CHAPTER 5

Internal
Scanning:
Organizational
Analysis

STRATEGIC MANAGEMENT & BUSINESS POLICY

10TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER

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 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. Identify and classify resources

2. Combine strengths into capabilities
3. Appraise profit potential of capabilities
4. Select strategy that best exploits strengths
5. Identify resource gaps invest in weaknesses

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 Sustainability of Advantage

Sustainability of an Advantage

Durability –
Rate at which a firm’s underlying resources and
capabilities depreciate or become obsolete
Imitability –
Rate at which a firm’s 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
Company’s 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. Examine each product line’s value chain in terms
of activities involved.
2. Examine the linkages within each product’s value
chain.
3. Examine the potential synergies among the value
chains of different product lines.

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 Corporation’s 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 (SBU’s)
–Conglomerate structure (Holding Co.)

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 Scanning Functional Resources & Capabilities

Strategic business units (SBU’s)

1. a unique mission.
2. identifiable competitors
3. an external market focus
4. control of it’s 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
corporation’s 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
2 Microsoft
3 IBM
4 GE
5 Intel
6 Disney
7 McDonalds
8 Nokia
9 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 (1970’s - Mainframes)
2. Automate the individual’s tasks (1980’s - PC)
3. Enhance key business functions (1990’s - Business
Process Software)
4. Create a competitive advantage (2000’s –
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 J. DAVID HUNGER

Prentice Hall, Inc. © 2006 5-32