Resources & Competitive Capabilities,

SWOT Analysis &

Value Chain Analysis

Course Material used from:

 Competitive Strategy by Michael E. Porter
 Strategic Management by Strickland & Thomson
 Competitive Advantage by Michael E. Porter

Salah uddin CBM 1

1. SWOT analysis
2. Internal Analysis
3. How to do an Internal Analysis
4. Resource based Model
5. Capability, Core Competence & Distinctive
Capability
6. Value Chain Analysis
7. Out-Sourcing

Salah uddin CBM 2

 By studying the external
POLITICAL environment, firms identify
what they might choose to
EC
Industry
L

ON
do
GA

Environment
OM
LE

IC
Opportunities and threats
GL

L
CI A

Competitor
OB

Environment
SO
AL

TECHNOLOGICAL

Salah uddin CBM 3

 By studying the internal
environment, firms
identify what they can do

Unique resources,
capabilities, and core
competencies
(sustainable
competitive
advantage)

Salah uddin CBM 4

 Opportunities

Strengths Organization Weaknesses

Threats

Salah uddin CBM 5

 Simply listing a Company’s SWOT is not enough;
what matters is the evaluations and conclusions
that flow from the four lists

 Successful strategists aim at capturing a

Company’s best growth opportunities and
creating defenses against external threats
to its competitive position & future performance

Salah uddin CBM 6

 INTERNAL ANALYSIS identifies and evaluates resources,
capabilities, and core competencies

 Strengths are resources that an organization

possesses and capabilities that an organization has
developed that can be exploited and developed into
a sustainable competitive advantage

 Weaknesses are resources and capabilities that are

lacking or deficient and prevents an organization
from developing a sustainable competitive
advantage

Salah uddin CBM 7

1. Prepare current product-market profile
2. Identify sources of competitive advantage and
disadvantage in the main product-market
segments
3. Describe all the organizational capabilities and
competencies
4. Sort the core capabilities and competencies
according to strategic importance
5. Identify and agree on the key capabilities and
competencies

Salah uddin CBM 8

A firm’s unique resources and capabilities provide
the basis for a strategy:
Action required:
Identify firm resources.
Resources
Study strengths &
Inputs to a firm’s
production process.
weaknesses relative to
rivals.

Action required:
Capability Determine what firm
Capacity for set of capabilities allow it to do
resources to perform better than rivals.
a task or activity.
Salah uddin CBM 9
 Action required:
Competitive Determine how firm’s
Advantage resources & capabilities
Ability to outperform
rivals may create competitive
advantage.

Attractive Industry Action required:

Location, with Locate an attractive
opportunities that can be industry.
exploited by firm’s
resources & capabilities

Salah uddin CBM 10

Strategy
Formulation and Action required:
Implementation Select strategy that best
exploits resources &
Strategic actions taken capabilities relative to
to earn above-average opportunities
returns

Action required:
Maintain selected strategy
to outperform industry
rivals.

Salah uddin CBM 11

 A company capability is the product of
organizational learning and experience and
represents real proficiency in performing an
internal activity
 A core competence is a well-performed internal
activity that is central (not peripheral or incidental)
to a company’s competitiveness and profitability
 A distinctive Capability is a competitively
valuable activity that a company performs better
than its rivals

Salah uddin CBM 12

 Value Creation

Competitive
Advantage

Core Discovering Core

Competencies Competencies

Capabilities
Four Criteria
of Sustainable
Advantages Value
Resources Chain
• Tangible
• Intangible Analysis
• Valuable
• Rare
• Costly to Imitate • Outsource
• Nonsubstitutable

Salah uddin CBM 13

RESOURCES:
 Resources are what a firm has to work with--its assets--
including its people and the value of its brand name
 Resources represent inputs into a firm’s production
process... such as capital equipment, skills of employees,
brand names, finances and talented managers

