Strategic Management and

Business Policy 15e, Global Edition

Chapter 5
Organizational
Analysis and
Competitive
Advantage

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Learning Objectives (1 of 2)

5-1 Apply the resource-based view of the firm and

the VRIO framework to determine core and
distinctive competencies
5-2 Understand a company business models and
how they can be imitated
5-3 Use value chain to assess the activities of
an industry and of an organization

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5-2
Learning Objectives (2 of 2)

5-4 Explain why different organizational structures

are utilized in business
5-5 Assess a company’s corporate culture and how
it might affect a proposed strategy
5-6 Construct an IFAS Table that summarizes
internal factors

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5-3
A Resource-Based Approach
to Organizational Analysis
• Organizational analysis
– concerned with identifying and developing an
organization’s resources and competencies

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5-4
Core and Distinctive Competencies
(1 of 5)
• Resources
– An organization’s assets and are thus the basic
building blocks of the organization.
– Tangible, intangible
• Capabilities
– Refer to a corporation’s ability to exploit(use) its
resources.
– Consist of business processes and routines that
manage the interaction among resources to turn
inputs into outputs
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5-5
Core and Distinctive Competencies
(2 of 5)
• Core competency
– Something that the corporation does
exceedingly well – a key strength.
• Distinctive competency
– core competencies that are superior to those of
the competition

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VRIO Framework of Analysis
Analysis, proposes four questions to evaluate a
firm’s competencies:
1. Valuable: Does it provide customer value and
competitive advantage?
2. Rareness: Do no other competitors possess it at
the same level?
3. Imitability: Do the competitors have the
financial ability to imitate?
4. Organization: Is the firm organized to exploit
(use) the resource?
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Core and Distinctive Competencies (3 of 5)

Determining the sustainability of an advantage

1.Durability
– the rate at which a firm’s underlying resources,
capabilities or core competencies depreciate or
become obsolete
2. Imitability
– the rate at which a firm’s underlying resources,
capabilities, or core competencies can be
duplicated by others
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5-8
Core and Distinctive Competencies (4 of 5)
A core competency can be easily imitated to the extent
that is:
• Transparency
– the speed at which other firms under the relationship of
resources and capabilities support a successful strategy ex:
Gillette's razor
• Transferability
– the ability of competitors to gather the resources and capabilities
necessary to support a competitive challenge ex: French wine
• Replicability
– the ability of competitors to use duplicated resources and
capabilities to imitate the other firm’s success
ex: P&G success
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5-9
Core and Distinctive Competencies (5 of 5)
It is relatively easy to learn and imitate another
company’s core competency or capability if it comes
from :
• Explicit knowledge
– knowledge that can be easily articulated and
communicated
• Tacit knowledge (more valuable and leads to sustainable
competitive advantage)
– knowledge that is not easily communicated because it
is deeply rooted in employee experience or in the
company’s culture

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Access to a Distinctive Competency (1 of 2)
Where does a distinctive competency come from?
1. Asset endowment Such as a key patent coming from
the founding of the company.

2. Acquired from someone else It may be acquired

from someone else, as when Whirlpool bought a worldwide
distribution system when it purchased Philips’ appliance
division.

3. Shared with another business It may be shared

with another business unit or alliance partner.

4. Built and accumulated within the company

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5-11
Access to a Distinctive Competency
(2 of 2)
5.Clusters
– geographic concentrations of interconnected
companies and industries
– According to Michael Porter, clusters provide
access to :
– employees
– suppliers
– specialized information
– complementary products

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5-12
Business Models (1 of 5)
• Business model
– a company’s method for making money in the
current business environment
– includes the key structural and operational
characteristics of a firm—how it earns revenue
and makes a profit

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5-13
Business Models (2 of 5)
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

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5-14
Business Models (3 of 5)
Some of the many possible business models are:

1. Customer solutions model IBM consulting model

2. Profit pyramid model GM a variety of automobiles

3. Multi-component system/installed base model

HP printers and cartridge is not one product but a system

4. Advertising model free product

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5-15
Business Models (4 of 5)
Some other possible business models are:
5. Time model first market new innovation

6. Efficiency model a company waits until the product is

standardized and the enters the market

7. Blockbuster model focus on high investments in few

products that are protected by patent ex: pharmaceuticals

8. Profit multiplier model ex: Walt Disney

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5-16
Business Models (5 of 5)
9. Entrepreneurial model market niche is too small but
have potential to grow quickly ex: DuPont

10.De facto industry standard model Company

offers free products or at a very low price to saturate the
market and become industry standard ex: internet explorer
is free with widows soft ware

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17
Value-Chain Analysis
• Value chain
– 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.

