STRATEGIC MANAGEMENT & BUSINESS POLICY

13TH EDITION
THOMAS L. WHEELEN

J. DAVID HUNGER

 Learning Objectives
Understand a companys business model and how it could be
imitated
Assess a companys corporate culture and how it might affect
a proposed strategy
Scan functional resources to determine their fit with a firms
strategy

5-2

Scanning and analyzing the external environment is not enough

to provide an organization a competitive advantage. Analysts
must also look within the corporation itself to identify internal
strategic factors (critical strengths and weaknesses) that are
likely to determine whether a firm will be able to take
advantage of opportunities while avoiding threats. This internal
scanning, often referred to as organizational analysis.

Organizational analysis- Concerned with

identifying and developing an
organizations resources and
competencies
5-3

Obj1: Apply the resource

view of the firm to determine
core and distinctive
competencies

Core and Distinctive Competencies

1. Resources are an organizations assets

Tangible e.g. equipment

Intangible e.g. culture, and reputation

2. Capabilities- a corporations ability to exploit

its resources. They consist of business processes that manage

the interaction among resources to turn inputs into outputs. A capability
is functionally based and is resident in a particular function. Thus, there
are marketing capabilities, manufacturing capabilities, and HR
management capabilities. When these capabilities are constantly being
changed and reconfigured to make them more adaptive to an uncertain
environment, they are called dynamic capabilities.

5-4

Core and Distinctive Competencies

3. Competency- a cross-functional integration and

coordination of capabilities. For example, a competency

in new product development may be the consequence
of integrating information systems capabilities,
marketing capabilities, R&D capabilities, and production
capabilities.

Core competency- a collection of competencies that

cross divisional boundaries, is wide-spread
throughout the corporation and is something the
corporation does exceedingly well
Distinctive competency- core competencies that
are superior to those of the competition
5-5

Core and Distinctive Competencies

VRIO framework (Barney), four questions to

evaluate a firms competencies:

Value: Does it provide customer value and
competitive advantage?

Rare
Imitability

Organization: Is the firm organized to exploit the

resource?

Obj2: Use the VRIO framework and the value chain to assess an
organizations competitive advantage and how it can be sustained

5-6

Core and Distinctive Competencies

It is important to evaluate the importance of a companys (1) resources, (2)
capabilities, and (3) competencies to ascertain whether they are
internal strategic factors. This can be done by comparing measures of
these factors with measures of (1) the companys past performance, (2)
the companys key competitors, and (3) the industry as a whole.
Even though a distinctive competency is certainly considered to be a
corporations key strength, a key strength may not always be a
distinctive competency. As competitors attempt to imitate another
companys competency. Even though the competency may still be a
core competency and thus a strength, it is no longer unique. For
example, when Maytag Company alone made high-quality home
appliances, this ability was a distinctive competency. As other appliance
makers imitated Maytags quality control and design processes, this
continued to be a key strength (that is, a core competency) of Maytag,
but it was less and less a distinctive competency.

5-7

Using Resources to Gain Competitive Advantage

A five-step, resource-based approach to strategy analysis.
1. Identify and classify resources in terms of strengths
and weaknesses.
2. Combine the firms strengths into specific capabilities
and core competencies
Appraise profit potential- Are there any distinctive
competencies?
4. Select the strategy that best exploits the firms capabilities
and competencies relative to external opportunities
5. Identify resource gaps and invest in upgrading weaknesses
Where do these competencies come from. A corporation can
gain access to a distinctive competency in four ways:
3.

Obj2: Use the VRIO framework and the value chain to assess an
organizations competitive advantage and how it can be sustained

5-8

Access to a Distinctive Competency

1. Asset endowment ,

such as a key patent

coming from the founding of the company. OR

2. Acquired from someone else. OR

3. Shared with another business
4. Built and accumulated within the company
over time.
There is some evidence that the best corporations
prefer organic internal growth over acquisitions.

