CHAPTER 5

Internal
Scanning:
Organizational
Analysis

5-1
Resource-Based Approach to Organizational Analysis

Scanning and analyzing the external environment is not

enough to provide a competitive advantage.

Critical strengths and weaknesses determine whether a

firm will be able to take advantage of opportunities while
avoiding threats.

Organizational analysis is concerned with identifying

and developing an organization’s resources and
competencies.
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 Resource-Based Approach to Organizational Analysis

CORE AND DISTINCTIVE COMPETENCIES

Resources: An organization’s assets and are thus

the basic building blocks of the organization.
Tangible & Intangible Assets

Capabilities: A corporation’s ability to use its

resources.
•Consist of business processes and routines that
manage the interaction among resources to turn
inputs into outputs.
•Marketing capabilities, manufacturing capabilities,
& human resource management capabilities. 5-3
 Resource-Based Approach to Organizational Analysis

CORE AND DISTINCTIVE COMPETENCIES

Competency: A cross-functional integration and

coordination of capabilities.
Core competency: collection of competencies that
crosses divisional boundaries.
•Something that the corporation can do exceedingly
well.
Distinctive competencies: When core competencies are
superior to those of the competition.
5-4
 Evaluating Core Competencies
VRIO Framework
Barney, in his framework of analysis, proposes four
questions to evaluate a firm’s competencies:

–Value: Does it provide customer value and

competitive advantage?

–Rareness: Don’t other competitors possess it?

–Imitability: Is it costly for others to imitate?

–Organization: Is the firm organized to exploit

the resource?
–(See Harrison's approach Lecture-7a) 5-5
 Resource-Based Approach to Organizational Analysis

Using Resources to Gain Competitive Advantage

5-Steps

1. Identify and classify resources in terms of

strengths & weaknesses.
2. Combine strengths into capabilities & core
competencies.
3. Appraise profit potential of capabilities &
competencies in terms of competitive
advantage.
4. Select strategy that best exploits capabilities
& competencies.
5. Identify resource gaps & invest in upgrading
weaknesses. 5-6
 Sustainability of Advantage

Determining the sustainability of an advantage

Durability: The rate at which a firm’s underlying

resources, capabilities, or core competencies
depreciate or become obsolete.

New technology can make a company’s core

competency obsolete or irrelevant.

5-7
 Sustainability of Advantage

Determining the sustainability of an advantage

Imitability: The rate at which a firm’s underlying

resources, capabilities, or core competencies can be
duplicated by others.

5-8
Core Competency can be easily imitated--
Transparency: speed with which other firms can
understand the relationship of resources and capabilities
supporting a successful firm’s 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
firm’s success.

Imitability depends upon either core competency or

capability comes from explicit knowledge or Tacit
Knowledge.
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Continuum of Sustainability

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

Typical Value Chain for

a Manufactured Product

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Corporate Value-Chain Analysis
Each corporation has its own internal value chain of
activities.
Porter’s Value chain analysis consist of two type of
activities:
Primary activities
Secondary activities

The systematic examination of individual value

activities can lead to a better understanding
of a corporation’s strengths and weaknesses.

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Corporation’s Value Chain

5-13
 Corporate Value-Chain Analysis

•According to Porter, differences among

competitor value chains are a key source of competitive
advantage.
• Corporate value chain analysis involves three steps:
1. Examine each product line’s value chain in terms of
the various activities.
2. Examine the linkages within each product line’s value
chain.
3. Examine the potential synergies among the value
chains of different product lines or business units.

5-14