Tangible Resources Intangible Resources

• Financial • Human
• Organizational • Innovation
• Physical • Reputation
• Technological

Salah uddin CBM 14

 A Company is positioned to succeed if has a
competitively valuable complement of Resources
at its command

 A Company’s resource strengths represent

competitive assets;
assets its resource weaknesses
represent competitive liabilities

Salah uddin CBM 15

CAPABILITIES:
 Capabilities are what a firm does, and represent the
firm’s capacity to deploy resources that have been
purposely integrated to achieve a desired end state
 Capabilities become important when they are combined
in unique combinations which create core competencies
which have strategic value and can lead to competitive
advantage

Salah uddin CBM 16

 Core competencies are resources and
capabilities that serve as a source of competitive
advantage

 Core competencies distinguish a company

competitively and make it distinctive

Salah uddin CBM 17

 Resources Core Competence
• Inputs to a firm’s • A strategic
production process capability

Yes
Does it satisfy the
Capability
criteria of sustainable
• An integration of a
The source of competitive
team of resources
advantage? No

Capability
• A nonstrategic
team or resource
Salah uddin CBM 18
A core competence is something that a company
does well relative to other internal activities

A distinctive competence is something a

Company does well relative to competitors

A distinctive competence empowers a company

to build competitive advantage

Salah uddin CBM 19

 Four Criteria
of Sustainable
Advantages

Valuable: Capabilities that help a firm neutralize threats or exploit

opportunities
Rare: Capabilities that are not possessed by many others
Costly to imitate: capabilities that other firms cannot develop
easily, usually due to
• Unique historical conditions
• Causal ambiguity
• Social complexity
Non-substitutable: capabilities that do not have strategic
equivalents
• Invisible to competitors
• Firm specific knowledge
• Trust-based working relationships between managers and staff

Salah uddin CBM 20

 ?
?

le
te

b
ita

ta
Im

u
tit
?

to

bs
le

Competitive Performance
tly
ab

su
e?
os
lu

on
Consequences Implications
ar
Va

N
R

No No No No Competitive Below Average

Disadvantage Returns

Yes No No Yes/ Competitive Average Returns

No Parity

Yes Yes No Yes/ Temporary Com- Average to Above

No petitive Advantage Average Returns

Yes Yes Yes Yes Sustainable Com- Above Average

petitive Advantage Returns

Salah uddin CBM 3–21

Never take for granted that core competencies will
continue to provide a source of competitive
advantage.
All core competencies have the potential to become
Core Rigidities.
Core Rigidities
They are former core competencies that sow the
seeds of organizational inertia.
Prevent the firm from responding appropriately to
changes in the external environment.
Salah uddin CBM 22
 Value Chain
 Shows how a product moves from the raw-
material stage to the final customer.
 To be a source of competitive advantage, a resource
or capability must allow the firm:
 To perform an activity in a manner that is
superior to the way competitors perform it, or
 To perform a value-creating activity that
competitors cannot complete

Salah uddin CBM 23

Support HUMAN RESOURCES MANAGEMENT PR
Activities H O
FI
TECHNOLOGICAL DEVELOPMENT T
PROCUREMENT

Service
Operations

Outbound
Logistics

Marketing
Logistics
Inbound

& Sales
IN
RG
A
M

Primary Activities
Salah uddin CBM 24
 Primary activities involved with:
 A product’s physical creation
 A product’s sale and distribution to buyers
 The product’s service after the sale
 Support Activities
 Provide the assistance necessary for the primary
activities to take place.