5-9

Using Resources to Gain Competitive Advantage

The desire to build a core competency is one reason
entrepreneurial and other fast-growing firms often tend to
locate close to their competitors. They form Clusters-

geographic concentrations of interconnected

companies and industries (e.g. Silicon Valley)
1. Provide Access to:

Employees, Suppliers, Information, and Complementary

products
2. Being close to ones competitors makes it easier to
measure and compare performance against rivals.
companies with core competencies have little to gain from locating in a cluster with other firms and therefore do not do so.
In contrast, firms with the weakest technologies, human resources, training programs, suppliers, and distributors are
strongly motivated to cluster

5-10

Determining the Sustainability of an

Advantage
Two characteristics determine the sustainability
of a firms distinctive competency(ies)
Durability- the rate at which a firms underlying
resources, capabilities, or core competencies
depreciate or become obsolete .
Imitability- the rate at which a firms underlying
resources, capabilities, or core competencies
can be duplicated by others

Obj2: Use the VRIO framework and the value chain to assess an
organizations competitive advantage and how it can be sustained

5-11

A core competency can be easily imitated to the extent

that it is (Imitability an Advantage)

Transparency- the speed at which other firms

understand the relationship of resources and
capabilities supporting a successful strategy
Transferability- the ability of competitors to
gather the resources and capabilities
necessary to support a competitive challenge
Replicability- the ability of competitors to use
duplicated resources and capabilities to
imitate the other firms success

5-12

It is relatively easy to learn and imitate

another companys core competency or
capability if it comes from
Explicit knowledge- knowledge that can be
easily articulated and communicated
Tacit knowledge- knowledge that is not
easily communicated because it is
deeply rooted in employee experience
or in the companys culture
5-13

An organizations resources and capabilities can be placed on a continuum to the

extent they are durable and cant be imitated (that is, arent transparent,
transferable, or replicable) by another firm. This continuum of sustainability is
depicted in Figure 51.

5-14

Q1: What is the relevance of the resource-based view of the firm to

strategic management in a global environment?

The resource-based view of the firm is an attempt to bring attention to the importance of a
corporation's resources in strategic management. Porter's concepts of industry analysis and
competitive strategy alone cant determine a firm's profit potential. emphasis on the industry
tended to ignore a firm's core skills and competencies. What good is the knowledge that a
niche in the market exists that can be reached through a focused differentiation competitive
strategy if a corporation doesn't have the resources to implement such a strategy? As
noted in the text, experts on the resource-based view suggest that differences in
performance among companies may be explained best, not through differences in industry
structure identified by industry analysis, but through differences in corporate assets and
resources and their application. The resource-based view of the firm is compatible with the
traditional concepts of S.W.O.T. The only danger with the resource-based approach is that
people may go overboard again and tend to put too much emphasis on internal factors and
not enough on external factors. Nevertheless, the idea that the durability and imitability of
corporate resources determine competitive advance is a very useful one. The movement
toward a more global environment simply accentuates the need to assess and to build a
firms competencies so that it can successfully compete world-wide. A competency may be
distinctive in ones home country, but only be a core competency (or less) in another
location in the world.
5-15

When analyzing a company, it is helpful to learn what sort of business model it is

following.

Business models- a companys method for making

money in the current business environment
composed of five elements:
Who the company serves (customers)
What the company provides (product)
How the company makes money
How the company differentiates and sustains
competitive advantage
How the company provides its product/service
The simplest business model is to provide a good or service that can be
sold so that revenues exceed costs. Other models can be much more
complicated. Some of the many possible business models are:
5-16

Business models

Customer solutions model:

Profit pyramid model:

not by selling products, but by

selling expertise to improve its customers operations. This is a
consulting model (e.g. IBM) .
offers a full line of products in order to
close out any niches where a competitor might find a position. The
key is to get customers to buy in at the low-priced, low-margin
entry point and move them up to high-priced, high-margin products
where the company makes its money (e.g. auto manufac.
Multi-component system/installed model: sell one product at break-even
pricing in order to make money on higher-margin product (HP printers)

Advertising model:

Switchboard model:

offers its basic product free in order to

make money on advertising (e.g. free newspapers)
a firm acts as an intermediary to connect multiple sellers to

multiple buyers (ebuy).

5-17

Business models (contd)

Time model: be the first to the market

Efficiency model: company waits until a product becomes

standardized and then enters the market with a low-priced, lowmargin product that appeals to the mass market.

