CHAPTER 5

Internal Scanning:
Organizational
Analysis
 Learning Objectives
After reading this chapter, students should be able to:

● Apply the resource view of the firm to

determine core and distinctive ● Assess a company’s corporate
competencies culture and how it might affect a
proposed strategy
● Use the VRIO framework and the
value chain to assess an organization’s ●
Scan functional resources to
competitive advantage and how it can
determine their fit with a firm’s
be sustained
strategy
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● Understand a company’s business and infographics & images by Freepik
model and how it could be imitated ● Construct an IFAS Table that
summarizes internal factors
ORGANIZATIONALANALYSIS
ORGANIZATIONAL ANALYSIS
-concerned with identifying and developing an
organization’s resources and competencies

There are two approaches for analyzing

the organization:
1. A Resource Based View ( RBV )
2. Value Chain Analysis (VCA)
 Proponents of the RBV contend that organizational
performance will primarily be determined by
internal resources that can be grouped into three
all-encompassing categories:

● Physical resources
1.The Resource-Based ● Human resources
● Organizational resources
View (RBV) approach
For a resource to be valuable, it must be
- contends that internal RARE HARD TO IMITATE NOT EASILY SUBSTITUTABLE

resources are more

These three characteristics of resources enable a firm
important for a firm than to implement strategies that improve its
external factors in efficiency and effectiveness and lead to a
achieving and sustaining sustainable competitive advantage.
competitive advantage.
 Resources
-an organization’s assets and are
thus the basic building blocks of the
organization.

Core
Core and
and
•Tangible
•Intangible

Distinctive
Distinctive Capabilities
-a corporation’s ability to exploit its

Competencies
Competencies
resources
-consist of business processes and
routines that manage the
interaction among resources to turn
inputs into outputs
 - a cross-functional integration and
COMPETENCY
COMPETENCY coordination of capabilities

CORE
CORE
- a collection of competencies that cross divisional
boundaries, is widespread throughout the corporation
COMPETENCY
COMPETENCY and is something the corporation does exceedingly well.

- core competencies that are superior to those of

the competition. A firm’s strengths that cannot be easily
DISTINCTIVE
DISTINCTIVE matched or imitated by competitors. Building competitive
C0MPETENCY
C0MPETENCY advantages involves taking advantage of distinctive
competencies.
 EXAMPLE
CORE DISTINCTIVE
COMPETENCY C0MPETENCY
(1) New product development in one
division of the company is a result of GENERAL ELECTRIC has
integration of information system Distinctive competency in
capabilities, marketing capabilities, R&D
capabilities, production capabilities in management development. Its
the division. executives are sought out by other
companies hiring top managers.
(2) Fedex in information technology to all its
operations. And AVON in its selling.
 VRIO framework (Barney)
Value (Does it provide customer value and competitive
advantage?)
Rare (Do no other competitors possess it?)
Imitability (Is it costly for others to imitate?)
Organization (Is the firm organized to exploit the /resource?)

This can be done by comparing measures of these factors with measures of

(1) the company’s (2) the company’s key (3) the industry as
past performance competitors a whole.
USING RESOURCES TO GAIN COMPETITIVE
ADVANTAGE
Step resource-based approach to
strategy analysis

1. Identify and classify

the firm’s resources in
terms of strengths and
5.Identify resource weaknesses
gaps and invest in
upgrading
weaknesses 2.Combine the firm’s strengths
into specific capabilities and
core competencies.

4.Select the strategy that

best exploits the firm’s 3.Profit potential of these
capabilities and
capabilities and
competencies relative to
competencies
external opportunities
 A corporation can gain access to a distinctive
competency in four ways:

It may be an asset
It may be shared It may be carefully built
endowment, such It may be
with another and accumulated over
as a key patent, acquired from
coming from the business unit or time within the
founding of the
someone else. alliance partner. company.
company.
For example, Whirlpool For example, Apple
bought a worldwide For example, Honda carefully
Computer worked with a
For example, Xerox distribution system when it extended its expertise in small motor
design firm to create the
grew on the basis of its purchased Philips’s manufacturing from motorcycles to
special appeal of its personal
original copying patent appliance division. autos and lawnmowers.
computers and iPods
DETERMINING THE SUSTAINABILITY OF
AN ADVANTAGE
Two characteristics determine the sustainability of a firm’s
distinctive competency(ies):

DURABILITY IMITABILITY

TRANSPARENCY

TRANSFERABILITY

REPLICABILITY
 Business Models
-It is a company’s method for making money in the current business environment. It
includes the key structural and operational characteristics of a firm.

A business model is usually composed of five elements:

-Who it serves
-What it provides
-How it makes money
-How it differentiates and sustains competitive advantage
-How it provides its product/service

The simplest business model is to provide a good or service that can be sold so that
revenues exceed costs and expenses
 ● Customer solutions model - making money not by selling products, but
by selling its expertise to improve its customers’ operations.

● Profit pyramid model - get customers to buy the product in at the low-

Possible ●
priced, low-margin entry point and move them up to high-priced, high-
margin products where the company makes its money.

Advertising model - heavily used in commercial radio and television.

