim at obtaining rare resources in order to achieve a
competitive advantage. In spite of that, valuable but non-rare (common) resources are
important, too. These resources and capabilities can be used to create competitive parity, thus
ensuring the survival of the company.
E) VRIO Framework:
3) Imatibility:
Imitability refers to the degree to which a company’s product, brand, resource or capability can
be copied by competitors. Imitability is a very important aspect in strategic management.
When it is difficult and/or expensive for competitors to copy a certain resource, the company
has gained a significant competitive advantage. The extent to which a resource can be copied
plays a role in the market performance of the firm’s product and influences the brand value.
Scientist identified four important factors capable of generating inimitability for a resource:
Unique historical conditions, causal ambiguity, social complexity and institutional condition.
4) Organisation:
The final characteristic of the VRIO framework, organisation, is defined as the company’s skill
at keeping and using their resources and capabilities in a value-adding way and describes how
well a firm exploits the resource in question. A resource might be valuable, rare and inimitable,
but in order to turn this resource into a competitive advantage, it also needs to be identified
and exploited in the right way otherwise, it might not benefit the company, or even become a
weakness. The organisational structure and the attached control systems and compensation
policies are crucial in supporting the correct exploitation of the company’s resources.
F) Competitive Parity & Competitive Disadvantage:

Most studies of responses to change in competitive environments focus on competitor-
specific adaptations. However, rivals are often acutely aware of one another, and this
awareness should influence their competitive behavior. The firm/company resources and
capability is it rare, if it very rare then the firm/company will have a competitive advantage,
but if the rarity is not that significant, then the firm/company resources and capability is more
towards competitive parity. In combination with a firm’s other resources and capabilities, it
can result in sustained competitive advantage. Without the correct organization, even firms
with valuable, rare and costly to imitate resources and capabilities can suffer competitive
disadvantage. Following are the concept of comparative parity and disadvantage.
1) Competitive Parity
2) Competitive Disadvantage
F) Competitive Parity & Competitive Disadvantage:

1) Competitive Parity:
This criterion uses the action of successful competitors or potential competitors. The premise
is that the firm at the minimum must meet the actions of its competitors. For example if 60
days credit is the industry norm and the firm does not follow it, it may be considered as a
weakness. It has to be borne in mind that all practices may not be optimum and cannot be
generalized for all firms e.g. product. market scope. Therefore it may be advisable to identify
the dimensions of uniqueness and use other criteria besides competitive criterion, to classify
strength or weakness.
2) Competitive Disadvantage:
If a resource or capability controlled by a firm is not valuable, that resource will not enable a
firm to choose or implement strategies that exploit environmental opportunities or neutralize
environmental threats. Organizing to exploit this resource will increase a firm`s costs or
decrease its revenues. These types of resources are weaknesses. Firms will either have to fix
these weaknesses or avoid using them when choosing and implementing strategies. In this
sense Valuable-but-not-rare resources can be thought of as organizational strengths.
F) Core Competence:
Core competencies are those capabilities that are critical to a business achieving competitive
advantage. The concept of core competencies was developed in the management field. C. K.
Prahalad and Gary Hamel introduced the concept in a 1990 Harward Business Review article
According to them; a core competency is an area of specialized expertise that is the result of
harmonizing complex streams of technology and work activity.
1) Development of Concept:
Many researchers have tried to highlight and further illuminate the meaning of core
competency. In other words, a core competency guides a firm recombining its competencies in
response to demands from the environment. Thus, core competency is something that a firm
can do well and that meets the following three conditions:
a) It provides consumer benefits.
b) It is not easy for competitors to imitate.
c) It can be leveraged widely too many products and markets.
F) Core Competence:
2) Forms of Core Competencies:
A core competency can take various forms. They can be given as follows:
a) Technical/ subject matter know how.
b) A reliable process.
c) Close relationships with customers and suppliers.
d) Product development or cultures, such as employee dedication.
3) Core Competency versus Competitive Advantage:

Core competencies are capabilities that serve as a source of competitive advantage for a firm
over its rivals. Core competencies emerge through an organisational process of accumulating
and learning how to deploy different resources and capabilities. Examples of capabilities can
be given as follows:
Examples of Capabilities:
i) Management:
Ability to envision the future of their industry and effective organisational structure.
F) Core Competence:
Examples of Capabilities:
ii) Marketing :
Effective promotion of brand-name products, effective customer service, innovative
merchandising are the capabilities of marketing.
iii) Human Resources :
Motivating, empowering and retaining employees.
iv) Manufacturing :
In manufacturing capabilities is use of advanced technologies and skilled labor.
v) Distribution :
Selection of effective distribution channels, proper and timely delivery of goods and services.
vi) Management Information Systems :
In management information system developing effective management information system is
capability.
vii) Research and Development:
To determine whether a capability is a core competency, its capability of producing
sustainable competitive advantage is judged. It is done on certain criteria.
F) Core Competence:
4) Model of Sustainable Competitive Advantage:
Hanson uses an updated model with four criteria of sustainable competitive advantages:
a) Rare :
Capabilities that few, if any, of its competitors possess.
b) Valuable :
The capacity allows the firm to exploit opportunities or neutralize threats in its competitors
possess.
c) Costly to Imitate :
Capabilities that other firms cannot easily develop, It is to be noted here that it does not
simply mean it is expensive to imitate, it means it is difficult to imitate.
d) Non- Substitutable :
The capacity does not have a strategic equivalent. One example is research and
developments, the objective of which is obtaining new technology by developing internally or
by monitoring the external environment for development them as strategic equivalents.
F) Core Competence:
5) Characteristics of Core Competence:
Core competencies are fundamental, unique strengths of the firm. It is therefore incumbent
upon management to identify the organizations core competencies. The following common
characteristics of core competencies may help an organization to distinguish areas of
competencies from the multitude of other activities:
a) Core competencies provide the distinctive advantage for the firm.
b) They are difficult for the competitors to imitate.
c) They make a significant contribution to customer value and the end products offered by the
firm.
d) They provide access to a wide variety of markets.
G) Distinctive Competitiveness:
Organization's competitive ability is determined by net result of its strengths and weaknesses.
When organisation possesses exclusive or relatively large ability to compete, it is called a
‘distinctive competence’. Distinctive competence means, an advantage a company has over its
competitors. It is because it can do something which they cannot. All organizations do not
possess distinctive competence, but which organisation possess, use them for strategic
purposes. Distinctive competence of an organisation is very useful in strategy formulation,
because it gives a company. The competitive age in the market place.
For some organisation becomes a success factor. For example - superior quality of a product
on a particular attribute say a two wheelers more fuel efficient than its competitors.
Sometimes firm achieves differential advantage because of its research and developments
programmers which may not possess by its competitors. Distinctive competencies are helpful
for organisation in many ways. So they try to build up distinctive competencies.
H) Benchmarking as a Method of Comparative Analysis:

If a company is to be successful, it needs to evaluate its performance in a consistent manner.
In order to do so, businesses need to set standards for themselves, and measure their
processes and performance against recognized, industry leaders.
1) Meaning and Purpose:
An organization's ability to compare itself to others is of prime importance. Some companies
use benchmarking to find out the best practices in class and compare those to their own.
Benchmark is a reference point for the purpose of measuring. Benchmarking involves the
creation of a continuous process of measuring an organizations products and services,
procedures and process against successful competitors and leading companies in other
industries. This may involve measurement against many different organizations in order to
fully cover all the functions.

2) Definitions of Benchmarking:
a) CEO of Xerox -D.T. Kearns:
Benchmarking is the continuous process of measuring the products, the services, and practices
against the best competitors or the leader in their industry.”
b) Freytag and Hollensen :
“Benchmarking involves measurement of business performance against the best and makes
continuous effort in reviewing process practice and method”.

