Strategy Integrates

STRATEGY

Environment

Firm

Search for resources and capabilities that provide the firm with sustainable competitive advantage

Assumptions

All firms are alike and all firms are different Success of individual firms depends on the

differences – the strength of the unique set of skills,resources and organizational capabilities the firm has developed over time

• align with external conditions• provide value for the market• satisfy their stakeholders• create barriers to competitors

Internal Analysis

Internal Analysis has two parts1. Evaluation of the firms strategy to

determine how well the strategy integrates the firm with the external environment.

2. Systematic analysis of the resources, capabilities, and competencies the firm utilizes to support its strategy

Internal Analysis

The objective of the analysis is to 1. Examine the firm’s business strategy

Addresses conditions in the external environment

Creates value for the market and profits for the firm

Deters competitors

2. Identify the firm’s core competencies3. Evaluate the effectiveness of the core

competencies to support strategy and create sustainable competitive advantage

Internal Analysis

External Environment

ActivitiesActivities

ResourcesResources

Strategy

Identify the strategy approach Rational v. emergent Low cost leader v. differentiator v.

integrated Evaluate the effectiveness of the

strategy Financial Balanced Scorecard Stakeholder

Models of Business and Strategic Management

Traditional or IO Model

Stakeholder Model

Value Chain Model

Resource-Based View (RBV)

Guerilla View

IO Model

Views the firm as an economic actor responding to market forces

The external environment is the primary determinant of success

Strategic decisions involve choosing products and markets

Primary Tools: Environment Analysis Financial Ratios

Stakeholder Model

Views firm as an extended network of relationships and dependencies

Key stakeholders determine sustainability Primary Tools

Stakeholder Analysis

Views firm as a set of linked value creating activities that transform inputs into outputs

Customers determine success Strategic decisions involve creating

superior value at lowest cost Primary Tools:

External Analysis Value Chain Analysis

Value Chain Model

The Value Chain

General administration

Human resource management

Technology development

Procurement

Inbound logistics

OperationsOutbound logistics

Marketing and sales

Service

Value-Chain Analysis

Value chain analysis involves identifying key activities that support

the firm’s strategy evaluating the effectiveness of key

activities Compare the costs and value added of key

activities in the value chain Benchmarking to compare key activities to

competitors VRIN

Resource Based View

Views firm as a unique collection of resources and competencies

Unique characteristics of the firm determine success

Strategic decisions involve creating and sustaining competitive advantage through core competencies

Primary Tools: VRIN Analysis Financial Ratios

Resource Based Model

Firm converts inputs into outputs usingResources: the assets available to a firm to develop and implement value creating strategies

Tangible: assets the firm uses to create value financial, physical, technological, organizational

Intangible: unique routines and practices that are developed over time

human, creative, reputation, cultureCapabilities: the procedures and processes the

firm has developed to use its resources effectively to achieve desired ends; the ability to put resources to productive use

Core Competencies

Competitive advantage is derived from unique resources and capabilities.

Firms distinguish themselves from competitors by developing Core Competencies The resources of a firm that allow it to

differentiate it products or services from competitors

Core competencies are the basis for competitive advantage

Core competencies are most effective when they are based on intangible resources and organizational capabilities

VRIN Analysis

To be a source of sustainable competitive advantage, a resource must have four attributes:

• Valuable: Allows the firm to differentiate products/services and create unique value

• Rare: Competitors do not have access to the resource

• Inimitable: Competitors cannot easily copy or reproduce the resource

• Nonsubsitutable: Equivalent resources that may allow similar strategy are not readily available

VRIN Analysis

Identify key competencies Construct a VRIN Table

Competency

Valuable Rare Inimitable

Non- Sub

Conclusion

Superior Engineering

Yes No No Yes Comp. Parity

Automated Production

Yes Yes No No Temp. comp. adv.

Integrated Design

Yes Yes Yes Yes Sustainable comp. adv.• Look for combinations of capabilities

• Assess strategic implications for success

Guerilla Strategy

Internal ResourcesMarket Position

CompetitorFirm

Internal ResourcesMarket Position

Perceived Opportunity

Competitive Action

Competitive Interaction

Response

 

Competitive Uncertainty

Competitive Uncertainty

Perceived Weakness