Internal Analysis Lecture

Internal Analysis: Resources, Capabilities, Competencies, and Competitive Advantage: 

Internal Analysis: Resources, Capabilities, Competencies, and Competitive Advantage Dr. Jeff Shay

Key terminology: 

Key terminology Company Portfolio Competitive advantage Core competency Competitive landscape

Company Portfolio: 

Company Portfolio The set of products or services that an organizations offers consumers Example: Marriott International - Courtyard, New World, Renaissance, etc.

Competitive advantage: 

Competitive advantage A relatively unique characteristic of an organization that provides greater opportunities over rival organizations Example: American Airlines Sabre system

Core competency: 

Core competency “A bundle of skills and technologies (rather than a single discrete skill or technology) that enables a company to provide a particular benefit to customers” Example: Pepsico’s unique distribution, franchising, and branding skills bundled together allowed for quick penetration of Asian market with KFC

Core competencies at FedEx:: 

Core competencies at FedEx: Bar-code technology Wireless communications Network management Linear programming Logistics management Package tracking Metacompetency FedEx

Competitive Advantage: Value Creation, Low Cost, and Differentiation: 

Competitive Advantage: Value Creation, Low Cost, and Differentiation Competitive Advantage Sustained Competitive Advantage

The Impact of Quality on Profits: 

The Impact of Quality on Profits Increased Reliability Higher Prices Increased Quality Higher Profits Increased Productivity Lower Costs

Generic Building Blocks of Competitive Advantage: 

Generic Building Blocks of Competitive Advantage

Summary of the Impact of Efficiency, Quality, Innovation, and Customer Responsiveness on Unit Costs and Prices: 

Summary of the Impact of Efficiency, Quality, Innovation, and Customer Responsiveness on Unit Costs and Prices Customer Responsiveness

The Value Chain: 

The Value Chain Inputs Outputs Produc- tion Marketing and Sales Service Primary Activities Research and Development Support Activities Company Infra-Structure Human Resources Materials Management Business Functions, The Value Chain, and Value Creation

Portfolio Planning Approach: 

Portfolio Planning Approach

Why Portfolio Planning?: 

Why Portfolio Planning? Corporations change Diversified Extended market reach Increased volume and capacity Impact on Corporations Rapid growth Increased complexity

Portfolio Planning:Four Areas of Emphasis: 

Portfolio Planning: Four Areas of Emphasis Allocating resources Formulating business-unit strategy Setting performance targets Analyzing portfolio balance Cash flow Continuity Risk

BCG Growth-Share Matrix: 

BCG Growth-Share Matrix Relative Market Share Star Question Mark Dog Cash Cow High Market Growth Low Weak Strong

Four Main Strategies of the BCG Model: 

Four Main Strategies of the BCG Model Increase market share Hold market share Harvest Divest

Slide17: 

BCG Growth-Share Matrix: Quadrant Characteristics Relative Market Share Star Earnings: high stable, growing Cash flow: neutral Strategy: hold or invest for growth Question Mark Earnings: low, unstable, growing Cash flow: negative Strategy: increase market share or harvest/divest Dog Earnings: low, unstable Cash flow: neutral or negative Strategy: harvest/divest Cash Cow Earnings: high stable Cash flow: high stable Strategy: hold or add market share 30% Market Growth -10% .1 10 1.0

Using the Model: Symbols: 

Using the Model: Symbols Product A Previous Market Size and Position Market Share Product A Total Market Product B Market Smaller but firm has greater share

Plotting Your SBU’s: 

Plotting Your SBU’s Relative Market Share Star Question Mark Dog Cash Cow 30% Market Growth -10% .1 10 1.0

Traditional SBU or Product Path: 

Traditional SBU or Product Path Relative Market Share Star Question Mark Dog Cash Cow 30% Market Growth -10% .1 10 1.0 1

Business Attractiveness Matrix: 

Business Attractiveness Matrix Market attractiveness Business strength within market H M L H M L A B C D

Core Competency Approach: 

Core Competency Approach

Must we wait for consumer demand?: 

Must we wait for consumer demand? Southwest Airlines CNN Microbreweries Needs Unarticulated Articulated Customer Types Served Unserved Unexploited Opportunities

Strategic Stretch and Leverage: 

Strategic Stretch and Leverage Strategic Architecture in place Strategic Stretch Inspires Strategic leverage Efficiently focuses resources

Hamel and Prahalad’s Core Competency Agenda Matrix: 

Hamel and Prahalad’s Core Competency Agenda Matrix Premier plus 10 Mega-opportunities White spaces Fill in the blanks New Core Competence Existing Market New Existing Adapted from : Gary Hamel and C. K. Prahalad, Competing for the Future (Boston: Harvard Business School Press, 1994), p. 224-236.

Fill in the Blanks:Existing CC/Existing Market: 

Fill in the Blanks: Existing CC/Existing Market What is the opportunity to improve our position in existing markets by better leveraging our existing core competencies?

Premier plus 10:New CC/Existing Market: 

Premier plus 10: New CC/Existing Market What new core competencies will we need to build to protect and extend our franchise in current markets? New core competencies may also replace existing competencies

White Spaces:Existing CC/New Market: 

White Spaces: Existing CC/New Market What new products or services could we create by creatively redeploying or recombining our current core competencies?

Mega-opportunities:New CC/New Market: 

Mega-opportunities: New CC/New Market What new core competencies would we need to build to participate in the most exciting markets of the future?

The Roots of Competitive Advantage: 

The Roots of Competitive Advantage Distinctive Competencies, Resources, and Capabilities

Types of Business-Level Strategies: 

Types of Business-Level Strategies Offers Products to Only One Group of Customers Offers Products to Many Kinds of Customers Offers Low- Priced Products to Customers Offers Unique or Distinctive Products to Customers Focused Cost- Leadership Strategy Focused Differentiation Strategy Differentiation Strategy Cost- Leadership Strategy Choosing a Generic Business-Level Strategy (Continued)