Environmental Scanning & Monitoring

Internal Analysis & Challenge of Internal Analysis
What Tools Are Useful in Assessing Strengths and Weaknesses i.e. Resources, Capabilities, and Core Competencies?

Strengths and Weaknesses

Goal: objective assessment of your strengths and weaknesses  relative to competitors  important to customers
Note: This is difficult to do well.

Challenge of Internal Analysis

Identifying, developing, protecting, and deploying resources, capabilities, and core competencies

Resources

Inputs into a firm’s production process such as capital equipment, skill of individual employees, patents, finance, and talented managers

Tangible Resources – Assets that can be seen and quantified Intangible Resources – Family commitment, networks, organizational culture, reputation, intellectual property rights, trademarks, copyrights

By themselves, resources do not create a strategic advantage for the firm.

Capabilities

Capacity to deploy resources that have been purposely integrated to achieve a desired end state. Primary base for the firm’s capabilities is the skills and knowledge of its employees. Just because the firm has a strong capacity for deploying resources does not mean it has a competitive advantage.

Core Competencies

Resources and capabilities serve as a source of competitive advantage for a firm over its rival. Not all resources and capabilities are core competencies. Many suggest that firms should identify and concentrate on only 3 or 4 core competencies.

Identifying and Building Core Competencies

Core competencies must be distinctive.

Capabilities that are done better than competitors

Identifying core competencies is key to development of sound strategy. We use the value chain to help identify core competencies.

The Value Chain

A framework for identifying core competencies
 

Inside the firm In the supply chain Identify strengths and weaknesses Identify sources of competitive advantage Identify market opportunities

Can be used to
  

The Value Chain
Firm Infrastructure

Supporting Activities

Human Resource Management Technological Development Procurement

IN RG MA

Primary Activities

Relationship with Suppliers
Elapsed Time - Value added time cost

Relationship with Buyers

MA RG I

N

Inbound Operations Logistics

Outbound Marketing Service Logistics & Sales

The Value Chain
Firm Infrastructure

Supporting Activities

Human Resource Management Technological Development Procurement

IN RG MA

Primary Activities

Relationship with Suppliers
Elapsed Time - Value added time cost

Relationship with Buyers

MA RG I

N

Inbound Operations Logistics

Outbound Marketing Service Logistics & Sales

Primary Activities in the Value Chain
Procurement Human Resource management Human Resources Firm Infrastructure Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

Inbound Logistics

Materials handling, warehousing, inventory control used to receive, store and disseminate inputs to a product Fertilizer and chemical storage, delivery of inputs, application of inputs

Primary Activities in the Value Chain
Procurement Human Resource management Human Resources Firm Infrastructure

Operations

Inbound Logistics

Operations

Outbound Logistics

Marketing and Sales

Service

Take inputs from inbound logistics and convert to final products Plowing, planting, spraying, harvesting, feeding, medicating, weighing,etc.

Primary Activities in the Value Chain
Procurement Human Resource management Human Resources Firm Infrastructure

Outbound Logistics

Inbound Logistics

Operations

Outbound Logistics

Marketing and Sales

Service

Collecting, Storing, and physical distribution of the final product. Crop storage, finished hog handling, Processing and determining delivery dates, delivery to the packer or elevator etc.

Primary Activities in the Value Chain
Procurement Human Resource management Human Resources Firm Infrastructure

Marketing and Sales

Inbound Logistics

Operations

Outbound Logistics

Marketing and Sales

Service

Provide means through which customers can purchase products and to induce them to do so Advertising, communicating with buyers, developing customer relationships, pricing products (futures, hedging, forward contracting, etc.), delivery scheduling

Primary Activities in the Value Chain
Procurement Human Resource management Human Resources Firm Infrastructure

Service

Inbound Logistics

Operations

Outbound Logistics

Marketing and Sales

Service

Activities designed to enhance or maintain a product’s value Timely delivery, identity preservation, ISO9000, certifying as organic, etc.

Supporting Activities in the Value Chain
Procurement Technological Development Human Resources Firm Infrastructure

Procurement
 

Inbound Logistics

Operations

Outbound Logistics

Marketing and Sales

Service

Activities to purchase the inputs needed to produce products Negotiating with suppliers, standard timing of replenishing parts and tools, setting up buying groups, etc.

Technological Development
 

Activities that improve the firm’s products and/or processes Volunteering for test plots, being a part of feeding trials, attending technology seminars/field days, designing equipment to make specific production tasks more efficient, etc.