3) Methodology of Benchmarking: Identify other
Industries that
have Similar
Processes
Identify
Identify Organisations
Problem that are
Areas: Leaders in
these Areas
Methods of
Benchmarking
Visit the "Best
Practice" Survey
Companies to Companies for
Identify Measures and
Leading Edge Practices
Practices Implement
New and
Improved
Business
Practices

3) Methodology of Benchmarking:
The following is an example of a typical benchmarking methodology:
a) Identify Problem Areas:
Before embarking on comparison with other organizations it is essential to know the
organization's function and processes provides a point against which improvement effort can
be measured.
b) Identify other Industries that have Similar Processes:
For instance, if one is interested in improving hand-offs in addiction treatment one would
identify other fields that also have hand-off challenges. These could include air traffic control,
cell -phone switching between towers, transfer of patients from surgery to recovery rooms.
c) Identify Organizations that are Leaders in these Areas:
Look best in any industry and in any country. Consult customers , suppliers, financial analysts,
trade associations and magazines to determine which companies are worthy of study.

3) Methodology of Benchmarking:
d) Visit the "Best Practice" Companies to Identify Leading Edge Practices:

Companies typically agree to mutually exchange information beneficial to all parties in a
benchmarking group and share the results within the group.
e) Implement New and Improved Business Practices:
Take the leading edge practices and develop implementation plans which include
identification of specific opportunities, funding the project and selling the ideas to the
organization for the purpose of gaining demonstrated value from the process.
G) Benchmarking as a Method of Comparative Analysis:

4) Advantages of Benchmarking: Lowering
Labor Costs
Improving
Awareness Product
Quality
Advantages of
Benchmarking Increasing
Immediate Sales and
Profits
Objectivity Clarity

4) Advantages of Benchmarking:
Following are the advantage of benchmarking.
a) Lowering Labor Costs:
One advantage of benchmarking may be lower labor costs. They may also identify the
company that sold the competitor the robots. Subsequently, the company using
benchmarking may call the robot manufacturer to help set up its own system.
b) Improving Product Quality:
Companies may also use benchmarking to improve product quality. Engineers sometimes
purchase leading competitors products. They may then take them apart, study them and
determine how the competitors' products outlast or outperform others in the industry.

c) Increasing Sales and Profits:
A company that uses benchmarking to improve its functions, operations, products and services
may enjoy increases in sales and profits. Customers are likely to notice these improvements.
d) Clarity:
One of the biggest advantages of benchmarking is its clarity. By benchmarking or comparing
performance markers, such as revenue or number of pieces produced per minute, the
company's relative performance is very clear.
e) Objectivity:
A large benefit is that benchmarks tend to be quantified (i.e., a number) rather than
qualitative, and as such are more objective.
f) Immediate:
Benchmarking also carries the advantage of being immediate comparing one company's
performance to another is fairly straight forward and can be accomplished fairly and quickly.
g) Awareness:
This can help company to form better strategies, make more informed decisions, develop
policy, determine best investments and improve quality at individual, team, or company level.

5) Disadvantages of Benchmarking:
Inadequate To Measure
Require Large
Investment:
Danger of Complacency
and Arrogance
Disadvantages