Business Internet-based firms, such as Google, offer free services to users in order
to expose them to the advertising that pays the bills.

Models
● Entrepreneurial model - This model, a company offers specialized
products/services to market niches that are too small to be worthwhile to
large competitors but have the potential to grow quickly.

● Efficiency model - This model, a company waits until a product

becomes standardized and then enters the market with a low-priced, low-
margin product that appeals to the mass market.

● Time model - A model that being the first to market with a new
innovation to offer in a business.
 VALUE CHAIN ANALYSIS
VALUE CHAIN ANALYSIS
- is a linked set of value-creating activities
that begin with basic raw materials
coming from suppliers, moving on to a
series of value-added activities involved in
producing and marketing a product or
service, and ending with distributors
getting the final goods into the hands of
the ultimate consumer.
 INDUSTRY VALUE-CHAIN ANALYSIS
A concrete description of the different processes required in creating
goods and services starting with raw materials and ending with the
finished result.
CORPORATE VALUE-CHAIN ANALYSIS
The process of assessing each activity in a company's value chain in order to see where
improvements may be made.

Corporate value chain analysis involves the following three steps:

1. Examine each product line’s value chain in terms of the various activities involved in producing
that product or service

2. Examine the “linkages” within each product line’s value chain

3. Examine the potential synergies among the value chains of different product lines or business
units
A Corporation’s Value Chain
 BASIC ORGANIZATIONAL
STRUCTURE
SIMPLE FUNCTIONA
DIVISIONAL
STRUCTUR L
STRUCTURE
E STRUCTURE

CONGLOMERATE
STRUCTURE

STRATEGIC
BUSINESS UNITS
BASIC
ORGANIZATIONAL
STRUCTURE
CORPORATE CULTURE - is the collection of beliefs, expectations, and
values learned and shared by a corporation’s members and transmitted from
one generation of employees to another.
Corporate culture has two distinct attributes;
1. Cultural intensity is the degree to which members of a unit accept the
norms, values, or other culture content associated with the unit.
2. Cultural integration is the extent to which units throughout an organization
share a common culture. This is the culture’s breadth
 STRATEGIC MARKETING ISSUES
Market position deals with the question, “Who are our customers?” It refers to the
selection of specific areas for marketing concentration and can be expressed in terms of
market, product, and geographic locations.

Marketing mix refers to the particular combination of key variables under a

corporation’s control that can be used to affect demand and to gain competitive
advantage.
Product life cycle is a graph
showing time plotted against the
monetary sales of a product as it
moves from introduction through
growth and maturity to decline.
 BRAND AND CORPORATE
REPUTATION
Brand is a name given to a company’s product which identifies that item in the
mind of the consumer.
Corporate brand is a type of brand in which the company’s name serves as
the brand.
Corporate reputation is a widely held perception of a company by the general
public.
It consists of two attributes:
(1) stakeholders’ perceptions of a corporation’s ability to produce quality goods

(2) a corporation’s prominence in the minds of stakeholders.

 STRATEGIC FINANCIAL ISSUES

● Financial leverage (the ratio of total debt to total assets) is helpful in

describing how debt is used to increase the earnings available to common
shareholders.

● Capital budgeting is the analyzing and ranking of possible investments in

fixed assets such as land, buildings, and equipment in terms of the additional
outlays and additional receipts that will result from each investment.
 STRATEGIC RESEARCH AND
DEVELOPMENT (R&D) ISSUES

R&D intensity- spending on R&D as a percentage of sales revenue

- principal means of gaining market share in global
competition

Technology transfer- the process of taking a new technology from

the laboratory to the marketplace.
 R&D MIX

Basic R&D is conducted by scientists in well-equipped laboratories

where the focus is on theoretical problem areas.
Product R&D concentrates on marketing and is concerned with
product or product-packaging improvements.
Engineering (or process) R&D is concerned with engineering,
concentrating on quality control, and the development of design
specifications and improved production equipment.
 Impact of Technological Discontinuity on Strategy

Technological discontinuity - when a new technology cannot simply

be used to enhance the current technology, but actually substitutes for
that technology to yield better performance.
Strategic Operations Issues
Intermittent systems Continuous systems
Operating leverage
-the item is normally - work is laid out as
-the impact of a
processed lines on which products
specific change in
sequentially, but the can be continuously
sales volume on net
work and sequence of assembled or
operating income.
the process vary processed.
 Increasing Use of Teams
Concurrent Engineering
Autonomous (self- Cross-functional specialists now work side
managing) a group of
work teams various by side and compare notes
people work together
disciplines are involve constantly in an effort to
without a supervisor to
in a project from the design cost-effective
plan, coordinate, and
beginning. products with features
evaluate their own work.
customers want.

Virtual teams are groups of geographically

and/or organizationally dispersed coworkers that
are assembled using a combination of
telecommunications and information
technologies to accomplish an organizational
task
Supply chain management is the forming of networks for sourcing raw materials,
manufacturing products or creating services, storing and distributing the goods,
and delivering them to customers and consumers
IFAS (Internal Factor Analysis Summary) Table
THANKYOU!