1. Chapter Four: Analyzing an Industry
By: Lauren Sterna, Collin Gillaspie, Clint Chapman, Craig Crowell, Jennifer Eccles, & Scott Addison

2. What is an Internal Analysis?
Evaluates an organization’s resources and capabilities, and core competencies
Resources include financial, physical, human, intangible, and structural-cultural.
Provides information on assets, skills, and work activities

3. Organizational Capabilities
Definition: The various routines and processes that transform those inputs (resources) into outputs (physical goods and services)
These organizational routines and processes are the regular and predictable work activities done by organizational members
Delta Air Lines vs. Southwest Airlines

4. Sustainable Competitive Advantage
Capabilities that lead to a competitive advantage now may not do so in the future as conditions and competitors change
Dynamic Capabilities: an organizations ability to build, integrate, and reconfigure capabilities to address rapidly changing environments

5. Figure 4.2 Performance Results Competitive Advantage Unique Resources
The Strategic Role of
Organizational Resources and Organizational Capabilties
Performance Results
Competitive Advantage
Unique Resources
Distinctive Organizational Capabilities
Organizational Resources
Core Competencies
Organizational Capabilities
Financial assets
Physical assets
Human Resources
Intangible Assets
Structural-Cultural
Organizational processes and routines
Accumulated knowledge
Actual work activities

6. Organizational Capabilities, Core Competencies & Distinctive Capabilities
Core Competencies-Any major value-creating capabilities organizations have that are essential to their business.
Nokia-Product design, customer research
Dordstrom-customer service
What comes first out of the 3? Organizational Capabilities
Fundamental building blocks for developing core competencies
Distinctive Organizational Capabilities-the special and unique capabilities that distinguish an organization from its competitors.
Southwest-Processes and routines(turnaround, ticketing, and interaction)

7. Distinctive Capabilities
Three Characteristics
First, a distinctive capability contributes to superior customer value and offers real benefits to customers.
Second, the should be difficult to imitate.
Third, should be able to be used in a variety of ways.
Ex. Honda

8. Strengths & Weaknesses
Internal Analysis-Find S&W
Strengths-resources that the organization possesses and capabilities that it has developed which can be turned into a competitive advantage.
Not every strength will lead to a sustainable competitive advantage, but an organization’s strengths should be nurtured and reinforced as its main competitive weapons
Weaknesses-resources and capabilities that are lacking or deficient and prevent the organization from developing a sustainable competitive advantage.
To be corrected if they’re in critical areas that are preventing the organization from developing a sustainable competitive advantage.
Most organizations simply minimize the impact of the weakness.

9. Value Chain Analysis
A systematic way of examining all the organization’s functional activities and how well they create customer value.
Value comes from 3 broad categories:
Product is unique and different
Product is low priced
Product meets the needs of a specific group of customers quickly and efficiently

10. Assessing the Activities in the Value Chain
Primary Activities
Support Activities
Inbound logistics
Procurement
Operations
Technological development
Outbound logistics
Marketing and sale
Human resource management
Customer service
Firm infrastructure

11. Assessing the Primary Activities in the Value Chain
Inbound Logistics
Materials control system, inventory control system, raw materials
Operations
Plant layout, productive equipment as compared to competitors
Outbound logistics
Finished products
Marketing and Sales
Marketing research, brand loyalty, alternative distribution channels
Customer Service
Customer input, product warranty, employee training, repair and replacement services

12. Assessing the Support Activities in the Value Chain
Procurement
Alternate resources, long-term relationships and reliable suppliers
Technological Development
R & D activities, organizational culture, trained technicians
Human Resource Management
Effective recruiting, and training programs, promotion policies, reward systems, employee motivation
Firm Infrastructure
External opportunities and threats, organizational goals, public image, stakeholder relationships

13. Overview
Value chain analysis is important because it creates the varying levels of customer value and organizational costs.
They assess the organization’s ability to create customer value through its work activities.
The advantage of the value chain analysis is that it emphasizes the importance of how well an organization performs the primary and support activities in creating customer value

14. Internal Audit
A thorough examination of an organization’s internal areas.
Begins with the premise that every organization has functions it must perform, and strengths and weaknesses are based on how well they are performed.
Looks at six organizational functional areas and measures the efficiency of each area.
Central theme of auditing is looking for competencies in each area.