Supporting Activities in the Value Chain
Procurement Technological Development Human Resources Firm Infrastructure Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

Human Resources

Recruiting, hiring, training, developing, and compensating all personnel

Supporting Activities in the Value Chain Firm Infrastructure
Inbound Logistics

Human Resource management Procurement

Technology

Firm Infrastructure

Service Outbound Logistics Marketing and Sales

Operations

General Management, planning, finance, accounting, legal support, governmental relations, etc. Establishment of accounting practices, management information systems, compliance with environmental regulations, tracking and reporting for government programs, etc. Where strategy development takes place identifying opportunities and threats, resources and capabilities, and support of core competencies

Primary Activities in the Value Chain Inbound Logistics
 

Materials handling, warehousing, inventory control used to receive, store and disseminate inputs to a product Fertilizer and chemical storage, delivery of inputs, application of inputs Take inputs from inbound logistics and convert to final products Plowing, planting, spraying, harvesting, feeding, medicating, weighing,etc. Collecting, Storing, and physical distribution of the final product. Crop storage, finished hog handling, Processing and determining delivery dates, delivery to the packer or elevator etc.

Operations
 

Outbound Logistics
 

Primary Activities in the Value Chain  Marketing and Sales
 

Provide means through which customers can purchase products and to induce them to do so Advertising, communicating with buyers, developing customer relationships, pricing products (futures, hedging, forward contracting, etc.), delivery scheduling Activities designed to enhance or maintain a product’s value Timely delivery, identity preservation, ISO9000, certifying as organic, etc.
Procurement Human Resource management Human Resources Firm Infrastructure Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

Service
 

Supporting Activities in the Value Chain
Procurement Technological Development Human Resources Firm Infrastructure

Procurement
 

Inbound Logistics

Operations

Outbound Logistics

Marketing and Sales

Service

Activities to purchase the inputs needed to produce products Negotiating with suppliers, standard timing of replenishing parts and tools, setting up buying groups, etc. Activities that improve the firm’s products and/or processes Volunteering for test plots, being a part of feeding trials, attending technology seminars/field days, designing equipment to make specific production tasks more efficient, etc.

Technological Development
 

Human Resources

Recruiting, hiring, training, developing, and compensating al personnel

Supporting Activities in the Value Chain 
Inbound Logistics

Human Resource management Procurement

Technology

Firm Infrastructure

Service Outbound Logistics Marketing and Sales

Operations

Firm Infrastructure
 

General Management, planning, finance, accounting, legal support, governmental relations, etc. Establishment of accounting practices, management information systems, compliance with environmental regulations, tracking and reporting for government programs, etc. Where strategy development takes place identifying opportunities and threats, resources and capabilities, and support of core competencies

The Result of the Value Chain  Margins
 

Capture the value from performing valuecreating activities as cheaply as possible The basic idea is that the consumer is willing to pay a certain amount for the value you create. This is depicted as the size of the overall pentagon. The size of the individual activity boxes represents the cost of performing those particular activities. Thus, the smaller the size of the individual activity boxes relative to the value the consumer is willing to pay, the greater the MARGIN will be for the firm.

Value Chain Analysis

A firm’s value chain must be compared to competitors’ value chains to determine where competitive advantages exist. To be a source of competitive advantage a resource or capability must allow a firm to:

Perform an activity in a manner that is superior to competitor’s performances Perform a value-creating activity that competitors cannot complete

Generating Alternative Strategies From SWOT
 

SWOT analysis is a tool for helping assess the current situation for the firm. However, we need to be able to combine the information in the SWOT analysis in a meaningful way to generate alternative strategies that we might pursue. The TOWS matrix is a tool designed to match external opportunities and threats with our internal strengths and weaknesses

SWOT Analysis
Strengths 1. 2. 3. Weaknesses 1. 2. 3.

Internal Environment

External Environment

Opportunities 1. 2. 3.

Threats 1. 2. 3.

Technique used in strategy formulation for combining

TOWS Matrix

External analysis
Opportunities  Threats

Internal analysis
Strengths  Weaknesses

TOWS Matrix
Opportunities: 1. 2. 3. Strengths: 1. 2. 3. Weaknesses: 1. 2. 3. SO Strategies Use strengths to take advantage of opportunities Threats: 1. 2. 3. ST Strategies Take advantage of Strengths to avoid threats WT Strategies Defensive strategies to minimize weaknesses and avoid threats
Source: Weihrich

