Internal Analysis

And Competitive
advantages

Lecture 2
Learning Outcomes
 Understand why we have to complete an internal analysis.

 Understand how the internal analysis fits into the overall marketing

strategy.

 Understand the components of an internal analysis.

 Understand the real life application of this process.

Recap & SWOT Analysis

External Analysis Internal Analysis

Opportunities & Strengths &

Threats Weaknesses

Refine & Prioritise

SWOT Analysis Source: Lecturers Own Development

Recap
Last session we:

 considered the external environment factors and

their impact on marketing Strategy

 looked at Porters 5 force model

 Look at PESTEL

These models contribute to

opportunities and threats! (external).
Why analyse the
internal
environment?
Why do an Internal Analysis?

 Enables a firm to identify its strengths and weaknesses

 Enables a firm to make good strategic decisions

 Information from internal environment provides basis for developing

strategic alternatives
What is Internal Analysis?
 The process of identifying and evaluating an

organisation’s specific characteristics

 Resources, capabilities, and core competencies
 Looks at organisation’s
 Current strategy
 Mission
 Strategic & financial objectives
 Management and structure
Identifying an organisation’s
strengths and weaknesses
 Strength: A strength can be defined as an internal capability that an
organisation has that will allow it to achieve its objectives
 Weakness: A weakness can be defined as an internal capability that
potentially could prevent an organisation from achieving its objectives.

8
 SWOT Analysis
The review of an organisation’s strengths and weaknesses should lead to an identification of
opportunities and threats. It is often referred to as a SWOT analysis

Strengths – within the company

Weaknesses – within the company

Opportunities – when strengths are related to the

external environment
Threats - when weaknesses are related to the external
environment
SWOT Analysis

 Potential Issues to Consider in a SWOT Analysis (Ferrel, Hartline, 2017, p 98)

 Ferrell, O.C, and Hartline, M.D. (2017).Marketing Strategy: Text and Cases. 7th

Edition. Australia: South-Western Cengage Learning.

Potential Issues to Consider in a SWOT Analysis
(1)
 Potential Internal Strengths  Potential Internal Weaknesses
Abundant financial resources Lack of strategic direction
Well-known brand name Limited financial resources
Number 1 ranking in the Weak spending on R&D
industry Economies of scale Very narrow product line
Proprietary technology Limited distribution
Patented products or processes Higher costs (raw
Lower costs (raw materials or processes) materials or
Respected company/brand image processes)
Superior management talent Out-of-date products or
Better marketing skills technology
Superior product quality Internal operating
Alliances with other firms problems
Good distribution skills Internal political
Committed employees problems
Weak market image
Poor marketing skills
Alliances with weak firms
Potential Issues to Consider in a SWOT Analysis
(2)
 Potential External Opportunities
Rapid market growth
Complacent rival firms
Changing customer needs/tastes
Opening of foreign markets
Mishap of a rival firm
New product or process discoveries
Economic boom/downturn
Government deregulation
New technology
Demographic shifts
Other firms seeking alliances
High brand switching
Sales decline for a substitute
product
Evolving business models in
the industry
 Potential External Threats
Entry of foreign competitors
Introduction of new substitute products
Product life cycle in decline
Evolving business models in the
industry
Changing customer needs/tastes
Declining consumer confidence
Rival firms adopting new strategies
Increased government regulation
Economic boom/downturn
Change in Federal Reserve policy
New technology
Demographic shifts
Foreign trade barriers
Poor performance of
ally firm
International political turmoil
SWOT Analysis

Strengths and Weaknesses show ‘where the

organisation is now’

Opportunities and Threats show ‘where they want (or don’t

want) to be’

Organisation can then assess ‘where they need to go’ and

‘how they do it’
Internal Analysis
McKinsey 7S Framework for internal analysis
 Strategy

 Structure

 Systems

 Shared Values

 Skills

 Style

 Staff
McKinsey 7S
 Strategy: The definition of key approaches for an organization to achieve its goals.

 Structure: The organization of resources within a company into different business groups and

teams.

 Systems: Business processes and the technical platforms used to support operations.

 Staff: The type of employees, remuneration packages and how they are attracted and retained.

 Skills: Capabilities to complete different activities.

 Style: The culture of the organization in terms of leadership and interactions between staff and

other stakeholders.

 Shared Values: Summarized in a vision and or mission, this is how the organization defines its

reason for existing.

Core Competencies Analysis

 The core competency analysis is an internal analysis tool which helps organizations

create strategies that move them ahead of their competitors.