15. Organizational functional areas
Production and operations
Marketing
Research and Development
Financial and Accounting
Management
Information systems and Information technology

16. 3 Additional Organizational Elements
Strategic Managers-board of directors and top managers
Organizational Structure
Organizational Culture

17. Capabilities Assessment Profile
CAP is an in-depth evaluation of an organization’s capabilities.
Assessing capabilities can be complex since they arise from the ways that resources are combined in the organization’s basic work processes and routines.
Capabilities assessment consists of two phases:
Identify distinctive capabilities
Developing and leveraging these distinctive capabilities

18. Capabilities Assessment Profile
The first step in assessing organizational capabilities is preparing a current product- market profile.
Emphasizes organization-customer interactions.
Identifies what we’re selling, who we’re selling to, and whether we’re providing superior customer value and offering the customer desirable benefits.

19. Capabilities Assessment Profile
In order to prepare a current product-market profile we need:
Information about specific products and markets
Principal competitors in each of these product- market segments
Performance measures for each product-market segment.
Sales growth rate
Market share
Competitive position
Contribution to sales and earnings

20. Capabilities Assessment Profile
The next step is identifying sources of competitive advantage and disadvantage in the main product-market segments.
We need to know why customers choose our products instead of our competitors.
Identify specific costs, product, and service attributes.
When someone buys our product they are buying a bundle of attributes that they believe will satisfy their needs.
We need to know what these attributes are!!!

21. Capabilities Assessment Profile
The third step involves describing organizational capabilities and competencies.
Examine the resources, skills, and abilities of your organizations different divisions.
Uncover what resources and capabilities lead to your competitive advantage.

22. Capabilities Assessment Profile
The last step involves sorting these capabilities and competencies according to their strategic importance.
Which capabilities are most important for building the organization’s future.
We should evaluate each category according to three criteria:
Does the capability provide tangible customer benefits?
Is the capability difficult for competitors to imitate?
Can the capability provide wide access to a number of different markets?
By sorting organizational capabilities according to level of strategic importance, strategic decision makers gain an understanding of their organization’s critical strengths and weaknesses.

23. Capabilities Assessment Profile
The final step involves identifying and agreeing on the key competencies and capabilities.
By ranking key competencies and capabilities, decision makers can easily identify the key ones.
The hard part is agreeing with competencies and departments deserve future resource allocation.

24. Determining Strengths and Weaknesses
The first criteria used to determine strengths and weaknesses is past performance.
Financial ratios
Operational efficiency statistics
Employee productivity statistics
Quality control data
Is market share increasing or decreasing?
Are liquidity ratios going up or down?
Ect…

25. Determining Strengths and Weaknesses
The second criteria is how actual performance measures up against specific performance goals.
Organizational goals are statements of desired outcomes.
Looking at performance trends and organizational goals isn’t enough, we need something to compare them to.

26. Determining Strengths and Weaknesses
The third criteria is comparing resources and capabilities against competitors.
To do this you use SEC fillings, industry association newsletters, annual reports, customer contacts, and the competitor's web page.
However it’s unethical to go through someone’s garbage cans.

27. Determining Strengths and Weaknesses
The fourth and last criterion for judging organizational strengths and weaknesses is personal or subjective opinions.
These can come from decision makers or consultants from inside or outside the company.

28. Summary Internal Analysis Strengths and Weaknesses
Evaluating a company based on its resources and capabilities
Strengths and Weaknesses
Capabilities Assessment Profile