07 - internal analysis

7/31/2019 07 - Internal Analysis

1/22

Dr. Harris [email protected]

harristk.blogspot.com


2/22

1. Conceptual Thinking

2. Strength and Weakness

3. Value Configuration


3/22

New Entrant

Substitute

Supplier Buyer

Politic/Regulation

Economy

Technology

Globalization

Socio

Culture

Demography

General

Environment

Industry

Environment

CompetitiveEnvironment

Company Environment

(internal analysis)


4/22

Internal analysis is identification factors inside the

company boundary that might influence business

performance (strength and weakness).

This analysis helps us to:o Provide an update overall internal condition to compete in

defined industry.

o Additional information to guide strategy formulation

o Identify the strategic assets that can be exploited for future

growth.


5/22

Insight/Idea

Strategy

Vision

Mission

Objectives

External

Environment

BusinessModel

Internal

Environment

PEST analysis

Industrial analysis

Market analysis

Competitive analysis

(Five Forces, Strategic

group), etc

O and T S and W

Resources

Process

Performance


6/22


7/22

Firm as bundle of resources

o Resource and capabilities

o Differentiate among firms

Firm growth is driven by excess resources

o Entrepreneurial spirit

o Zero marginal cost

o Growth limit

Firm growth relates to the environmental context

o Productive opportunities

o

Environmental changes

Edith Penrose (1959):


8/22

Jay Barney (1986):

Firm Performance =Sustainable above average profit

SCA(Sustainable Competitive Advantage)

VRIO Resources(Strategic assets)

Strategic advantages of the firm

that are superior among its

rivals, and make firm gains long

term superior profit

Strategic resources (and

capabilities) that significantly

contribute to build firms SCA


9/22

Company SCA Strategic Resources

Toyota Efficient

production cost

Kaizen

Lean manufacturing

Walmart Low price Global sourcing

Operational excellent

Apple Industry Breaker

(trend setter)

Innovative culture

Visionary leader

Microsoft Market leader Huge market share

Product expansion

Pool of creative engineers


10/22

Valuable? Rare? Costly to

Imitate?

Organized by

superior

capabilities?

Competitive

Implication

Profit

Implication

NO Disadvantage Below normal

YES Parity NormalNO

YES Temporary

Advantage

Above and

short run

YES NO

YES Temporary+

Advantage

Above+ and

short run

YES YES NO

YES Sustained

Advantage

Above and

long run

YES YES YES


11/22

Strategic Assets

Stock

Experience, knowledge

creation, acquisition, R&D,

etc

Strategic assets are deteriorated

over time.

To maintain VRIO, strategic assets

stock need to be added,accumulated, expanded, or

increased its quality continuously.

Example:

o Toyotas lean manufacturing has

adopted by its rivals or different

industries.

o But they can not achieve the quality as

high as Toyota.


12/22

Where should we find them?


13/22

Identify industry critical success factors (CSFs).

Analyze the strength of those CFSs in our company

(compare to rivals, especially within strategic group or

closest strategic group).

The weak CFSs should become the consideration to

build strategic initiatives.


14/22

STRENGTHS

OPPORTUNITIES

WEAKNESSES

THREATS

Improve

AnticipateGraps

Emphasize

From

Internal Analysis

From

External Analysis


15/22

Strategy Formulation

Strategy Formulation is the process of choosing a setof different activities to:o create or preserve unique and valuable position

by:

o exploit opportunities (O) and strengths (S)

and in the same time:

o anticipate threats (T) and improve weakness (W)

Through SWOT analysis, we then creatively choose a

set of different activities.

Those set of different activities can be

depicted on the value configuration

model.


16/22

Firm can be viewed as collection of activities thatare performed to design, produce, market, and

support its products (Porter, 1985).

All these activities can be represented using value

configuration model (value activities system).

There are three models of value configurations:

Value Configuration

o Value Chain: transform input into product

o Value Network: serve exchange between customers

o Value Shop: solve customer problem


17/22

Basic Value Chain

Costs Selling

Price

C

U

S

TO

M

E

R

Value

Porter (1980)


18/22

Basic Value Network

Stabell & Fjedstad (1998)

o Infrastructure

o HR Management

o Technology Development

o Procurement

Primary

Activitie

s

Su

pport

Activities

Network promotion & contract mgt

Service provisioning

Infrastructure operation


19/22

Basic Value Shop

Stabell & Fjedstad (1998)

o Infrastructure

o HR Management

o Technology Development

o Procurement

Problem Finding

and Acquisition

Problem

Solving

Control

(Evaluation)Execution

Choice

Prim

ary

Activ

ities

Support

Ac

tivities


20/22

Example

Valuable

Unique

Competitive

Advantage (CA)

Superior

Performance

Different Set

of Activities

Source

of CA

Competitive Strategy

Customized

product Lower price

Dell Computer: Direct selling

JIT inventory

Integrated

process withglobal suppliers

Efficient working

capital

management, etc


21/22

Inbound

Logistic:

No warehouse

Integrated

process

JIT inventory

36 days

payment

Production

(Operation):

Assembly

components

from supplier

Outbound

Logistic:

Immediate

delivery

No warehouse

Zero finished

product

inventory

Marketing

and Sales:

Direct selling

Direct

payment

7-10 days

delivery

After Sales

Service:

Online

Complain

handling

Support ActivitiesInfrastructure Exclusive agreement with Intel and Microsoft

Exclusive agreement with Samsung, Kodak, Fuji (for printer)

Manage network of suppliers around the world

HR Mgt Recruitment, training, performance management, etc.

Tech Dev. Little spending on R&D

Total quality management to improve

supply chain mgt and assembly line

Online communication (e.g.

internet, phone)

Procurement Global sourcing for generic component

Local sourcing for microprocessor & OS

Value Chain: Dell Computer


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07 - internal analysis

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