 The basic premise of the analysis is to identify the organization's core competencies
- the combined resources, knowledge, and skills of an organization that creates unique value
to their customer. Once organizations have identified their core competencies,
strategies can be created to focus on only what the organization does well and provides
unique value to the customer.
5 Ms in internal analysis

 Men

 Money

 Material

 Machinery

 Minutes
Confirm Compliance (Morgan et al, 2002)

 Make sure you are not breaking any

rules.

 GDPR.

 Google world record fine 4.3 billion

EU.

 Important for the highly regulated

industries e.g. pharmaceuticals
 Multiple regulations have to be https://www.bbc.co.uk/news/technology-44858238

adhered to.
Monitor Organisation ”Vital Signs” (Morgan et al, 2012)

 Financial performance.

 KPI’s

 Allows to predict future issues.

 Enron scandal.

 Scenario: You are a marketing manager for a

large soft drinks company, data shows there is a
gradual decline in sales in sugary drinks over
the past five years, how do you react?
Provide Data inputs for Planning/Strategy and Aid
Implementation
 Feed into the strategic planning

process.

 Enables analysis of the

organization.

 Only if done objectively.

 Moneyball

 Data over opinions.

h
t
t
p
s
:
Signal Marketing Priorities and Desired Outcomes

 What is right (or wrong) about an

organization.

 Will help determine where you want to

be.

 Also helps inform objectives.

 Marketing myopia.
Internal Analysis - TRADITIONAL MODEL

 Productivity

 Strategy

 Systems Want to see this in the CW - you will

follow this structure in seminars.
 Organisation (Tangible and
Intangible)
 Marketing Function (Marketing
Mix)
Developed from: Kotler & Armstrong (2010) and Morgan et al (2002).

Note that we will revisit many of these as we develop strategy

Productivity
 Financial metrics
 Company profitability
 Return on capital
 Cashflow
 Shareholder value e.g. Body Shop
 Most profitable company in the fortune 500?

 Marketing metrics
 Customer profitability
 Customer satisfaction ratings
 Market share
 Promotional performance
 Easy to understand, easily replicated, useful
actionable data (Popky, 2015)
Strategy

 Objective Mission: To deliver the valuable

nutrition to community with our
 Strategy respect, love and responsibility.
 Action

How do you think about this strategy?

Systems
Examples:
 Management Information Systems e.g.
KPS’s
 Marketing Information System e.g. Google
Analytics
 Competitor Information System e.g.
HOTSTATS
 CRM System. e.g Zara, BMW (see case study)
 Quality processes and systems e.g.
McDonalds.
Tangible resources

 Financial resources  Technological resources

 Cash  Trade secrets
 Capacity to raise Equity  Innovative production process
 Borrowing capacity  Patient, copy right, trade mark
 Physical resources  Organisational resources
 Plant  Effective planning processes
 Place of manufacturing  Excellent Evaluation, control
processes
Intangible resources

 Innovation and creativity

 Reputation

 Human
Organization (Tangible & Intangible)

What are the tangible

and intangible
elements of an
airlines?
Measuring the Intangible

https://www.youtube.com/watch?v=pBU0RP0VwZI
Relationships
 What are the organisations relationships?
 Source of competitive advantage e.g. Star
Alliance
 Competitive disadvantage e.g. Marriot
Broadband deal.
 Relationship Marketing.
 Link to Porter’s and co-creation?
 Stakeholder theory
 What is Stakeholder Theory:
https://www.youtube.com/watch?v=bIRUaLcvPe8
Marketing Function
Internal analysis

 Furher reading:

 A Framework for Analyzing the Internal Environment (Ferrell, Hartline, 2013, page 58)

 Internal The Internal Environment (Ferrell, Hartline, 2013, p 58-60)

 Ferrell, O.C, and Hartline, M.D. (2013).Marketing Strategy: Text and Cases. 6th Edition.

Australia: South-Western Cengage Learning.


General Electric Matrix- strategic implications
High Business strength Low
High PROTECT POSITION INVEST TO BUILD BUILD SELECTIVELY
Market attractiveness

BUID SELECTIVELY SELECTIVITY/MANAGE FOR LIMITED EXPANSION OR

EARNING HARVEST

PROTECT AND REFOCUS MANAGE FOR EARNINGS DIVEST

Low
35
General Electric Matrix- strategic implications

36
 SWOT Example - Starbucks

Strengths Weaknesses
• Global brand • Reliant on one industry sector
• Respected employer • Have been reliant on US/UK customer
• Profitable base
• Innovative marketing campaigns • Negative publicity?

Opportunities Threats
• Further innovation • Market down turn
• New products • Exposed to rises in costs
• Expand globally • Competitors
• Co-branding
Model: Quantitative Assessment of the SWOT Matrix

 M: Magnitude of the element,

 I: importance of the element,
 R : total rating of the element=M*I

-Magnitude scale ranges from 1 (low magnitude) to 3 (high magnitude).