5) Disadvantages of Benchmarking:
a) Inadequate To Measure:
A major limitation of benchmarking is that while it helps organisations in measuring the
efficiency of their operational metrics. It remains inadequate to measure the overall
effectiveness of such metrics. Benchmarking reveals the standards attained by competitors
but does not consider the circumstances under which the competitors attained such
standards.
b) Require Large Investment:
Benchmarking can require a large investment in time, labour, and capital. Costs for a large
project can easily reach into the hundreds of thousands of dollars. These can be minimized
through careful, thoughtful, and deliberate planning.
c) Danger of Complacency and Arrogance:
A bigger disadvantage of benchmarking is the danger of complacency and arrogance. Many
organisations tend to relax after excelling beyond competitors' standards, allowing
complacency to develop
H) SWOT Analysis:
SWOT is an acronym used to describe the particular Strengths, Weaknesses, Opportunities, and Threats
that are strategic factors for a specific company. A SWOT analysis should not only result in the
identification of a corporation's core competencies, but also in the identification of opportunities that
the firm is not currently able to take advantage of due to a lack of appropriate resources.
a) SWOT as a Technique of Environmental Analysis:
SWOT analysis is an analysis undertaken by business firms to understand their external and internal
environment. The term SWOT consists of four words;
S = Strengths
W = Weaknesses
O = Opportunities
T = Threats
SWOT analysis is applied to formulate effective organisational strategic. Through SWOT analysis, the
business firm can match the strengths (S) and weaknesses (W) existing within an organisation with the
opportunities (O) and threats (T) existing in the external environment It enables a business firm to use its
strengths to exploit the opportunities provided by the environment.
H) SWOT Analysis:
A company can be strong or weak in respect of technology, finance, human resources,
marketing capabilities and production facilities. The task is to make best use of its strengths.
Opportunities and Threats ate related to external environment The environment might
present many opportunities but the company might not have the strength to avail these
opportunities; white some other companies may be strong enough to avail the opportunities
provided by environment, Similarly the environment might pose a threat in the form of
growing competition and the company may or may not have the strength to meet the
threats.
Strengths Opportunities
Internal External
Environment Environment
Weaknesses Threats
H) SWOT Analysis:
b) Components of SWOT:
Strength Weakness Opportunities Threats

H) SWOT Analysis:
1) Strength:
The strength of a business organisation refers to the capacity by which an organisation can
gain advantage over its competitors. For example, consider superior research facilities and
presence of development skills or the strengths of a business organisation. These can be
used for development of new products enabling the business organisation to have
competitive advantage over his competitors.
2) Weakness:
The weakness of a firm refers to limitation of a business firm. It results in significant
disadvantage for a firm in comparison to its competitors, For example, overdependence of a
firm on a single product line, outdated technology, lack of financial resources etc. can be
weaknesses of a business unit. It can result in losses in times of crisis.
H) SWOT Analysis:
3) Opportunity :
The availability of opportunity is a favorable condition in the organisation's environment. If a
company has enough strength to avail the opportunity, it can generate extra profits. For
example, government has made it mandatory for two-wheeler’s drivers to wear helmet while
driving the vehicle. This has created opportunity for helmet industry.
4) Threat:
It is unfavorable condition in the organisation's environment. It creates a risk for the
organisation. Threat can be in the form of growing competition, change in fashion,
unfavorable changes in government policy, raw-material shortages etc. For example, Zen car
is facing threat in the form of increased competition from Hyundai's Santro and Tata's Indica.
Similarly, entry of Reliance and Tata in telecommunication sector has posed threat to existing
companies, Honda Activa scooter has created a threat to the Kinetic scooter-After the
identification of environmental threats and opportunities and the organisational strengths
and weaknesses, the management should consider various strategic alternative and choose
the most appropriate strategy.
TWOS Analysis
2.3The Value Chain Analysis Using
Porter’s Model
Value chain analysis allows the firm to understand the parts of its operations that create value
and those that do not. The idea of a value chain was first suggested by Michael Porter (1985) to
depict how customer value accumulates along a chain of activities that lead to an end product
or service. Porter describes the value chain as the internal processes or activities a company
perform “to design, produce, market, deliver and support its product.”
A) Porter’s Model:
Porter describes two major categories of business activities: primary activities and secondary
/support activities.P orter’s value chain consists of a “set of activities that are performed to
design, produce and market, deliver and support its product”. The idea of the value chain is
based on the process view of organisations, the idea of seeing a manufacturing (or service)
organisation as a system, made up of subsystems each with inputs, transformation processes
and outputs.
Porter’s Model
Fig: Porters Model

