Internal analysis strategic management

“Analysis of Company’s
Resources and Competitive
Position”
Internal Analysis
Prof. Vijay K S, MBA Programme`-BIET, Davangere

Internal
Analysis
Is present strategy working? strengths, weaknesses,
opportunities, & threats firm’s prices costs
competitive competitive position
strategic issues How Company Create Value
Superior efficiency, innovation,
quality responsiveness towards customers
Source of competitive advantage
profitability
Value Chain Analysis SWOT
Benchmarking

Internal
Analysis
Key
questions
to be asked
1. How well is firm’s present strategy working?
2. What are firm’s strengths, weaknesses,
opportunities, & threats?
3. Are firm’s prices & costs competitive?
4. How strong is firm’s competitive position?
5. What strategic issues does firm face?

Internal
Analysis
Internal
Analysis is a
three step
process
Manager should understand
1. Process by which companies create value for customers
2. Importance of Superior efficiency, innovation, quality and
responsiveness towards customers
3. Source of competitive advantage – that drives the
profitability – Strengths and Weakness

Capabilities
Resources Competency
Core Competency
Distinctive Competencies
Internal
Analysis
Important
Keys

Internal
Analysis
Important
Keys –
Resources
Resources are the organization’s assets and are thus
the basic building blocks of the organization
- Tangible assets
- Human assets
- Intangible assets

Internal
Analysis
Important
Keys –
Capabilities
Capabilities refers to a corporation’s ability to exploit
its resources
Examples
- Marketing capabilities
- Manufacturing capabilities
- HR Capabilities
Dynamic capabilities

Internal
Analysis
Important
Keys –
Competencies
Competencies is a cross functional integration and
coordination of capabilities
Examples
- Competency in developing a new product
VRIO framework of Analysis to evaluate firms competencies
Value : Does it provide customer value and Competitive advantage
Rareness : Do no other competitors possess it?
Imitability : Is it costly for others to imitate?
Organization : Is the firm organized to exploit the resource?

Internal
Analysis
Important
Keys – Core
Competencies
A core competency is a collection of competencies that
crosses divisional boundaries, is wide spread
within the corporation, and is something that the
corporation can do exceedingly well.
Examples
- FedEx – Application of IT to its operations

Internal
Analysis
Important
Keys –
Distinctive
Competencies
When the core competencies are superior to those of
the competition , they are called as distinctive
competencies
Examples
- GE’s Management Development

Internal
Analysis
Strategy,
Resources,
Capabilities
and
Competencies
Resources
Distinctive
Competencies
Capabilities
Strategies
Competitive
Advantage
Superior
Profitability
Build
Shape
Build

Internal
Analysis
- Value Chain
Analysis
Product
Raw Materials
Primary
Manufacturing
Fabrication Distribution Retailer
• A company’s value chain consists of the linked set of value-
creating activities the company performs internally.

Internal
Analysis
- Value Chain
Analysis
Industry
Value Chain
Upstream
Segment
Downstream
Segment
Value chain analysis is a useful method for
organizational appraisal as it helps in providing clarity
about the areas where the strengths and weaknesses
of the organisation reside.

Internal
Analysis
- Value Chain
Analysis
Corporate /
Company
Porter’s Generic Value Chain
(Corporate Value Chain Analysis)
Firm Infrastructure
(general management, accounting, finance, Strategic planning)
Human Resource Management
Technological Development
Procurement
Inbound
Logistics
(raw
materials
handling and
warehousing
)
Operations
(Machining,
Assembling,
testing)
Outbound
Logistics
(Warehousin
g and
distribution
of finished
products)
Marketing
and Sales
(Advertising,
promotion,
pricing,
channel
relations)
Services
(Installation,
Repair, Parts)
Profit
Margin
Support
Activities
Primary Activities

Internal
Analysis
- SWOT Analysis
SWOT Analysis
Internal Assessment of the
Organisation
External Assessment of the
Environment
Potential Strengths and
Competitive Assets
Potential Weaknesses and
Competitive Deficiencies
Potential Market
Opportunities
Potential External Threats to a
Company’s Future Profitability