Salah uddin CBM 25

The Value-Creating Potential of Primary Activities

 Inbound Logistics
 Activities used to receive, store, and disseminate
inputs to a product
 Operations
 Activities necessary to convert the inputs provided
by inbound logistics into final product form
 Outbound Logistics
 Activities involved with collecting, storing, and
physically distributing the product to customers

Salah uddin CBM 26

The Value-Creating Potential of Primary Activities

 Marketing and Sales

 Activities completed to provide the means through
which customers can purchase products and to
induce them to do so
 Service
 Activities designed to enhance or maintain a
product’s value
Each activity should be examined relative to competitor’s
abilities and rated as superior, equivalent or inferior

Salah uddin CBM 27

The Value-Creating Potential of Support Activities

 Firm Infrastructure
 Activities that support the work of the entire value
chain (general management, planning, finance,
accounting, legal, government relations, etc.)
o Effectively and consistently identify external

opportunities and threats

o Identify resources and capabilities

o Support core competencies

Salah uddin CBM 28

The Value-Creating Potential of Support Activities

 Human Resource Management

 Activities involved with recruiting, hiring, training,
developing, and compensating all personnel
 Technological Development
 Activities completed to improve a firm’s product and
the processes used to manufacture it
 Procurement
 Activities completed to purchase the inputs needed
to produce a firm’s products

Salah uddin CBM 29

 Allows the firm to understand the parts of its
operations that create value and those that do
not.
 Is used to:
 Understand cost position.
 Identify multiple means that might be used to
facilitate implementation of a chosen business-
level strategy.

Salah uddin CBM 30

 The higher a Company’s costs are, the more
competitively vulnerable it becomes
 Cost disparities arise from differences in:
o prices paid for raw materials, parts, energy, etc.
o technology, age of plants & equipment
o learning & experience curve effects
o marketing costs, sales & advertising exps
o in-bound transportation & out-bound shipping costs
o Forward channel distribution costs (mark ups of
distributors, wholesalers)

Salah uddin CBM 31

 Strategic Cost Analysis compares how a
Company’s unit costs appear against the unit
costs of key competitors, activity by activity,
thereby pinpointing which internal activities are
a source of cost advantage or disadvantage

 Strategic Cost Analysis is a Value Chain

identifying the separate activities, functions and
business processes that are performed in
designing, producing, marketing and delivering a
product or service
Salah uddin CBM 32
 The Value Chain includes a Profit margin
because a markup over the cost of performing
the firm’s value –creating activities is customarily
part of the price borne by buyers

 Each activity in the value Chain incurs costs &

ties up assets; assigning costs and assets to
each individual activity in the chain provides
cost estimates for each activity

Salah uddin CBM 33

 Outsourcing is the purchase of some or all of a
value-creating activity from an external supplier

 Usually this is because the specialty supplier can

provide these functions more efficiently

Salah uddin CBM 34

 Improves Business Focus
lets company focus on broader business issues by
having outside experts handle various operational
details
 Provides Access to World-Class Capabilities
the specialized resources of outsourcing providers
makes world-class capabilities available to firms in a
wide range of applications
 Shares Risks
reduces investment requirements and makes firm
more flexible, dynamic and better able to adapt to
changing opportunities

Salah uddin CBM 35

 Accelerates Business Re-Engineering
achieves re-engineering benefits more quickly by
having outsiders--who have already achieved world-
class standards--take over process

 Frees Resources for Other Purposes

permits firm to redirect efforts from non-core
activities toward those that serve customers more
effectively

Salah uddin CBM 36

Do not outsource:

 activities in which the firm itself can create and

capture value
 primary and support activities that are used to
neutralize environmental threats or complete
necessary ongoing organizational task
 activities that stimulate the development of new
capabilities and competencies

Salah uddin CBM 37

 Internal Analysis tells what a firm CAN do

 Goal is to create core competencies and

distinctive capabilities
o Without them, you will not be in business long
o Creating distinctive capabilities takes time

 Value chain analysis a way to

o Understand where the competencies lie
o Think about outsourcing

Salah uddin CBM 38

 Sustainable competitive advantage can be
created by:
 Managing value chain activities better than rivals
and/or
 Developing distinctive value chain capabilities to
serve customers!

Salah uddin CBM 39

Salah uddin CBM 40