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04/18/23 Dave Garten- Business Strategy 2
Internal Analysis – Key Points
Internal analysis is never really just internal Relative performance Economic performance ~ competitive
advantage
Internal analysis – “S” and “W” in SWOTAccurate view of oneself is hard… Underestimate vs. overestimate
Short term bias
04/18/23 Dave Garten- Business Strategy 3
VRIO “Internal” AnalysisCritical analysis of the value chainCompetitive advantage from where?
Source: derived from Gaining & Sustaining Competitive Advantage, by Jay Barney
Valuable?
Rare? Costly to imitate?
Exploited by
Organization?
Advantage?
Research
Development
Manufacturing
Marketing
Sales/Channel
Service
Sustainable advantageTemporary advantageParityDisadvantage
VRIO – Barney 5.2/5.3
04/18/23 Dave Garten- Business Strategy 4
Valuable
? Rare?Costly to Imitate?
Strength/Weakness
Competitive Implication
Economic Performance
1 N WeaknessDis-
advantage Below normal
2 Y N Strength Parity Normal
3 Y Y N
Strength & distinctive
competenceTemporary advantage Above
4 Y Y Y
Strength & sustainable distinctive
competenceSustained advantage Above
04/18/23 Dave Garten- Business Strategy 5
Core CompetenceDefined:
What can a company do w/its core competence?
Examples: Canon, HDTV, 3M, HondaSource: derived from The Core Competence of the Corporation, by C.K. Prahalad and Gary Hammel, HBS, 1990. cX
collective learning that coalesce around individuals who coordinate a comprehensive set of diverse skills & integrate multiple streams of know-how
04/18/23 Dave Garten- Business Strategy 6
Core CompetenceDistinguish between core capability, core components, core productsTo gain competitive advantage, must be distinctive competencies as well…Outsourcing a core only works for a while – ultimately position/profitability will erode. Core competency -> a few, perhaps 2-5Mgmt: SBU vs. core competence
“Benefits of competency, like the benefits of money supply, depend upon their velocity of their
circulation.” -The Core Competence of the Corporation by C.K. Prahald and Gary Hammel, 1990
“Benefits of competency, like the benefits of money supply, depend upon their velocity of their
circulation.” -The Core Competence of the Corporation by C.K. Prahald and Gary Hammel, 1990
3 measures of CC1. “provides potential access to a
variety of markets”2. “makes a significant contribution
to the perceived customer benefits of the end product”
3. “should be difficult for competitors to imitate”
04/18/23 Dave Garten- Business Strategy 7
Source: The Core Competence of the Corporation, by C.K. Prahalad and Gary Hammel, HBS, 1990. c
04/18/23 Dave Garten- Business Strategy 8
Core Competence
Low
Low High
High
Rel
ativ
e S
tren
gth
Strategic Importance
Superfluous Strengths
CoreCompetency
Zone of Irrelevance
KeyWeakness
TransformUp
TransformAway
04/18/23 Dave Garten- Business Strategy 9
Core Competency and Growth
Core
Step 1 (38%)
Step 2 (26%)
Step 3 (7%)
Diversification (<1%)
Source: Bain, October 2003
04/18/23 Dave Garten- Business Strategy 10
Ambidexterity
“Structural”Separate
units/teams More specialists Exploratory
Radical/disruptiveClearly defined
Ambidextrous qualitiesInitiative: alert to opportunities beyond 4 wallsCooperative: seek to combine effort w/others
Brokers: looking to build linkagesMulti-taskers: comfortable wearing multiple hats
“Contextual”Part of the job
IncrementalDistributed
Less definedMore generalists
VS
04/18/23 Dave Garten- Business Strategy 11
Ambidexterity
04/18/23 Dave Garten- Business Strategy 12
Internal Evaluation Tools
Low
Low High
High
Impo
rtan
ce to
Str
ateg
y
Cultural Compatibility
LowRisk
LowRisk
LowRisk
HighRisk
HighRisk
HighRisk
Internal Alignment
04/18/23 Dave Garten- Business Strategy 13
Under-investment
Over-investment
Internal Evaluation Tools
Lowest
Lowest Highest
Highest
Res
ourc
e A
lloc
atio
n P
lans
Investment Priorities
Internal Alignment
04/18/23 Dave Garten- Business Strategy 14
Week #3 Case Write-upObjective: analyze a company’s strengths and weaknesses and how they relate to core competencyLearnings:
The game changes as the industry structure changes. Successful companies must adapt to take advantage of opportunities and mitigate the threats.
Apple’s competencies provide a point of strength for Apple to pursue a consumer brand business.
The changes to the PC industry have a huge affect on the winners and losers.
04/18/23 Dave Garten- Business Strategy 15
Apple
04/18/23 Dave Garten- Business Strategy 16
Strategy Evaluation ToolsSWOT & Strategy Development
Opportunities (O)
Threats (T)
Strengths (S) Weaknesses (W)
SO Strategies
ST Strategies
WO Strategies
WT Strategies
Use strengths to take advantage of opportunities
Use strengths to avoid threats
Overcome weaknesses by
taking advantage of opportunities
Minimize weaknesses and
avoid threats
1.2...
1.2...
1.2...
1.2...
Source: Strategic management by Fred R. David