Professional Documents
Culture Documents
Analysis
Scanning external environment- not
enough
Identify internal strategic factors
Internal scanning is therefore
organizational scanning
What is a resource?
An asset, competency, process, skill or
knowledge controlled by the organization
A strength, if it provides the firm a
competitive advantage
VRIO framework
Barney proposes 4 questions to evaluate
firm’s key resources:
Value- does it provide competitive
advantage?
Rareness: do competitors possess it?
Imitability: is it costly for others to
imitate?
Organization: is the firm organized to
exploit the resource?
Using resources to gain competitive
advantage
5-step resource based approach to
strategy analysis, proposed by Grant:
Identify/classify firm’s resources in terms
of strengths/weaknesses
Combine firm’s strength into corporate
capabilities/core competencies- if
these are superior to competitors they
become distinctive competencies
Using resources to gain competitive
advantage
Evaluate the profit potential of these
resources & capabilities
Select the strategy that best exploits the
firms resources/capabilities
Identify resource gaps & invest in
upgrading weaknesses
How to sustain firm’s distinctive
competencies
2 characteristics determine the
sustainability of a firm's distinctive
competencies:
Durability- rate at which a firm’s
underlying resources & capabilities
become obsolete, and
Imitability- rate at which a firm’s
underlying resources & capabilities can
be duplicated by others
A core competency can be easily
imitated to the extent that it is:
Transparent
Transferable and
Replicable
Value Chain Analysis
A linked set of value creating activities
starting with raw material coming from
suppliers, moving on to a series of value
added activities involved in producing &
marketing a product/service, & ending
with the ultimate consumer getting the
final product from the distributors
Value Chain Analysis
Very few corporations include a
product’s entire value chain
In 1920-30s, Ford Motor Company had
its own iron mines, ore-carrying ships,
railway line, plant, dealers & trucks for
delivery of cars to dealers
Industry Value Chain Analysis
Value chain of most industries- split in 2
segments: upstream & downstream
halves
Petroleum industry:
Upstream – oil exploration, drilling,
moving crude oil to refinery
Downstream – oil refining, transporting,
marketing
Industry Value Chain Analysis
ONGC- expertise in upstream activities-
exploration etc
Indian Oil Corporation- expertise in
downstream activities- marketing,
retailing etc
An industry can be analyzed in terms of
profit margin available at any one point
along the value chain
Industry Value Chain Analysis
Even if a firm operates up & down the
entire chain, it usually has an area of
primary expertise where its primary
activities lie
This is firm’s centre of gravity- the point
where its greatest expertise &
capabilities lie- its core competencies
Corporate Value Chain Analysis
Each firm has its own internal value chain of
activities
Porter proposes that a manufacturing firm’s
primary activities begin with inbound logistics
(raw material handling & warehousing), go
through an operations process in which a
product is manufactured, continue to outbound
logistics (warehousing & distribution),
marketing & sales & finally to service
(installation, repair, spares)
Corporate Value Chain Analysis
Various support activities such as:
procurement, R & D, HRM & infrastructure
(accounting, finance, strategic planning),
ensure that the primary value-chain activities
operate effectively & efficiently
Each of a firm’s product lines has its own
distinctive value chain
Scanning Functional Resources
Apart from the financial, physical & human
assets, functional resources also include :
Ability to formulate/implement the necessary
functional objectives/strategies/policies
Knowledge of analytical concepts