Blockbuster model: focus is on high investment in a few

products with high potential payoffs (e.g. medicine)

Profit multiplier model Walt Disney

Entrepreneurial model (small innovations)

De Facto industry standard model:

offers products free or at a

very low price in order to saturate the market and become the industry
standard. Once users are locked in, the company offers higher-margin
products using this standard (e.g. MS IE)

5-18

Business models (contd)

In order to understand how some of these business
models work, it is important to learn where on the
value chain the company makes its money.
Although a company might offer a large number of
products and services, one product line might
contribute most of the profits. For example, ink and
toner supplies for Hewlett-Packards printers make
up more than half of the companys profits while
accounting for less than 25% of its sales.

5-19

Value chain- a linked set of value creating activities

that begin with basic raw materials coming from
suppliers, moving on to a series of value-added
activities involved in producing and marketing a
product or service, and ending with distributors
getting the final goods into the hands of the ultimate
consumer.
The focus of value-chain analysis is to examine the corporation
in the context of the overall chain of value-creating activities,
of which the firm may be only a small part.
Very few corporations include a products entire value chain.
Ford Motor Company at that time was completely vertically
integrated, that is, it controlled (usually by ownership) every
stage of the value chain, from the iron mines to the retailers.
5-20

Industry Value Chain Analysis

The value chains can be split into two segments:

Upstream
Downstream

In the petroleum industry, for example, upstream refers to oil

exploration, drilling, and moving of the crude oil to the refinery,

and downstream refers to refining the oil plus transporting and
marketing gasoline and refined oil to distributors and gas station
retailers.
An industry can be analyzed in terms of the profit margin available at
any point along the value chain. In auto industry From a revenue
standpoint, auto manufacturers dominate the industry, accounting
for almost 60% of total industry revenues. Profits, however, are a
different matter. Auto leasing has been the most profitable activity
in the value chain, followed by insurance and auto loans.
5-21

Industry Value Chain Analysis

Center of gravity- the part of the chain that is most
important to the company and the point where its
core competencies lie. center of gravity is usually
the point at which the company started. After a
firm successfully establishes itself at this point by
obtaining a competitive advantage, one of its first
strategic moves is to move forward or backward
along the value chain in order to reduce costs,
guarantee access to key raw materials, or to
guarantee distribution. This process, called,
Vertical integration

5-22

Q2: How can value chain analysis help identify a

companys strengths and weaknesses?

Industry value-chain analysis can identify which firms are

strongest (and weakest) in each stage of the industrys
value chain. Assuming the firm under consideration
operates at various stages of the industry value chain, a
comparison with other firms at each stage can help identify
a firms strengths and weaknesses. The systematic
examination of an individual firms value activities in
corporate value-chain analysis can lead to a better
understanding of a corporations strengths and weaknesses
- thus identifying any core or distinctive competencies.
5-23

Corporate Value Chain Analysis

Each corporation has its own internal value chain of activities.
Manufacturing firms primary activities begin with

- Primary activities:
1. Inbound logistics:
raw materials handling

2. Operations
3. Outbound
logistics: distribution

Support activities:

ensure
that the primary value chain
activities operate effectively

Procurement
Technology
development
Human resource
management
Firm infrastructure
5-24

5-25

Corporate Value Chain Analysis

Examination of individual value activities can lead to a better understanding
of a corporations strengths and weaknesses. Corporate value chain
analysis involves the following three steps:

1. Examine each product lines value chain in terms of the

various activities involved in producing the product or
service: Which activities can be considered strengths (core
2.

competencies) or weaknesses (core deficiencies)

Examine the linkages within each product lines value chain:
Linkages are the connections between the way one value activity (for
example, marketing) is performed and the cost of performance of another
activity (for example, quality control) In seeking ways for a corporation to
gain competitive advantage in the marketplace, the same function can be
performed in different ways with different results. For example, quality
inspection of 100% of output by the workers themselves instead of the usual
10% by quality control inspectors might increase production costs,

5-26

Corporate Value Chain Analysis

3. Examine the potential synergies among the value
chains of different product lines or business units:
Each value element, such as advertising or manufacturing,
has an inherent economy of scale in which activities are
conducted at their lowest possible cost per unit of output. If a
particular product is not being produced at a high enough
level to reach economies of scale in distribution, another
product could be used to share the same distribution channel.
This is an example of economies of scope, which result when
the value chains of two separate products or services share
activities, such as the same marketing channels or
manufacturing facilities. The cost of joint production of
multiple products can be lower than the cost of separate
production.
5-27

 A1. What is the difference between industry and corporate value

chain analysis? What are their value in strategic planning?

