Chapter 4

Internal Scanning:
Organizational Analysis

1
Internal strategic factors:

Critical strengths and weaknesses that

are likely to determine if the firm will be
able to take advantage of opportunities
while avoiding threats.

2
 Resource-Based Approach

Resource:

An asset, competency, process, skill,

or knowledge controlled by the
corporation.

3
 Evaluating Key Resources
VRIO Framework
 Value: Does it provide competitive
advantage?

 Rareness: Do other competitors possess it?

 Imitability: Is it costly for others to imitate?

 Organization: Is the firm organized to

exploit the resource?

4
 Resource-Based Approach

5-Step approach to strategy analysis:

 Identify & classify firm’s resources

 Strengths & weaknesses

 Combine firm’s strengths into capabilities

 Core competencies
 Distinctive competencies

5
 Resource-Based Approach
5-Step approach to strategy analysis:

 Profit potential of resources

 Sustainable competitive advantage

 Select strategy
 Exploits firm’s resources relative to external
opportunities

 Identify resource gaps

 Invest in upgrading weaknesses

6
 Sustainability of an
Advantage
Durability:

Rate at which a firm’s underlying resources and

capabilities (core competencies) depreciate or become
obsolete.

Imitability:

Rate at which a firm’s underlying resources and

capabilities (core competencies) can be duplicated by
others.

7
 Core Competencies
Imitability of core competencies determined by:

 Transparency: how easy it is to understand the

competencies of others

 Transferability: how easy it is to bring the

competency to your organization

 Replicability : overall how easy it is to copy

8
 Core Competencies

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 a
corporation’s culture .

9
Resource Sustainability

10
Corporate Value Chain

11
 Corporate Value Chain
Analysis
 Examine each product line’s value chain
 Core competencies & core deficiencies

 Examine the “linkages” within each product

line’s value chain
 Connections between the way one value activity is
performed and the cost of performance of another
activity

 Examine the synergies among the value chains

of different product lines or business units
 Economies of scope

12
Basic Organizational Structures:
Simple and Functional
I. Simple Structure

Owner-Manager

Workers

II. Functional Structure

Top Management

Manufacturing Sales Finance Personnel

13
 Basic Structures of
Corporations: Divisional
III. Divisional Structure*

Top Management

Product Division A Product Division B

Manufacturing Finance Manufacturing Finance

Sales Personnel Sales Personnel

*Conglomerate structure is a variant of the division structure.

14
 Corporate Culture

Defined:
Collection of beliefs, expectations, and values
learned and shared by a corporation’s members
and transmitted from one generation of
employees to another.

15
 Corporate Culture

Distinct Attributes

1. Cultural intensity
 Degree to which members of a unit accept the norms,
values, or other culture content associated with the unit.
 Strong vs. Weak

2. Cultural integration
 Extent to which units throughout an organization share a
common culture.

16
 Corporate Culture

Important Functions

 Sense of identity for employees

 Generate employee commitment
 Stability of organization
 Guide for appropriate behavior

17
 Strategic Marketing Issues

Market Position:
 “Who are our customers?”

Market Segmentation:
 Niches, new product development

Marketing Mix:
 Combination of key variables under the
corporation’s control used to affect demand and
gain competitive advantage.

18
 Marketing Mix Variables
Product Place Promotion Price
Quality Channels Advertising List price
Features Coverage Personal selling Discounts
Options Locations Sales promotion Allowances
Style Inventory Publicity Payment periods
Brand name Transport Credit terms
Packaging
Sizes
Services
Warranties
Returns
Source: Philip Kotler, Marketing Management: Analysis, Planning, and Control, 4th ed. (Englewood Cliffs,
N.J.: Prentice-Hall, 1980), p. 89. Copyright © 1980. Reprinted by permission of Prentice-Hall, Inc.

19
 The Product Life Cycle
Sales

*The right end of the

Growth stage is often
called Competitive
Turbulence because of
price and distribution
competition that shakes
out the weaker
competitors. For further
Introduction Growth* Maturity Decline information, see C. R.
Wasson, Dynamic
Time Competitive Strategy and
Product Life Cycles, 3rd ed.
(Austin, Tex.: Austin Press,
1978).
20
 Strategic Financial Issues

Financial Leverage:
 Ratio of total debt to total assets.

Capital Budgeting:
 Analyzing and ranking possible investments
in fixed assets.

21
 Strategic R&D Issues

R&D Intensity:
 Spending on R&D as a percentage of sales
revenue.

Technological Competence:
 Development and use of innovative technology.

Technology Transfer:
 Process of taking new technology from the lab
to the marketplace.

22
 Technological Discontinuity
What the S-Curves Reveal
Product Performance

Mature
Technology

New
Technology

Research Effort/Expenditure
In the corporate planning process, it is generally assumed Source: P. Pascarella, “Are You
that incremental progress in technology will occur. But past Investing in the Wrong
developments in a given technology cannot be extrapolated Technology?” Industry Week (July
into the future, because every technology has its limits. The 25, 1983), p. 38. Copyright © 1983
key to competitiveness is to determine when to shift re- Penton/IPC. All rights reserved.
sources to a technology with more potential. Reprinted by permission.

23
 Strategic Operations Issues

Intermittent systems:
 Manufacturing systems where items are
normally processed sequentially but the work
and sequence of the process vary.
Continuous systems:
 Laid out as lines where products are
continuously assembled or processed.

24
 Strategic HRM Issues
Teams
 Autonomous (self-managing)
 Cross-functional

 Concurrent engineering

Unionization
 13.9% of labor force overall
 12% of private labor force

Temporary Workers
 Increase flexibility; avoid layoffs

25
 Strategic HRM Issues

Quality of Work life

 Participative problem solving
 Restructuring work

 Innovative reward systems

 Improvements in work environment

Human Diversity
 Different races, cultures and
backgrounds in the workplace.

26
 Strategic Information Systems
Issues

 Automate back-office processes

 Automate individual tasks
 Enhance key business functions
 Develop competitive advantages

27
 Strategic Information Systems
Issues
 Intranet:
 Information network within an
organization that also has access to the
external worldwide Internet.

 Extranet:
 Information network within an
organization available to key suppliers
and customers.
28
 Internal Factor Analysis Summary (IFAS)

Weighted
Internal Factors Weight Rating Score Comments
1 2 3 4 5
Strengths

Weaknesses

Total Weighted Score 1.00

29
 Internal Factor Analysis Summary (IFAS):
Maytag as Example

Internal
Weighted
Factors
Weight Rating Score Comments
Strengths
• Quality Maytag culture 1 2 3 4 5
• Experienced top management .15 5 .75 Quality key to success
• Vertical integration .05 4 .20 Know appliances
• Employee relations .10 4 .40 Dedicated factories
• Hoover’s international orientation .05 3 .15 Good, but deteriorating
.15 3 .45 Hoover name in cleaners
Weaknesses
• Process-oriented R&D
• Distribution channels .05 2 .10 Slow on new products
.05 2 .10 Superstores replacing
• Financial position small dealers
• Global positioning .15 2 .30 High debt load
.20 2 .40 Hoover weak outside the
United Kingdom and
• Manufacturing facilities Australia
.05 4 .20 Investing now
Total Weighted Score
1.00 3.05

30
 Impact of the Internet

 Virtual Teams:
 Groups of geographically and/or
organizationally dispersed coworkers that
are assembled using a combination of
telecommunications and information
technologies to accomplish an
organizational task.

31
 Impact of the Internet

Virtual Teams
• Flatter organizational structures
• Turbulent environments
• Employee autonomy
• Higher knowledge requirements
• Globalization of trade

32