Chapter Five

Internal Scanning :
Organizational Analysis

Learning Objectives
Apply the resource view of the firm to determine
core and distinctive competencies
Use the VRIO framework ad the value chain to
assess a organizations competitive advantage
and how it can be sustained
Understand a companys business model and
how it might affect the proposed strategy

 Scan functional resources to determine

their fit with a firms strategy
Construct an IFAS Table that summarizes
internal factors

Resource-Based Approach to
Organizational Analysis

Internal Strategic Factors

those critical strengths and
weaknesses that are likely to
determine if the firm will be able
to take advantage of opportunities
while avoiding threats

Core and Distinctive Competencies

Resources : an organizations assets and
are thus the basic building
blocks of the organization
(physical assets, human assets,
organizational assets)
Capabilities : a corporations ability to
ability to exploit its resources

 Competency :
a cross-functional integration and
coordination of capabilities
Core competency :
a collection of competencies that crosses
divisional boundaries, is widespread within
the corporation, and is something that the
corporation can do exceedingly well

VRIO fremework to evaluate

competencies
1. Value : Does it provide competitive
advantage ?
2. Rareness : Do other competitors
posses it ?
3. Imitability : Is it costly for others to
imitate ?
4. Organization : Is the firm organized
to exploit the resource ?

Using Resource to Gain

Competitive Advantage
1. Identify and classify the firms resources in
terms of strengths and weaknesses
2. Combine the strengths into specific capabilities
3. Appraise the profit potential of these resources
and capabilities in terms of their potential for
sustainable competitive advantage and the
ability to harvest the profits resulting from the
use of these resources and capabilities

4. Select the strategy that best exploits the

firms resources and capabilities relative
to external opportunities
5. Identify resource gaps and invest in
upgrading weaknesses

 Distinctive competency can gain in 4 ways:

1. It may be an assets endowment ( key
patent or founding of the company)
2. It may be acquired frome someone else.
3. It may shared with another business
unit or alliance partner
4. It may be carefully built and
accumlated over time within the
company

Determining the Sustainability of

and Advantage
Durability
the rate at which a firms underlying
resources and capabilities (core
competencies) depreciate or become
obsolete

 Imitability
the rate at which a firms underlying
resources and capabilities (core
competencies) can be duplicated by
others
A core competencies can be easily imitated
to the extent that is transparent,
transferable, and replicable

 Transparency
the speed with which other firms
can understand the relationship of
resources and capabilities supporting
a successful firms strategy
Transferability
the ability of competitors to gather the
resources and capabilities necessary
to support a competitive challenge

 Replicability
the ability of competitors to use
duplicated resources and capabilities
to imitate the other firms success
EXPLICIT KNOWLEDGE
TACIT KNOWLEDGE

Value chain
a linked set of value-creating activities
beginning with basic raw materials
coming from suppliers, moving on to
a series of value-added activities
involved in producing and marketing
product or service, and ending with
distributors getting the final goods into
hands of the ultimate consumer

CORPORATE VALUE-CHAIN
ANALYSIS
Value chain Analysis
is a way of examining the nature
and extend of the synergies
that do or do not exist between
the internal activities of a
corporation

Primary Activities
1.
2.
3.
4.
5.

Inbound logistics of raw materials

Operations
Outbound logistics of the finished goods
Marketing and sales
Customer - service

Support activities
1.
2.
3.
4.

Procurement process
Technology development
Human resource management
Infrastructure of planning,
accounting, finance, legal,
government affairs, and quality
management

SCANNING FUNCTIONAL RESOURCES

AND CAPABILITIES
Basic Organizational Structures
- Simple structure
- Functional structure
- Divisional structure
- Strategic Business Units
- Conglomerate structure

Corporate Culture
the collection of beliefs,
expectations, and values learned
and shared by the corporations
members and transmitted from
one generation of employees to
another

Corporate Culture
Cultural intensity
the degree to which members of a unit
accept the norm, values, or other
culture content associated with the unit
Cultural integration
the extent to which units throughout an
organization share a common culture