The focus of value-chain analysis is to examine the corporation in the context of the overall
chain of value-creating activities, of which the firm may be only a small part. In industry
value-chain analysis, the value chain is split into two segments, upstream and downstream
parts with the corporation under examination being the focal point. In analyzing the complete
value chain of a product, note that even if a firm operates up and down the entire industry
chain, it usually has a center of gravity - an area of primary expertise where its primary
activities (and core competencies) lie. One goal of industry value-chain analysis is to identify
where on the chain is the activity providing the greatest return on investment. This might be
an activity which a corporation might want to expand when doing strategic planning.

In corporate value-chain analysis, each corporation has its own internal value
chain of activities. Each of a companys product lines has its own distinctive value
chain. Because most corporations make several different products or services, an
internal analysis of the firm involves analyzing a series of different value chains.
The systematic examination of individual value activities can lead to a better
understanding of a corporations strengths and weaknesses - thus supporting
strategic planning.

5-28

The simplest way to begin an analysis of a corporations value

chain is by carefully examining its traditional functional areas
for potential strengths and weaknesses. Functional resources
and capabilities include not only the financial, physical, and
human assets in each area but also the ability of the people in
each area to formulate and implement the necessary
functional objectives, strategies, and policies. These resources
and capabilities include the knowledge of analytical concepts
and procedural techniques common to each area as well as
the ability of the people in each area to use them effectively. If
used properly, these resources and capabilities serve as
strengths to carry out value-added activities and support
strategic decisions. In addition to the usual business functions
of marketing, finance, R&D, operations, human resources, and
information systems/technology, we also discuss structure and
culture as key parts of a business corporations value chain.
5-29

1. Basic Organizational Structures

Simple: has no functional or product categories
Functional: appropriate for a medium-sized firm with
several product lines in one industry.

Divisional:

appropriate for a large corporation with

many product lines in several related industries.

Strategic Business Units: are a modification of the divisional

structure. Strategic business units are divisions or groups of divisions composed of
independent product market segments that are given primary responsibility and
authority for the management of their own functional areas.

Conglomerate :

appropriate for a large corporation

with many product lines in several unrelated industries.
5-30

5-31

2. Corporate Culture: The Company Way

company way of doing things is derived
from the corporations culture.
Corporate culture- the collection of
beliefs, expectations and values
learned and shared by a corporations
members and transmitted from one
generation of employees to another.
5-32

Functions fulfilled by Corporate Culture

Conveys a sense of identity for
employees
Generates employee commitment
Adds to the stability of the
organization as a social system
Serves as a frame of reference for
employees to understand
organizational activities and as a
guide for behavior
5-33

Functions fulfilled by Corporate Culture

Corporate culture shapes the behavior of people in a
corporation, thus affecting corporate
performance. For example, corporate cultures
that emphasize the socialization of new
employees have less employee turnover, leading
to lower costs.
Because corporate cultures have a powerful
influence on the behavior of people at all levels,
they can strongly affect a corporations ability to
shift its strategic direction. A strong culture
should not only promote survival, but it should
also create the basis for a superior competitive
position by increasing motivation
5-34

Corporate Culture: The Company Way

Cultural intensity- the degree of which
members of a unit accept the norms,
values and other cultural content
associated with the unit
Shows the depth of the culture
Cultural integration- the extent of which units
throughout the organization share a
common culture
Shows the breadth of the culture
5-35

Q3. In what ways can a corporations structure and culture be

internal strengths or weaknesses?