Figure 5-1: Typical Value Chain for a Manufactured Product

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5-18
Industry Value Chain Analysis
Value chain segments include:
• Upstream
includes company suppliers and the suppliers’ suppliers
and the process of managing relationships with them
• Downstream
process for distributing and delivering products to final
customers

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Figure 5-2: A Corporation’s Value Chain

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5-20
 Corporate Value Chain Analysis
(1 of 2)
Primary Activities Support Activities
• Inbound logistics ((raw • Procurement
materials handling and (purchasing),
warehousing), • Technology
• Operations (product is development
manufactured) • Human resource
• Outbound logistics management
(warehousing and • Firm infrastructure
distribution),
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Basic Organizational Structures
(1 of 2)
• Simple
• Functional
• Divisional
• Strategic business units
• Conglomerate

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Figure 5-3: Basic Organizational
Structures (2 of 2)

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5-23
 Basic Organizational Structures
• Divisional Structure:
– Appropriate for a large corporation with many product lines
in several related industries.
– employees tend to be functional specialists organized
according to product/market distinctions.
• Strategic business units (SBUs): are a modification of the
divisional structure.
• Conglomerate structure: a variant of the divisional structure,
sometimes called the “Holding Co.”, is an assemblage of
legally independent firms operating under one umbrella.

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5-24
Culture (1 of 2)
• Corporate culture
– the collection of beliefs, expectations, and
values learned and shared by a corporation’s
members and transmitted from one generation
of employees to another

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5-25
Culture (2 of 2)
• Cultural intensity
– the degree to which members of a unit accept
the norms, values and other cultural content
associated with the unit
– shows the culture’s depth
• Cultural integration
– the extent of which units throughout the
organization share a common culture
– culture’s breadth

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Functions of Corporate Culture
1. Conveys (transfer) a sense of identity for
employees
2. Generates employee commitment
3. Adds to the stability of the organization as a
social system
4. Serves as a frame of reference for employees to
understand organizational activities and as a
guide for behavior

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5-27
Strategic Marketing Issues
• Market position
– refers to the selection of specific areas for
marketing concentration and can be expressed
regarding market, product, and geographic
locations.
• Marketing mix
– the particular combination of key variables under
a corporation’s control that can be used to affect
demand and to gain competitive advantage

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5-28
Table 5-1: Marketing Mix Variables

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5-29
Product Life Cycle (1 of 2)
• Product life cycle
– a graph showing time plotted against the
sales of a product as it moves from
introduction through growth and maturity
to decline.

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5-30
Figure 5-4: Product Life Cycle (2 of 2)

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5-31
Brand and Corporate Reputation
(1 of 2)
• Brand
– a name given to a company’s product which
identifies that item in the mind of the consumer
• Corporate brand
– a type of brand in which the company’s name
serves as the brand

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Brand and Corporate Reputation
(2 of 2)
• Corporate reputation
– a widely held perception of a company by the
general public-stake holders

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5-33
Strategic Financial Issues
• Financial leverage
– ratio of total debt to total assets
– describes how debt is used to increase
earnings available to common shareholders
• Capital budgeting
– analyzing and ranking of possible investments
in fixed assets and receipts that will result from
each investment

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5-34
Strategic Research and Development
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 new technology from the
laboratory to the marketplace

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5-35
Increasing Use of Teams (1 of 2)
• Autonomous (self-managing)
– a group of people work together without a supervisor
to plan, coordinate and evaluate their work
• Cross-functional work teams
– various disciplines are involved in a project from the
beginning
• Concurrent engineering
– specialists work side-by-side and compare notes
constantly to design cost-effective products with
features customers want
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5-36
Increasing Use of Teams (2 of 2)

• Virtual teams
– groups of geographically and/or
organizationally dispersed co-workers that are
assembled using a combination of
telecommunications and information
technologies to accomplish an organizational
task

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5-37
Quality of Work Life and Human
Diversity (1 of 2)
Quality of work life includes improvements
in:
1. Introducing participative problem solving
2. Restructuring work
3. Introducing innovative reward systems
4. Improving the work environment

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5-38
Quality of Work Life and Human
Diversity (2 of 2)
• Human diversity
– the mix in the workplace of people from
different races, cultures and backgrounds
– human resources may be a key to competitive
advantage

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Strategic Information
Systems/Technology Issues (1 of 2)
Information systems/technology contributions
to performance:
• Automation of back office processes
• Automation of individual tasks
• Enhancement of key business functions
• Development of a competitive advantage

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Strategic Information
Systems/Technology Issues (2 of 2)
• Supply chain management
– 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.

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Thank you

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