- Importance scale ranges from 1 (low importance) to 3 (high importance).
Competitive advantage and
 Competitive advantage

 A single difference between an organisation and its competitors that is of

value to the market, and therefore provides that organisation with an

advantage

 A competitive advantage is something that the firm does better than its

competitors that gives it an edge in serving customers’ needs and/or

maintaining mutually satisfying relationships with important stakeholders.
 Defining what competitive advantage is
and Why it is important

 Value: Value is determined by what is important and relevant to the customer, not

what the organisation thinks is of value to the customer

 Sustainable: Any competitive advantage must be sustained by the organisation

itself (in other words, ensuring it has the resources it requires).

 The organisation must ensure that its competitors do not replicate its advantage
What then constitutes a core
competence?

1. It makes a contribution to perceived customer

benefits. => importance (I)

2. It is difficult for competitors to imitate. =>

magnitude (M)

3. It can be leveraged to a wide variety of

markets.
The Roots of Competitive
Advantage
 Technical Resources

 Financial Resources

 Human Resources

 Marketing Resources

 Information Systems

44
Discussion

What are competitive advantage of:

Zara
Apple
Vinhomes
Vietjet
 Zaza’s competitive advantage

Zara’s key competitive advantage lies in

its ability to match fashion trends
that change quickly.
Apple’ competitive advantage

 Apple has been quite successful in leveraging innovation

and the customer experience to maintain a sizable competitive advantage in
computers, portable music players, and music and movie distribution.
Operational Excellence—Example Firms: Walmart,
Southwest Airlines, Dell
 Core Competencies
• Low cost operations
• Totally dependable product supply
• Expedient customer service
• Effective demand management
Operational Excellence

 Common Attributes of Operationally Excellent Firms

•Deliver compelling value through the use of low prices, standardized product offerings, and
convenient buying processes
• Target a broad, heterogeneous market of price-sensitive buyers
•Invest to achieve scale economies and efficiency-driven systems that translate into lower prices
for buyers
• Develop information systems geared toward capturing and distributing information on
inventories, shipments, customer transactions, and costs in real time
• Maintain a system to avoid waste and highly reward efficiency improvement
 Walmart’s long-running strategic investments in logistics allow the retailer to

operate with lower inventory costs than its competitors—an advantage that
translates into lower prices at retail.
Customer Intimacy—Example Firms: Nordstrom, Amazon,
Ritz-Carlton
Customer Intimacy

 Core Competencies
• Exceptional skills in discovering customer needs
• Problem solving proficiency
• Flexible product/solution customization
• A customer relationship management mind-set
• A wide presence of collaborative (win-win) negotiation skills
 Common Attributes of Customer-Intimate Firms
•See customer loyalty as their greatest asset as they focus their efforts on developing and
maintaining an intimate knowledge of customer requirements
•Consistently exceed customer expectations by offering high quality products and solutions
without an apology for charging higher prices
• Decentralize most decision-making authority to the customer-contact level
• Regularly form strategic alliances with other companies to address customers’ needs in a
comprehensive fashion
• Assess all relationships with customers or alliance partners on a long-term, even lifetime basis
Product Leadership—Example Firms: Pfizer, Intel, 3M
Product Leadership

Core Competencies
• Basic research/rapid research interpretation
• Applied research geared toward product development
• Rapid exploitation of market opportunities
• Excellent marketing skills
Product Leadership

 Common Attributes of Product-Leading Firms

•Focus their marketing plans on the rapid introduction of high quality, technologically
sophisticated products in order to create customer loyalty
• Constantly scan the environment in search of new opportunities; often making their own
products obsolete through continuous innovation
• Target narrow, homogeneous market segments
•Maintain organizational cultures characterized by decentralization, adaptability,
entrepreneurship, creativity, and the expectation of learning from failure
• Have an attitude of “How can we make this work?” rather than “Why can’t we make
this work?”
Summary

• Understand why we have to complete an internal

analysis.
• Understand how the internal analysis fits into the
overall marketing strategy.
• Understand the components of an internal
analysis.
• Understand the real life application of this
process.
References
 Kotler, P. and Armstrong, G., 2010. Principles of marketing. Pearson education.
 Morgan, N.A., Clark, B.H. and Gooner, R., 2002. Marketing productivity, marketing
audits, and systems for marketing performance assessment: integrating multiple
perspectives. Journal of Business Research, 55(5), pp.363-375.
 Popky, L.J., 2015. Identify the Marketing Metrics That Actually Matter. Harbard
Business Review. July, 14.
 Ferrell, O.C, and Hartline, M.D. (2017).Marketing Strategy: Text and Cases. 7th Edition.
Australia: South-Western Cengage Learning.
Plan your time to do CW1!