Internal Analysis:

Distinctive
Competencies,
Competitive
Advantage, and
Profitability
 LEARNING OBJECTIVES
01 Discuss the source of competitive advantage.

Identify and explore the role of efficiency, quality, innovation, and

02 customer responsiveness in building and maintaining a competitive
advantage.

03 Explain the concept of the value chain.

04 Understand the link between competitive advantage and

profitability.
Internal Analysis, is
concerned with identifying
the strengths that boosts
the company’s profitability
and weaknesses that leads
to lower profitability.
3 Steps of Internal Analysis
They need to understand the
importance of superior
efficiency, innovation, quality,
and customer responsiveness
when creating value and
generating high profitability.
2nd Step

1st Step
They must 3be Step
rd
able to analyze
Managers must
the sources of their
understand the process
company’s competitive
by which companies
advantage to identify what
create value for
drives the profitability of
customers and profit
their enterprise, and where
for the company.
opportunities for
Competitive
Advantage, Value
Creation, and
Profitability
Distinctive competencies

Firm-specific strengths that allow a company

to differentiate its products and/or achieve
substantially lower costs to achieve a
competitive advantage.
 Roots of Competitive Advantage

Resources Capabilities
Assets of a company. A company’s skills at
• Tangible resources coordinating its resources and
• Intangible resources putting them to productive use.
Value Chain
is idea that a company is a chain of activities that transforms inputs into
outputs that customers value.
Building Blocks of Competitive
Advantage
Efficiency Innovation
● Product Innovation
● Process Innovation

Quality
Customer
● Quality as Excellence Responsiveness
● Quality as Reliability
Business Models, The Value Chain,
and Generic Distinctive
Competencies
Analyzing Competitive Advantage and
Profitability
ROIC = net profits/invested capital
= net profits/revenues X revenues/ invested capital
Durability of Competitive Advantage
Barriers to Capability of
Imitation Competitors
Factors that make it The ability of an
difficult for a enterprise to identify,
competitor to copy a value, assimilate, and
company’s distinctive use new knowledge.
competencies.
Industry
•
•
Imitating Resources
Imitating Capabilities
Dynamism
Rapid changes in the
business environment.
Thank you!