Internal
Analysis
- SWOT Analysis
Potential
Strengths and
Competitive
Assets
Potential Strengths and Competitive Assets
• Competencies that are well matched to industry KSF.
• Ample financial resources to grow the business.
• Strong brand-name image/company reputation.
• Economies of scale and/or learning and experience curve advantages
over rivals.
• Other cost advantages over rivals.
• Attractive customer base.
• Proprietary technology, superior technological skills, important
patents.
• Strong bargaining power over suppliers or buyers.
• Resources and capabilities that are hard to copy and for which there
are no good substitutes.
• Superior product quality.
• Wide geographic coverage and/or strong global distribution
capabilities.
• Alliances/joint ventures that provide access to valuable technology,
competencies, and/or attractive geographic markets.

Internal
Analysis
- SWOT Analysis
Potential
Weakness and
Competitive
Deficiencies
Potential Weakness and Competitive Deficiencies
• No clear strategic vision.
• No well-developed or proven core competencies.
• No distinctive competencies or competitively superior resources.
• Lack of attention to customer needs.
• A product/service with features and attributes that are inferior to those
of rivals.
• Weak balance sheet, short on financial resources to grow the firm, too
much debt.
• Higher overall unit costs relative to those of key competitors.
• Too narrow a product line relative to rivals.
• Weak brand image or reputation.
• Weaker dealer network than key rivals and/or lack of adequate
distribution capabilities.
• Lack of management depth.
• Plagued with internal operating problems or obsolete facilities.
• Too much underutilized plant capacity.
• Resources that are readily copied or for which there are good
substitutes.

Internal
Analysis
- SWOT Analysis
Potential
Market
Opportunities
Potential Market Opportunities
• Sharply rising buyer demand for the industry’s product.
• Serving additional customer groups or market segments.
• Expanding into new geographic markets.
• Expanding the company’s product line to meet a broader range
of customer needs.
• Utilizing existing company skills or technological know-how to
enter new product lines or new businesses.
• Falling trade barriers in attractive foreign markets.
• Acquiring rival firms or companies with attractive technological
expertise or capabilities.
• Entering into alliances or joint ventures to expand the firm’s
market coverage or boost its competitive capability.

Internal
Analysis
- SWOT Analysis
Potential External
Threats to a
Company’s Future
Profitability
Potential External Threats to a Company’s Future Profitability
• Increasing intensity of competition among industry rivals-may
squeeze profit margins.
• Slowdown in market growth.
• Likely entry of potent new competitors.
• Growing bargaining power of customers or suppliers.
• A shift in buyer needs a d taste away from the industry’s product.
• Adverse demographic changes that threaten to curtail demand for
the industry’s product.
• Adverse economic conditions that threaten critical suppliers or
distributers.
• Changes in technology-particularly disruptive technology that can
undermine the company’s distinctive competencies.
• Restrictive foreign trade policies.
• Costly new regulatory requirements.
• Tight credit conditions.
• Rising prices on energy or other key inputs.

Internal
Analysis
- Benchmarking
Benchmarking is the process of identifying "best practice" in
relation to both products (including) and the processes by
which those products are created and delivered. The search
for "best practice" can take place both inside a particular
industry, and also in other industries
Benchmarking is the tool that allows a company to determine
whether the manner in which it performs particular functions
and activities represent industry best practices when both
cost and effectiveness are taken into account. It is a point of
reference against which performance is measured and
compared.

Internal
Analysis
- Benchmarking
Application of benchmarking involves four key steps:
(1) Understand in detail existing business processes
(2) Analyse the business processes of others
(3) Compare own business performance with that of others
analysed
(4) Implement the steps necessary to close the performance
gap

Internal
Analysis
- Benchmarking
Benefits of Benchmarking
 It ensures best practices will be identified, which in turn
assures appropriate improvement.
 It provides a deeper understanding of the organisation’s
process.
 It stimulates the company to try some thing different.
 Identify new technology

Internal
Analysis
- Benchmarking
Types of Benchmarking
 Strategic Benchmarking
 Performance or Competitive Benchmarking
 Process Benchmarking
 Functional Benchmarking
 Internal Benchmarking
 External Benchmarking
 International Benchmarking

Internal analysis strategic management

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