Business Strategy

LO2: Assess an Organization’s Internal Environment and Capabilities

 Learning Outcomes

LO1: Analyse the impact and influence which the macro environment has on an
organization and its business strategies.

LO2: Assess an organization’s internal environment and capabilities.

LO3: Evaluate and apply the outcomes of an analysis using Porter’s Five Forces model to a
given market sector.

LO4: Apply models, theories and concepts to assist with the understanding and
interpretation of strategic directions available to an organization.
Resource Analysis
Organizational Capabilities: Core Competency Analysis
Review your Organization’s Core Competencies through this Model
Marks & Spencer: How Resources and Capabilities lead to
advantages?
A resource based view of Strategy Analysis
Resource-based strategy

The resource-based view (RBV) of strategy asserts that the competitive advantage and
superior performance of an organisation is explained by the distinctiveness of its resources.

Question: How can a company’s resources create a competitive advantage for the company?
How resources can create competitive advantage
The four key criteria by which resources can be assessed in terms of
providing a basis for achieving sustainable competitive advantage are:

•value,
•rarity,
•inimitability and
•organisational support VRIO
 VRIO Strategic Capabilities – Competitive
Advantage
V Value: Do capabilities exist that are valued by customers and enable
the organization to respond to environmental opportunities or
threats?
R Rarity: Do capabilities exist that no (or few) competitors possess?
I Inimitability: Are capabilities difficult and costly for competitors to
obtain and imitate?
O Organisational support: Is the organization appropriately organized
to exploit the capabilities?
Resources, Systems & Know How

• Resources: Materials/ machines/ location/ Labour/ Brands

• Systems: Method by which resources are activated, coordinated and

deployed. Systems are usually explicit.

• Know How: Individual or group capability to “work” resources. Usually

implicit “Tacit Knowledge” which is difficult to explain.
Resources competences & capabilities
• Resources : the assets that organisations have or can call upon (e.g.
from partners or suppliers),
• i.e. ‘what we have’ .

• Competences : the knowledge and skills which ways those assets are
used or deployed effectively,
• i.e. what we know how to do well’.

• Capabilities : the capacity to supply specific goods or services

• i.e. Capabilities = resources + competencies
Strategic capabilities: the key issues
Components of strategic capabilities
 Threshold and distinctive capabilities
• Threshold capabilities are those needed for an organisation to meet
the necessary requirements to compete in a given market and achieve
parity with competitors in that market – ‘qualifiers’.

• Distinctive capabilities are those that critically underpin competitive

advantage and that others cannot imitate or obtain – ‘winners’.
Threshold and Distinctive Capabilities
 The value chain

• The value chain describes the categories of activities within an

organisation which, together, create a product or service.

• The value chain invites the strategist to think of an organisation in

terms of sets of activities – sources of competitive advantage can be
analysed in any or all of these activities.
Value Chain Analysis
Example : Value chain activities – examples of Cost
Leadership
 Value chain components

• Primary Activities - those that are directly concerned with creating and delivering a
product (e.g. component assembly); and

• Support Activities, which whilst they are not directly involved in production, may
increase effectiveness or efficiency (e.g. human resource management).
Primary activities
• Inbound Logistics - including receiving, storing and disseminating inputs to the
product or service. Materials handling, warehousing, inventory control, vehicle
scheduling and returns to suppliers are all part of inbound logistics

• Operations - operations transform inputs into the final product form.

• In a manufacturing company they could include machining, packaging,
assembly, maintenance and testing.
• In a service organisation like an architect’s practice, operations activities
would focus upon the creation of plans for a new building and include site
surveying, project evaluation and the generation of plans and specifications
Elements of the value chain
o Outbound Logistics - collecting, storing and physically distributing products
oThis could involve warehousing of the final product, materials
handling, delivery vehicle operation and services to buyers are included
here, including order processing

o Marketing and Sales – activities like advertising, promotion, sales force

management,

o Services - providing service to enhance or maintain the value of the product or

service after sale.
oThis might include installation, repair, training, parts supply, and
product adjustment
 Support activities
o Procurement - refers to the activity of purchasing inputs to be used within the
organisation’s value chain

o Technology Development - is concerned with investment in the updating and

improvement of both the organisation’s products and its processes

o Human Resource Management - includes recruiting, hiring, training, development,

knowledge sharing and compensation of all types of personnel

o Firm Infrastructure - consists of a number of activities including general

management, planning, finance, accounting, legal, government affairs and quality
management
McKinsey 7S Model
Gap Analysis & Strategic Planning
Classic Benchmarking Process
Types of Benchmarking Benchmark in Methodology
Risk Assessment
Opportunity Cost
Cost Benefit Analysis
 Activity

Draw up Value Chain for a Sandwich Bar operating as a retail outlet.

This activity will be done as Group activity.

 Sandwich bar value chain
Primary Goods inward Baking, Sandwich Van deliveries Merchandising
Customer relations Profit
fresh/ frozen & assembly, cleaning Till service
Activities Margin
dry goods
Staff training
productivity
Recipe development &
control
Supplier Food/ packaging Customer flows
Van maintenance
delivery suppliers Promotional
schedule Till mgmt.

Support
Activities

Adapted from Michael Porter

Assignment Discussion
Any Questions???