If a corporation's structure is compatible with present and potential strategies, it can be

viewed as an internal corporate strength. If, however, the structure is not compatible,
it is a definite weakness and will act to constrain strategy formulation. For example, if
a corporation is structured on the basis of function, this may be a weakness if the firm
wishes to grow by acquiring other profitable corporations. In order to implement such
a strategy, the strategy formulators may have to reorganize on a divisional basis.
Corporate culture, a collection of beliefs, expectations, and values shared by a
corporation's members, acts to shape the behavior of people in a corporation. Since
corporate culture has a powerful influence on the behavior of managers as well as
other employees, it may strongly affect a corporation's ability to shift its strategic
direction. Acting in a manner similar to structure, to the extent that a corporation's
culture is compatible with present and potential strategies, it can be viewed as an
internal corporate strength. To the extent that it is not compatible, it may spell disaster
for a strategic change in the implementation stage. A strategy with contradicts an
entrenched culture may find itself being quietly (or not so quietly) sabotaged by the
corporation's most loyal and competent employees.

5-36

3. Strategic Marketing Issues

Market position- deals with the question, Who are
our customers? It refers to the selection of specific
areas for marketing concentration and can be expressed in
terms of market, product, and geographic locations.

Marketing Mix- the particular combination of

key variables under a corporations control
that can be used to affect demand and to
gain competitive advantage. These variables are
product, place, promotion, and price. Within each of these
four variables are several sub-variables, listed in Table 51,
5-37

5-38

3. Strategic Marketing Issues

Product life cycle- product monetary sales over time
from introduction through growth and maturity to decline

5-39

3. Strategic Marketing Issues

Brand and Corporate Reputation:
Brand- a name given to a companys
product which identifies that item in
the mind of the consumer
Corporate brand- a type of brand in
which the companys name serves
as the brand
5-40

Brand and Corporate Reputation:

Corporate reputation- a widely held

perception of a company by the
general public
It consists of two attributes:
Stakeholders perceptions of quality
Corporations prominence in the
minds of stakeholders.

5-41

4. Strategic Financial Issues

Financial leverage- ratio of total debt to total assets
Used to describe how debt is used to increase
earnings available to common shareholders
Capital budgeting- the analyzing and ranking of
possible investments in fixed assets in terms of
additional outlays and receipts that will result
from each investment. A good finance department
will be able to prepare such capital budgets and
to rank them on the basis of some accepted
criteria or
Hurdle point
5-42

5. Strategic Research and Development Issues

R&D is responsible for suggesting and implementing a
companys technological strategy in light of its corporate
objectives and policies

R & D intensity- spending on R & D as a percentage

of sales revenue
Technology competence- the development and use
of innovative technology
Technology transfer- the process of taking new
technology from the laboratory to the
marketplace
5-43

Strategic Research and Development Issues

R & D Mix- the mix of:
Basic R & D- focuses on theoretical problems
Product R & D- concentrates on marketing
and is concerned with product or product
packaging improvements
Engineering R & D is concerned with
engineering, concentrating on quality
control, and the development of design
specifications and improved production
equipment
Prentice Hall, Inc. 2012

5-44

Strategic Research and Development

Issues
Technology discontinuity- when a
new technology cannot be used to
enhance current technology, but
substitutes for the technology to
yield better performance
Moores Law
5-45

5-46

Q5: How might a firm's management decide whether it

should continue to invest in current known technology or
in new, but untested, technology? What factors might
encourage or discourage such a shift?

Although technological discontinuity is discussed in the chapter, the answer to this question is
not provided. Igor Ansoff recommends that strategic managers deal with the issue of
technology substitution by (1) continuously searching for sources from which new technologies
are likely, (2) as the technology surfaces, making a timely commitment either to acquire the
new technology or to prepare to leave the market, and (3) reallocating resources from
improvements in the older processoriented technology to investments in the newer, typically
productoriented, technology as the new technology approaches commercial realization. In his
book, The Innovators Dilemma, Christensen explains how difficult it is for a firm to continue to
build and market its current products to its current customers using current, well-understood
technology when it is trying to create new products for new customers using new, untested
technology. The cost and time requirements to stay up to date with new and

old technologies can bankrupt a company, especially given that a

companys culture, structure, and processes are primarily built around the
old known technology.
5-47

6. Strategic Operations Issues

Task of the operations (manufacturing or service) manager is
to develop and operate a system that will produce the
required products or services, with a certain quality, at a
given cost, within an allotted time.
In very general terms, manufacturing can be intermittent or
continuous.

