What people issues must be addressed for Yahoo to regain success?
SWOT Analysis II - Internal Analysis (Strengths & Weaknesses)
The Purpose of Internal Analysis is to Identify Strengths and Weaknesses in the Firm’s Value Creation Capabilities The intended strategy that is derived should rest upon strengths and bolster weaknesses We analyze the firm in its competitive context to identify how our particular organization is different from others and how we can use that difference to our advantage Labor costs, capital costs, raw materials sourcing are seldom sources of sustained competitive advantage Must base strategies on resources that other firms do not have Internal structures and processes are often critical (human resource management)
Resources ==>Capabilities==>Core Competencies Resources: Inputs to the firm’s production process Capabilities: The capacity of a set of resources to integratively perform a task or activity Value chain - an analytical method 1. Break the firm into activities 2. Analyze how each activity creates value (lead to economic value) 3. Examine how the value created compares to that of competitors
Purchasing Operations Distribution MarketingServiceOverhead MARGINMARGIN Firm Infrastructure Technology Development Human Resource Management Procurement Complete Value Chain Support Activities Primary Activities
Core Competencies 7 Form the roots of long-term competitive advantages Arise from capabilities and resources Help the firm design and produce an ongoing stream of distinctive products or services The idea behind core competence is to identify critical skills and keep them inside the firm Neither technology nor products drives competitive advantage - competencies do 7 The definitive work on core competencies is: Prahalad, C.K., & Gary Hamel. 1990. The core competence of the corporation. Harvard Business Review, (May/June): 79-91.
Core Competencies Don’t overemphasize today’s products Competencies must be developed, they can’t be purchased Unlike physical assets, core competencies improve with use Identifying core competencies 1. Core competencies must provide potential access to a wide variety of markets 2. Core competencies must make a contribution to the perceived customer benefits of the end product 3. Core competencies must be hard for competitors to imitate. Core competencies cannot be separated from the people who embody them
Outcome Ex: Reduced Downtime Outcome Ex: Reduced Downtime Choosing Activities: “Inside Out” Versus “Outside In” Customer VALUE Activity Service Network Resource 1 Resource 2 Activity Service Network Customer VALUE Resource 1 Resource 2 “Inside Out”: Based on Resources Already Controlled “Outside In”:Begins with Customer Value as Focus -- Presumes Necessary Resources can be Obtained or Developed
Time Between Alternative A Creative “Outside In” Approach Opens the Door to Develop Multiple Alternatives and/or Unique Combinations of Activities for Delivering Value to Customers. May require additional resources not previously possessed Activity C Self Service Service Network Customer VALUE Resource 1 Resource 2 Resource 3 Resource 4 Resource 5 Resource 6 Alternative Activity B Reduce Mean Failures AlternativeOutcome Downtime Ex: Reduced Activity A
Margin Enhancing (Critical) Activities Activities that allow a firm to add value (contribute to margin) over the cost of the activities are the critical activities for the firm Typically each firm is characterized by its choices regarding a few critical activities A firm must strive to deliver more value from the critical activities or deliver the same value at a lower cost than its competitors
What Is Strategy?* Strategy is not Operational Effectiveness Strategy is about: Understanding Critical Firm Activities From “What is Strategy?” Michael E. Porter, Harvard Business Review, Nov-Dec, 1996 Recognizing the importance of Strategic Positioning So….Competitive Strategy is about being different Unique activities Unique mix of value…based on: Product or Service Niche Geography
What Is Strategy? Sustainable Strategic Position requires Trade-offs You can’t be all things to all people Creates the need to make choices Protects against straddlers Requires Focus and Prioritization Is essential to strategy Purposefully limits what a firms does or offers Strategy is about making trade-offs in how to compete
What Is Strategy? Fit drives both Competitive Advantage and Sustainability You need to understand the opportunity and the ability to deliver Opportunity is defined by Five Forces analysis Ability to deliver is defined by Value Chain and VRIO analysis Strategy is about combining activities and achieving positions that are difficult to imitate Implies complex combinations of resources and capabilities May rely on entire systems of activities
What Is Strategy? Successful Strategies involve: Defining and communicating the firm’s unique position MakingTrade-offs Forging fit among activities
Generic Strategies for the Future The firm should focus on individual activities rather than a generic strategy for the entire firm Depending on the nature of the value to the customer (visible or invisible), firms should try to lower costs or differentiate in individual activities. This approach may require additional resources. Value of the Activity Visible to the customerInvisible to the customer Lower costs Differentiate Try to reduce cost of activities if it does not impact any visible values If the outcome detracts from value, then make it invisible or eliminate If activity adds value, then make it visible Must provide at least as much value as the main competitors even if it means increased expenses