Corporate culture fulfills several important

functions in an organization :
1. Conveys a sense of identity for employees
2. Help generate employee commitment
to something greater than themselves
3. Adds to the stability of the organization
as a social system
4. Serve as a frame of reference for employees to
use to make sense out of organizational
activities and to use as a guide for appropriate
behavior

Strategic Marketing Issues

* Market position and
segmentation
* Marketing mix
* Product life cycle
* Brand and Corporate Reputation
- Corporate Brand
- Corporate Reputation

 Strategic Financial Issues

Financial Leverage
Capital Budgeting

Strategic R & D Issues

R&D Intensity, Technological Competency
and Technology Transfer
R&D mix
Impact of Technological Discontinuity on
Strategy

Strategic Operations Issues

Intermitent systems
Continuous systems
Operating leverage
Experience curve
Flexible Manufacturing for Mass
Customization

 Strategic Human Resource Issues

1. Use of Teams
2. Union Relations and Temporary
Workers
3. Quality of Work Life and
Human Diversity

Strategic Information
Systems/Technology Issues
Impact on Performance
Supply-chain Management

Internal Factor Analysis Summary (IFAS Table) : Maytag as Example

Internal Strategic Factors

Weight

Rating

Weighted
Score

Comments

Strengths :
Quality Maytag culture

.15

.75

Quality to success

Experienced top management

.05

.20

Know appliances

Vertical integration

.10

.40

Dedicated factories

Employee relations

.05

.15

Good, but
deteriorating

Hoovers international orientation

.15

.45

Hoover name in
cleaners

Process-oriented R & D

.05

.10

Slow on new products

Distribution channels

.05

.10

Superstores replacing
small dealers

Financial position

.15

.30

High debt load

Global positioning

.20

.40

Hoover weak outside

UK and Australia

Manufacturing facilities

.05

.20

Investing now

Weaknesses :

Total weighted score

1.00

3.05

Strategic Factor Analysis Summary (SFAS Table)

Internal Strategic Factors

Weight

1
S1- Quality Maytag culture (S)

Rating

Weighted
Score

Comments

0.10

0.5

Quality key to success

.10

2.8

.29

Name of recognition

W3- Financial position (W)

.10

2.0

.20

High debt

W4- Global positioning (W)

.15

2.2

.33

Only in UK and Austr

O1- Economic integration of Economic

Community (O)

.10

4.1

.41

Acquisition of Hoover

O2- Demographics favor quality (O)

.10

5.0

.50

Maytag quality

O5- Trends to super stores (O+T)

0.10

1.8

0.18

T3- Whirlpool and Electrolux (T)

.15

3.0

.45

Slow on new products

T5- Japanese appliance companies (T)

.10

1.6

.16

Superstores replacing
small dealers

S5- Hoovers international orientation

(S)

Total score

1.00

3.01

Internal Factors/
External Factors

Strengths (S)
S1 Quality Maytag culture
S2 Experienced top mgt
S3 Vertical integration
S4 Employee relations
S5 Hoovers interl orientation

Weakness (W)
W1 Process-oriented R&D
W2 Distribution channel
W3 Financial position
W4 Global positioning
W5 Manufacturing facilities

Opportunities (O)
O1 Ec integration of
European
Community
O2 Demographics favor qual
O3 Ec development of Asia
O4 Opening of East Europe
O5 Trend toward super stores

SO Strategies
. Use worldwide Hoover distr
channels to sell both Hoover
and Maytag major appliance
. Find joint venture partners
in East Europe and Asia

WO Strategies
. Expand Hoovers presence
in continental Europe by
improving Hoover quality
and reducing
. Emphasize superstore
channel for all non Maytag
brand

Threats (T)
T1 Increase governm reg
T2 Strong US competition
T3 Whirlpool & Electrolux
positioned for global ec
T4 New product advances
T5 Japanese appliance comp

ST Strategies
. Acquire Raytheons appliance business to increase US
market share
. Merge with a Japanese
major home appliance co
. Sell off all non-Maytag
brands and strongly defend
Maytag US niche

WT Strategies
. Sell-off Dixie-Narco Division
to reduce debt
. Emphasize cost reduction
to reduce BEP
. Sell out to Raytheon or a
Japanese firm