5-48

Strategic Operations Issues

Intermittent Systems- item is normally
processed sequentially, but the work and
sequence of the process vary
Continuous systems- work is laid out in lines on
which products can be continuously assembled
or processed, An example is an automobile assembly line. A

firm using continuous systems invests heavily in fixed

investments such as automated processes and highly
sophisticated machinery. Its labor force, relatively small but highly
skilled, earns salaries rather than piece-rate wages.
Consequently, this firm has a high amount of fixed costs. It also
has a relatively high break-even point, but its variable cost line
rises slowly. This is an example of operating leverage,

Operating leverage- impact of a specific change in

sales volume on net operation income
5-49

Strategic Operations Issues

Experience curve A conceptual framework that
many large corporations have used successfully.
(originally called the learning curve)-

unit
production costs decline by some
fixed percentage each time the total
accumulated volume of production
units doubles
5-50

The actual percentage varies by industry and is based on many variables: e.g., the
amount of time it takes a person to learn a new task, and many others.
For example, in an industry with an 85% experience curve, a corporation might expect a
15% reduction in unit costs for every doubling of volume.. Achieving these results often
means investing in R&D and fixed assets; higher fixed costs and less flexibility thus
result. Nevertheless the manufacturing strategy is one of building capacity ahead of
demand in order to achieve the lower unit costs that develop from the experience curve.
On the basis of some future point on the experience curve, the corporation should price
the product or service very low to preempt competition and increase market demand.
Management commonly uses the experience curve in estimating the production costs of
(1) a product never before made with the present techniques and processes or (2)
current products produced by newly introduced techniques or processes. For example,
a cleaning company can reduce its costs per employee by having its workers use the
same equipment and techniques to clean many adjacent offices in one office building
rather than just cleaning a few offices in multiple buildings. Although many firms have
used experience curves extensively, an unquestioning acceptance of the industry norm
(such as 80% for the airframe industry or 70% for integrated circuits) is very risky. The
experience curve of the industry as a whole might not hold true for a particular company
for a variety of reasons
5-51

Q4.What are the pros and cons of management's using the experience curve to
determine strategy?

To popularized the experience (or learning) curve concept in strategic

management. Based on the assumption underlying the BCG growth-share
portfolio matrix, the key to profits lies in market share. Results from PIMS
research supports this notion. If a corporation is able to sell a very large number
of new products by offering them at a very low price (actually below unit cost
unless vast quantities are sold), it will gain a dominant market share and preempt competition by keeping the price too low for potential competitors to earn
profits. This forms a formidable entry barrier. The corporation successfully using
the experience curve will earn large profits either as a star or when it eventually
becomes a cash cow. The experience curve is thus a basis for using financial and
operating leverage to achieve a low cost business-level strategy.

5-52

Q4.What are the pros and cons of management's using the experience curve to determine
strategy?

The experience curve concept does have its limitations, however. For one thing, it does not
consider that a corporation can be very profitable with very low leverage by occupying a
dependable niche in the marketplace based upon some differentiating strategy such as quality
or snob appeal. Rolls Royce automobiles and Maytag washers are just two examples of firms
ignoring the experience curve by pricing at a cost above the market price and still achieving
solid profits. Differentiation and focus strategies can be very successful without using the
experience curve. Another limitation of the experience curve is that much of its success is
based upon economies of scale. The use of computers and robots, however, negates much of
the experience curve advantages. The curve in a CAD/CAM plant might be so steep that all
the experience advantages are learned in the production of two thousand instead of two
million units. The implication is that a firm following Henderson's strategy of cost leadership
based on an assumed experience curve might find it very difficult to reach the required high
market share break-even point when its competitors using CAD/CAM can quickly meet its
price in the marketplace by going quickly down their own experience curves. Although it is
possible to have a number of successful niches in a given product/service market, only one
star position is available in Henderson's growth-share matrix. The risk is therefore very high to
a corporation contemplating a low cost strategy by using an assumed experience curve.