Porter’s Model
a) The Primary Activities:
Inbound Outbound Marketing

Operations: Service
Logistics Logistics and Sales
Porter’s Model
a) The Primary Activities:
1) Inbound Logistics:
Involve relationships with suppliers and include all the activities required to receive, store,
and disseminate inputs.
2)Operations:
Operations are all the activities required to transform inputs into outputs (products and
services).
3)Outbound Logistics
It includes all the activities required to collect, store, and distribute the output.
4) Marketing and Sales:
Marketing and Sales activities inform buyers about products and services induce buyers to
purchase them, and facilitate their purchase.
5)Service:
Service includes all the activities required to keep the product or service working effectively
for the buyer after it is sold and delivered.
Porter’s Model
b) Secondary Activities :
Human
Procurement Resource
management
Technological
Infrastructure
Development
Porter’s Model
b) Secondary Activities :
1) Procurement:
It is the acquisition of inputs, or resources, for the firm.
2) Human Resource management:
It consists of all activities involved in recruiting, hiring, training, developing, compensating
and (if necessary) dismissing or laying off personnel.
3) Technological Development:
It pertains to the equipment, hardware, software, procedures and technical knowledge
brought to bear in the firm's transformation of inputs into outputs.
4) Infrastructure:
Infrastructure serves the company's needs and ties it’s various parts together; it consists of
functions or departments such as accounting, legal, finance, planning, public affairs,
government relations, quality assurance and general management.
2.4 Organisational Capability Profile
Factors:
Important factors that support capability in that area. Finance
Capabilities
Marketing Personnel
Capabilities Capabilities
Factors
General
Operations
Management
Capabilities
Capabilities
Factors:
1) Finance Capabilities:
Strategists have to observe capital structure, sources of funds, reserves and surplus. He also
has to study assets, dividends and relationship with shareholders. Budgeting systems,
financial health and tax planning, should also be examined to find out strengths and
weakness in a financial areas.
2) Marketing Capabilities :
Strategist has to understand product related marketing factors as well as price related
marketing factors. He should also look through promotion policies, advertising, public relation
and distribution system. Sometimes, marketing capability affects the existence of the firm.
3) Operations Capabilities :
A strategist has to study about location, layout, operation capacity, degree of automation,
production planning system, quality control, product development, inventory, technical
collaboration level of capacity utilisation, availability of skilled personnel and R & D personnel.
Factors:
4) Personnel Capabilities :
Existence and use of human resources, communication, development, working conditions,
union-management relations, safety, welfare and security of employees, affect the personnel
capability. Good personnel policies make the workers to settle with their job.
5) General Management Capabilities :
Management capability is influenced by mission, purpose, objective setting system, strategy
implementation mechanism, evaluation system, management information system, rewards
given and incentives provided.
Thus, strengths and weaknesses in various departments and functional areas have an impact
on total organisation.
A) Strategic Advantage Profile:

Strategic Advantage Profile can be prepared with the help of organisational capability
profile. SAP provides a picture of the more critical areas. This profile can show the strengths
and weaknesses in terms of degree, either in quantity or definition like very strong to
average.
Internal Capability Far Competitive Strength and Weakness
Operations Excellent sourcing for raw material facilities are Outdated. Parts and components
available.
Marketing Fierce competition in industry, product line extensive.
Excellent service, weak distribution network in north.
Finance Ability to obtain needed capital, unsatisfactory reserves and surplus, low debt - equity
ratio.
Personnel Quality of management and skilled workers are available Compared to competitors.
R&D No R & D performed.
Resources Average size of company in the Industry.