WO Strategies Use Opportunities to overcome weaknesses

The External Environment Analysis

A continuous process which includes
q

External Environmental Analysis

q

q

q

Scanning: Identifying signals of environmental changes and trends Monitoring: Detecting meaning through ongoing observations of environmental changes and trends Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends Assessing: Determining the timing and importance of environmental changes and trends for firms’ strategies and their management

External Environmental Analysis
Analysis of general environment Analysis of industry environment Analysis of competitor environment

The External Environment Strategic Intent Strategic Mission

Analysis of general environment

PEST (STEP) Analysis
   

POLITICAL ECONOMIC SOCIAL/CULTURAL TECHNOLOGICAL

Analysis of general environment

SLEPT Analysis
    

SOCIAL/CULTURAL LEGAL ECONOMIC POLITICAL TECHNOLOGICAL

Analysis of general environment

PESTLE Analysis
     

POLITICAL ECONOMIC SOCIAL/CULTURAL TECHNOLOGICAL LEGAL ENVIRONMENTAL/ECOLOGICAL

Industry Environment

A set of factors that directly influences a company and its competitive actions and responses Interaction among these factors determine an industry’s profit potential
    

Threat of new entrants Power of suppliers Power of buyers Product substitutes Intensity of rivalry

Five Forces Model of Competition

 

Identify current and potential competitors and determine which firms serve them Conduct competitive analysis Recognize that suppliers and buyers can become competitors Recognize that producers of potential substitutes may become competitors

Five Forces Model of Competition ng s Thr o e
Am Firm l ry i ng iva pet R om C

ea to fN ew

En tr a nt s

Five Forces of Competition
Bargaining Power of Buyers

Bar g aini n g Po w Sup pl ier er of s

e te titut stitu Subs f Sub at of ts ts eat o Thre Produc Thr Produc

Threat of New Entrants

Barriers to entry
       

Economies of scale Product differentiation Capital requirements Switching costs Access to distribution channels Cost disadvantages independent of scale Government policy Expected retaliation

A supplier group is powerful when:
 

Bargaining Power of Suppliers

it is dominated by a few large companies satisfactory substitute products are not available to industry firms industry firms are not a significant customer for the supplier group suppliers’ goods are critical to buyers’ marketplace success effectiveness of suppliers’ products has created high switching costs suppliers are a credible threat to integrate forward into the buyers’ industry

Bargaining Power of Buyers

Buyers (customers) are powerful when:

 

they purchase a large portion of an industry’s total output the sales of the product being purchased account for a significant portion of the seller’s annual revenues they could easily switch to another product the industry’s products are undifferentiated or standardized, and buyers pose a credible threat if they were to integrate backward into the seller’s industry

Threat of Substitute Products

Product substitutes are strong threat when:  customers face few switching costs
 

substitute product’s price is lower substitute product’s quality and performance capabilities are equal to or greater than those of the competing product

Intensity of Rivalry

Intensity of rivalry is stronger when competitors:

     

are numerous or equally balanced experience slow industry growth have high fixed costs or high storage costs lack differentiation or low switching costs experience high strategic stakes have high exit barriers

High Exit Barriers

Common exit barriers include:

 

specialized assets (assets with values linked to a particular business or location) fixed costs of exit such as labor agreements strategic interrelationships (relationships of mutual dependence between one business and other parts of a company’s operation, such as shared facilities and access to financial markets) emotional barriers (career concerns, loyalty to employees, etc.) government and social restrictions

Competitor Environment
Competitor intelligence is the ethical gathering of needed information and data about competitors’ objectives, strategies, assumptions, and capabilities

what drives the competitor as shown by its future objectives what the competitor is doing and can do as revealed by its current strategy What the competitor believes about itself and the industry, as shown by its assumptions What the the competitor may be able to do, as shown by its capabilities

Competitor Analysis
Future objectives

Future Objectives:

How do our goals compare with our competitors’ goals? Where will the emphasis be placed in the future? What is the attitude toward risk?

Competitor Analysis
Future objectives

Current Strategy:

Current strategy

How are we currently competing? Does this strategy support changes in the competitive structure?

Competitor Analysis
Future objectives

Assumptions:
 

Current strategy

Assumptions

Do we assume the future will be volatile? Are we operating under a status quo? What assumptions do our competitors hold about the industry and themselves?

Competitor Analysis
Future objectives

Capabilities:
 

Current strategy

What are our strengths and weaknesses? How do we rate compared to our competitors?

Assumptions

Capabilities

Competitor Analysis
Future objectives Response

Response:
Current strategy

Assumptions

Capabilities

What will our competitors do in the future? Where do we hold an advantage over our competitors? How will this change our relationship with our competitors?

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