CHAPTER 5

Internal
Scanning:
Organizational
Analysis
STRATEGIC MANAGEMENT & BUSINESS POLICY
10TH EDITION
THOMAS L. WHEELEN

Prentice Hall, Inc. 2006

J. DAVID HUNGER

5-1

Resource-Based Approach to Organizational Analysis

Internal strategic factors -Critical strengths and weaknesses that are

likely to determine if the firm will be able to take
advantage of opportunities while avoiding
threats

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Resource-Based Approach to Organizational Analysis

Core and Distinctive Competencies

Resources physical, human and
organizational
Capabilities functional business processes
Competency integration/coordination of
capabilities
Core competency something that the
company does well.
Distinctive competency core competency
done better than competitors

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Core and Distinctive Competencies

VRIO Framework (Barney) for defining

Distinctive Competencies
Value To the Customer/Competitive Adv.
Rareness Do others do it?
Imitability Costly to imitate?
Organization Can firm exploit the resource?

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Resource-Based Approach to Organizational Analysis

5-Step Resource Approach to Strategy

Analysis (Grant)
1.
2.
3.
4.
5.

Identify and classify resources

Combine strengths into capabilities
Appraise profit potential of capabilities
Select strategy that best exploits strengths
Identify resource gaps invest in weaknesses

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Sustainability of Advantage

Sustainability of an Advantage
Durability
Rate at which a firms underlying resources and
capabilities depreciate or become obsolete

Imitability
Rate at which a firms underlying resources and
capabilities can be duplicated by others
Transparency
Transferability
Replicability
Explicit versus Tacit Knowledge
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Continuum of Sustainability

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Business Models

Business Model
Companys method for making money in
the current business environment.
Who it serves?
What it provides?
How it makes money?
How it differentiates itself?
How it provides products/services?

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Business Models

Types of Models -Customer Solutions Model Systems Integrator

Profit Pyramid Model Entry Level to High Profit
Multi-Component System/Installed Base Model
Advertising Model Internet Crash
Switchboard Model Many Buyers & Sellers
Time Model 1st to Market
Efficiency Model Mature Product/Low Price
Blockbuster Model Proprietary Product
Profit Multiplier Model Multi-Product/Spinoff
Entrepreneurial Model Specialized Niche
De Facto Standard Model Free Product
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Value-Chain Analysis

Value Chain
Linked set of value-creating activities
beginning with basic raw material and
ending with distributors getting final
goods into hands of customers

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Value-Chain Analysis

Typical Value Chain for

a Manufactured Product

Center of Gravity
(Distinctive/Core Competency)

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Corporate Value-Chain Analysis

Corporate Value Chain Analysis

1.
2.
3.

Examine each product lines value chain in terms

of activities involved.
Examine the linkages within each products value
chain.
Examine the potential synergies among the value
chains of different product lines.

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Corporations Value Chain

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Scanning Functional Resources & Capabilities

Basic Organizational Structures -Simple structure few products/small firm

Functional structure functional specialists
Divisional structure many product lines
Strategic business units (SBUs)
Conglomerate structure (Holding Co.)

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Scanning Functional Resources & Capabilities

Strategic business units (SBUs)

1.
2.
3.
4.

a unique mission.
identifiable competitors
an external market focus
control of its business functions

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Basic Organizational Structures

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Corporate Culture

Corporate Culture
Collection of beliefs, expectations, and
values learned and shared by a
corporations members and transmitted
from one generation of employees to
another
Attributes
Intensity degree of acceptance
Integration shared values
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Corporate Culture

Functions of Corporate Culture

1. Convey a sense of identity for employees
2. Generate employee commitment to the organization
3. Adds to the stability of the organization social
system
4. Serves as a frame of reference for employees to
make sense of organizational activities and as a
guide for behavior

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Strategic Marketing Issues

Strategic Marketing Issues

Market Position & Segmentation
Marketing Mix
Product Life Cycle
Brand & Corporate Reputation

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Strategic Marketing Issues

Marketing Mix Variables

Product

Place

Promotion

Price

Quality

Channels

Advertising

List

Features

Coverage

Personal Selling

Discount

Options

Locations

Sales promotion

Allowances

Style

Inventory

Publicity

Payment Period

Brand Name

Transportation

Credit Terms

Packaging
Sizes
Services
Waranties

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Product Life Cycle

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Strategic Marketing Issues

Top 10 Brands for 2004

1

Coca-Cola

Microsoft

IBM

GE

Intel

Disney

McDonalds

Nokia

Toyota

10

Marlboro

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Strategic Financial Issues

Financial leverage
Ratio of total debt to total assets

Capital budgeting
Analysis and ranking of investments in fixed
assets based on a hurdle rate

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Strategic Research & Development Issues

R&D Intensity
Spending as a % of sales

Technological Competence
Ability to develop and innovate

Technology Transfer
Ability to move products from research
to the market

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Strategic Research & Development Issues

R & D Mix
Basic
theoretical research leading to patents and publication
Product
product and packaging development focused on sales
and profit increase
Engineering/Process
concentrating on manufacturing quality and efficiency

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Technological Discontinuity

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Strategic Operations Issues

Manufacturing Systems
Intermittent (Job Shop)
High variable costs
Profit/unit is low above break-even
Can operate at relatively low production rates

Continuous (Automated/Assembly Lines)

High fixed cost/Small labor force
Breakeven is relatively high
Profitability is at higher levels of production

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Strategic Operations Issues

Experience Curve
Production costs decline by 20 30%
every time production doubles.

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Strategic Human Resource Management Issues

HRM
Increasing use of teams
Union relations
Temporary workers
Quality of work life
Human diversity

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Strategic Information Systems Issues

Information Systems Impact of Corporate Performance

1. Automation of back office systems (1970s - Mainframes)
2. Automate the individuals tasks (1980s - PC)
3. Enhance key business functions (1990s - Business
Process Software)
4. Create a competitive advantage (2000s
Internet/Intranet/Extranets)

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Internal Factor Analysis Summary Table

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CHAPTER 5
Internal
Scanning:
Organizational
Analysis
STRATEGIC MANAGEMENT & BUSINESS POLICY
10TH EDITION
THOMAS L. WHEELEN

Prentice Hall, Inc. 2006

J. DAVID HUNGER

5-32