B) Concept of Stretch, Leverage& Fit:

Subsequent to the idea of strategic intent, Hamel and Prahalad added the concept of ‘stretch’
and ‘leverage’.Stretch is a misfit between resources and aspirations.
The strategic fit is central to the strategy school of positioning where techniques like SWOT
analysis can be used to analyze and assess the organizational capabilities and environmental
opportunities.
“Leverage can be defined as the process or act of concentrating, accumulating,
complimenting, conserving, and recovering resources in such a manner that meagre (less or
insufficient in amount) resource base is stretched to meet the aspirations that an organization
dares to have.”
“This is exactly opposite to the idea of fit and deals with positioning the firm by matching its
organizational resources to its environment.”
B) Ways of Resource Leveraging:

‘Leveraging’ resources means
using the resources that a Concentrating
company already has in new and
innovative ways in order to reach
new ‘stretching’ goals which
require a company to use Recovering
Accumulating
Resources
resources to the full. It can be
argued that organisational success
arises from an organisation-wide
‘strategic intent’ based on a shared
vision of the future of the
organisation. These are skills and
Conserving Complementing
intentions which enable the
company to lever resources and
stretch towards new goals as the
environment changes.

1) Concentrating:
Leveraging through concentration demands convergence and focus. The organisation should
confine deployment of its limited resources in a few strategic areas identified by the
management to realise the vision. NEC is the only company in the world that is one of the top
five producers of both computer and communication equipment.
2) Accumulating:
Routes to leveraging through accumulation of resources are extraction and borrowing. The
thrust of extraction is on making maximum use of reservoir of experiences and insights
gained by organisational people in the past about customers, competitors, suppliers, and
technologists for developing new products at reduced cost,
3) Complementing:
Leveraging through complementing is done by way of blending and balancing. Blending
demands integration of diverse functional skills like R&D, production, marketing and sales.
GM or Ford could not beat Honda in the field of all round engine performance because the
former were less capable of harmonization of their diverse technologies than Honda.

4) Conserving:
Conserving resource is another device of leveraging. Two major ways of conserving resources
are recycling and coopting. More often a given skill is used the greater the scope for the
resource leverage. The common saying in Japan is that ‘no technology is ever abandoned; it is
reserved for future use`.
5) Recovering Resources:
Expediting returns by which the time between the expenditure of resources and the recovery
of those resources ("return") is minimized. A rapid recovery process acts as a resource
multiplier. An enterprise that can do anything twice as fast as its competitors, with a similar
resource commitment, enjoys a twofold leverage advantage.
• https://www.google.com/search?q=videos+on+s
trategic+management+analysis&oq=videos+on+s
trategic+management+analysis+&gs_lcrp=EgZjaH
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Prof.

 Nonprofit organizations may also conduct a similar analysis.

C) Analyzing Company’s Resources and Competitive Position:

C) Analyzing Company’s Resources and Competitive Position:

C) Analyzing Company’s Resources and Competitive Position:

Match the Ability to

C) Analyzing Company’s Resources and Competitive Position:

C) Analyzing Company’s Resources and Competitive Position:

High Performance or Technology

F) Competitive Parity & Competitive Disadvantage:

F) Competitive Parity & Competitive Disadvantage:

3) Core Competency versus Competitive Advantage:

H) Benchmarking as a Method of Comparative Analysis:

H) Benchmarking as a Method of Comparative Analysis:

H) Benchmarking as a Method of Comparative Analysis:

H) Benchmarking as a Method of Comparative Analysis:

H) Benchmarking as a Method of Comparative Analysis:

d) Visit the "Best Practice" Companies to Identify Leading Edge Practices:

G) Benchmarking as a Method of Comparative Analysis:

H) Benchmarking as a Method of Comparative Analysis:

G) Benchmarking as a Method of Comparative Analysis:

G) Benchmarking as a Method of Comparative Analysis:

G) Benchmarking as a Method of Comparative Analysis:

Strength Weakness Opportunities Threats

Fig: Porters Model

Inbound Outbound Marketing

A) Strategic Advantage Profile:

R&D No R & D performed.

Resources Average size of company in the Industry.

B) Concept of Stretch, Leverage& Fit:

B) Ways of Resource Leveraging:

B) Ways of Resource Leveraging:

B) Ways of Resource Leveraging:

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