Chapter 5 Internal Scanning: Organizational Analysis Resource-Based Approach (an assessment area): Internal Strategic Factors Those critical

l strengths and weaknesses that are likely to determine if the firm will be able to take advantage of opportunities while avoiding threats. Capabilities - the ability to exploit resources. (Used positively) Core Competencies - the things the corporation can do exceedingly well. Distinctive Competencies The core competencies or capabilities that are superior to those of your competitors. Particular capabilities and resources a firm possesses and the superior way the firm uses the capabilities and resources. Be able to distinguish between a core competency and a distinctive competency. VRIO Framework P.138 Used to evaluate a firms competencies Value: It must provide customer value and competitive advantage Rareness: No one else can possess it. Imitability: It must be costly for others to imitate. Organization: The firm must be organized to exploit the resource. (fullest potential) As competitors attempt to imitate another companys distinctive competency, what was once a distinctive competency becomes a minimum requirement to compete in the industry. Using Resources to Gain Competitive Advantage How can a corporation gain access to a distinctive competency?

Determining the Sustainability of an Advantage (many questions):

Durability the rate at which a firms resources, capabilities, or core competencies depreciate or become obsolete. Imitability the rate at which the firms resources, capabilities, or core competencies can be duplicated by others. Transparency the speed with which other firms can understand the relationship of the resources and capabilities supporting a successful firms strategy. Transferability the ability of competitors to gather the resources and capabilities necessary to support a competitive advantage. Replicability the ability of competitors to USE duplicate resources and capabilities to imitate the other firms success. This is not the same as imitability. Replicability is one part of imitablility. Know the difference. Explicit Knowledge Can be easily articulated and communicated. Tacit Knowledge Not easily communicated because it is deeply rooted in experience or culture. More valuable and more likely to lead to a sustainable competitive advantage. Continuum of Resource Sustainability An organizations resources and capabilities can be placed on this continuum to indicate the extent to which the resources are durable and cannot be imitated by another firm (see figure 5-1). Focus on protecting your competitive advantage Slow cycle resources your competitive advantage is shielded from imitation for long periods. Fast cycle resources 1. Focus on learning rapid innovation 2. You might have to cannibalize your own products

Value Chain Analysis A value chain is a linked set of value-creating activities that begins with basic raw materials coming from suppliers and ending with the distributor getting the final goods into the hands of the ultimate consumers. See Figure 5-2. The approach to internal scanning and organizational analysis that examines the nature and extent of any synergies. (synergy on test 1 & 2) The center of gravity is the part of the chain that is most important to the company and the point where its greatest expertise and capabilities lie. Learn the steps of value chain analysis. Synergy exists when the value created by business units working together exceeds the value that those same units create working independently. Economies of scope occur when the value chains of two separate products share activities, such as marketing, in order to reduce costs. Corporate value chain analysis is an approach to internal scanning and organizational analysis which examines the nature and extent of the synergies that so or do not exist between the internal activities of a corporation.

Scanning Functional Resources Basic Organizational Structures (an assessment area)

Be able to identify the basic organizational structures. Simple Structure: Small, entrepreneur-dominated companies Advantages: Highly informal Direct supervision Easy to coordinate activities Little specialization required Generalists

Disadvantages: Informality may lead to problems Unclear responsibilities Few rules and regulations Employees may act in their own self-interest Limited opportunities for advancement Functional Structure: Medium-sized firms with several product lines in one industry (related products) Advantages: Business function specialists (marketing, HRM, finance, operations) Pooling of specialists enhances coordination and control within specialties Centralized decision-making Efficient use of managerial and technical talent Facilitates career paths Disadvantages: May impede communication and coordination of the company May develop short term perspective and narrow functional orientation May develop conflicts between functions Hard to develop uniform performance standards Divisional Structure: Large companies with several product lines in related industries Advantages: Functional specialists by product line to gain synergy among divisional activities Increased strategic and operational control Quick response to environmental changes Increased focus on products and markets Disadvantages: Increased costs due to duplication of personnel and operations Dysfunctional competition among divisions

 Short-term focus Strategic Business Unit 1. What is the definition of an SBU? 2. What four things must a SBU have (page 148)? Conglomerate Structure: Large corporations with many product lines in several unrelated industries The unrelated nature of the subsidiaries prevents any attempt at gaining synergy among divisions. Matrix Structure Functional and product forms are combined at the same level of the organization (see page 286). Advantages: Increased market responsiveness through collaboration and synergies More efficient utilization of resources Improves flexibility, coordination, and communication Increases professional development through a broader range of responsibility. Disadvantages: Dual-reporting relationships can result in conflict and uncertainty about accountability Power struggles Complicated working relationships Excessive reliance of group processes and teamwork may slow decision- making The collection of beliefs, expectations, and values learned and shared by the corporations members and transmitted from one generation of employees to another. Powerful influence on behavior. Can affect the ability to shift strategic direction. Can reduce the ability to change the mission, objectives, or policies.

Corporate Culture

 Can include myths and rituals to ensure the continuation of the corporate culture. There are two distinct attributes of corporate culture: Cultural intensity is the degree to which members of a unit accept the norms, values, or other culture content associated with the unit. This is the cultures depth. Cultural integration is the extent to which units throughout the organization share a common culture. This is the cultures breadth. Corporate culture fulfills several important functions. What are they?

The marketing manager is the companys primary link to the customer and the competition. Market position refers to the selection of specific areas for marketing concentration: who are our customers? Market segmentation: what niches to seek, new products to develop, and how to ensure that the companys products do not directly compete with one another 1. Use market research to discover niches where you can target your various products or services. 2. Try to minimize competitive pressure.

Strategic Marketing Issues

A financial manager must determine the best sources of funds, uses of funds, and control these funds. All strategic issues have financial implications. What is financial leverage? What is capital budgeting?

Strategic Financial Issues

What are the R&D managers responsibilities? What is R&D intensity?

Strategic R&D Issues

Strategic Operations Issues

What is the primary task of an operations manager? What is an experience curve? What are economies of scale? What are economies of scope?

What is the primary task of the human resource manager? Use of teams (autonomous, cross-functional, and virtual) Strategic managers must be aware of the willingness of employees to implement a new strategy. The primary task of the manager of information/technology is to design and manage the flow of information in ways that improve productivity and decision making. What is supply chain management?

Strategic HRM Issues

Strategic Information/Technology Issues