Strategic Management

Module 4

Internal Analysis, Managing capabilities, Costs and Knowledge

Objective

➢ Concept of Internal Environment

➢ Organizational Analysis

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Takeaways
➢ Discuss the concept of Internal environment of a Business

➢ State the importance of organizational resource analysis

➢ Explain concept of Core competency, and Concept of

Competitive advantage

➢ Describe how to build sustainable competitive advantage

➢ Explain Techniques and factors affecting

Organizational analysis

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Concept of Internal Environment
Vendors or suppliers
• These are organizations or individuals who provide inputs or raw material to
the organization

Competitors
• These are organizations which manufacture or provide products or services
that are similar to those of the organization and within the same business
industry
Intermediaries
• These are distributors, retailers, wholesalers etc. and form a link between
organization and users

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Concept of Internal Environment (Cont’d)

Customers
• These are individuals or organizations that buy product or services.

Organizations itself
• It hosts many factors including Shareholders or investors, employees and
the Board that can significantly affect the functioning.

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Organizational Resource Analysis
➢ The Process of exploring strengths and weaknesses of the
organization

➢ The process of identifying and analyzing, helps to attain a

competitive advantage, and is known as Resource Based
View(RBV) organizational analysis

➢ RBV helps to use resources in the most

optimal way to attain competitive advantage

and sustainability 6
Types of Organizational Resources

➢ Business Environment has two resources :

1. Tangible: Financial ,Physical and HR. Financial include cash and

long term investments and HR includes employees while Physical
include Raw material , Plant and Equipment.

2. Non Tangible: Patents , copyrights, and IP rights. Three categories

of Intellectual capital are Human Capital,

Structural Capital and Customer Capital.

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 Organizational Capabilities
➢ It is the potential of the organization to use its Strengths and overcome
Weakness, to exploit opportunities and Face the threats.

• Static Capabilities:

Routine problems faced by the organization in all its processes and functions.

• Innovative Capabilities:

Innovation development related to the previous Knowledge resources of the

organization, which results in new products and

services adding value to the organization.

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 Types of Marketing Capabilities
Marketing Capabilities: Ability of the organization to use its knowledge,
skills and resources for gaining a sustainable competitive advantage.

➢ Factors influencing these are:

• Product Related-Design, variety, quality, packaging

• Price Related-Pricing objectives, discounts , tax and terms

• Place Related-Distribution , transportation,

marketing channels and marketing intermediaries

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Types of Marketing Capabilities (Cont’d)

• Promotion Related-Advertising and sales promotion.

• Benefits of a good Marketing Organization leads to a variety of

products and services to offer, better customer service, strong
distribution network, providing goods at competitive prices.

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Types of Capabilities

Operations Capability: Refers to the ability of an organization to

manage and control its core delivery process.

Components of Operations capability are:

1. Individual competencies of Employees

2. Collective capabilities

3. Processes used for Business

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Types of IM Capability
Information Management Capability : Ability of an organization to create,
acquire, store, analyze and use information to provide an intellectual
platform for supporting the growth and development of the Organization.

Factors influencing this capability are:

➢ Acquisition and retention-Source, quality, timeliness and Secure .

➢ Processing and Synthesis of Information-

Computer Systems, software and Database

management.
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GM capabilities
General Management Capabilities: Ability of an organization to
integrate, direct, coordinate different functions to achieve the common
goal.

Factors that contribute are:

➢ General Management system related factors:- Strategic

management, Intent, formulation, system evaluation, management
information, planning system, Incentive

and Rewards for top management.

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GM capabilities (Cont’d)

➢ General manager related factor:- Value, norms, personal goals,

orientation, competence, capacity, work, track record.

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Core Competency
➢ It is defined as “Collective learning of an organization that is gained by
coordinating diverse skills of its employees and integrating Technologies”.

➢ Competitors replicate Core competencies that have the following features:

1. Transparency- Transparency between Resource capabilities and Strategies

used to develop the core competencies.

2. Transferability-Capabilities of competitors to gather necessary resources or

capabilities required to build the core competency

3. Replicability-Usage of duplicate resources or

capabilities to imitate others core competency.

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 Core vs Distinctive Competency

➢ Core Competency is a well performed activity , which is central to the

organizational competitiveness and profitability. E.g. Sony has a core
competency of product miniaturization. Mc Donald delivery speed ,
customer care and cleanliness, FedEx customer service and logistics

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Distinctive Competency
➢ Distinctive Competency: Unique competitive activity that helps the
organization to outdo its rivals. e.g. Sharp Corporation in flat panel
display technology, Intel designing and manufacturing powerful micro-
processors for PC’s and Walmart in low cost distribution and state of
art technology in retail.

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Porter’s Generic Strategy Model for Competitive
Advantage

Cost
Differentiation
leadership
Competitive Edge

Differentiation
Cost Focus
Focus

Competitive Advantage
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 Sustainable Competitive advantage
➢ Competitive advantage helps the organization provide the valued
product to customers and increase profit margins.

➢ It is based on these two features:

1. Durability: It refers to the period of existence of the organization’s

capability or core competency in the market

2. Imitability: It is the relative difficulty of

replicating the organizations resources or

core competencies by competitors.

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Organizational Analysis
➢ It is described as process of identifying the Strengths and Weaknesses
of the organization.

➢ It enables the organization in strategy formulation, in alignment with

opportunities exiting in the external environment by avoiding threats.

➢ It involves the study of organizational resources, capabilities , core

competencies and value chain analysis of the

organization.

➢ It helps determine factors and their influence

on the organizational procedures. 20

Techniques for Organizational Analysis
➢ External environment scanning is performed at three levels:

1. Internal Analysis- VRIO framework, value chain analysis, quantitative

analysis and qualitative analysis

2. Comparative Analysis- Historical analysis, industry norms,

Benchmarking

3. Comprehensive Analysis- Key factor rating ,

system related to business intelligence, Balance

score card
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Comprehensive Analysis
➢ Three methods are adopted.

1. Key factor rating-The process of analyzing the capabilities by

considering key factors of different areas or functions with the help of
different questions.

2. Business Intelligence-To gather , store, analyze and provide access

to data enabling the organization to make

effective decisions related to business.

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Comprehensive Analysis (Cont’d)

3. Balanced Score card- Evaluates performance based on 4 perspective

such as Financial, customer, Internal business and Learning and Growth.

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Balanced scorecard view

Financial

Custome Vision Internal

r and Process
strategy

Learning
Innovati
on

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Factors affecting Organizational Analysis

➢ Strategist related Factors

➢ Organization related Factors

➢ Internal environment related Factors

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