5-53

Strategic Operations Issues

Flexible Manufacturing for Mass
Customization:
The use of large, continuous, mass-production
facilities to take advantage of experience-curve
economies has recently been criticized.

Computer Assisted Design

Computer Assisted Manufacturing
Economies of Scale
5-54

7. Strategic Human Resource Issues

Teams
Autonomous (self-managed)- a group of people
working together without a supervisor to
plan, coordinate and evaluate their work
Cross-functional work teams- various
disciplines are involved in a project from
the beginning
Concurrent engineering- specialists work sideby-side and compare notes constantly to
design cost-effective products with features
customers want
Prentice Hall, Inc. 2012

5-55

Strategic Human Resource Issues

Virtual Teams- groups of geographically
or organizationally dispersed
coworkers that are assembled using
a combination of telecommunications
and information technologies to
accomplish organizational tasksdriven by 5 trends
Prentice Hall, Inc. 2012

5-56

Strategic Human Resource Issues

Flatter organizational structures

Turbulent environments
Increased employee autonomy
Higher knowledge requirements
Increased globalization
Increased employee decision making

Prentice Hall, Inc. 2012

5-57

Strategic Human Resource Issues

Quality of work life- includes improvements
in:
Introducing participative problem
solving
Restructuring work
Introducing innovative reward systems
Improving the work environment
Prentice Hall, Inc. 2012

5-58

Strategic Human Resource Issues

Human diversity- the mix in the
workplace of people from different
races, cultures and backgrounds
Provides a sustainable competitive
advantage

Prentice Hall, Inc. 2012

5-59

8. Strategic Information
Systems/Technology Issues
Information systems/technology
contributions to performance:
Automation of back office processes
Automation of individual tasks
Enhancement of key business functions
Development of a competitive
advantage
Prentice Hall, Inc. 2012

5-60

Strategic Information
Systems/Technology Issues
Current trends in Information
systems/technology Internet include:
Intranet
Extranet
Web 2.0
Prentice Hall, Inc. 2012

5-61

Strategic Information
Systems/Technology Issues
Supply chain management- networks
for sourcing raw materials,
manufacturing products or creating
services, storing, and distributing
goods, and delivering them to
customers and consumers

Prentice Hall, Inc. 2012

5-62

5.5 The Strategic Audit:

A Checklist for Organizational Analysis
One way of conducting an organizational analysis to ascertain
a companys strengths and weakness is by using the
Strategic Audit found in Appendix 1.A at the end of
Chapter 1. The audit provides a checklist of questions by
area of concern. For example, Part IV of the audit
examines corporate structure, culture, and resources. It
looks at organizational resources and apabilities in terms
of the functional areas of marketing, finance, R&D,
operations, human resources, and information systems,
among others.

Prentice Hall, Inc. 2012

5-63

After strategists have scanned the internal organizational environment and

identified factors for their particular corporation, they may want to
summarize their analysis of these factors using a form such as that given in
Table 52. This IFAS (Internal Factor Analysis Summary)
Table is one way to organize the internal factors into the generally accepted
categories of strengths and weaknesses as well as to analyze how well a
particular companys management is responding to these specific factors in
light of the perceived importance of these factors to the company. Use the
VRIO framework (Value, Rareness, Imitability, & Organization) to assess the
importance of each of the factors that might be considered strengths.
Except for its internal orientation, this IFAS Table is built the same way
as the EFAS Table described in Chapter 4 (in Table 45).

5-64
Obj3: Construct an IFAS Table that summarizes internal factors

5-65
Obj3: Construct an IFAS Table that summarizes internal factors

1.What is the relevance of the resource-based view

of the
firm to strategic management in a global
environment?
2.How can value chain analysis help indentify a
companys
strengths and weaknesses?
3.In what ways can a corporations structure and
culture
be internal strengths and weaknesses?
4.What are the pros and cons of management
using the
experience curve to determine strategy?
5.How might a firms management decide whether
5-66