Understanding Business Strategy

1. Understanding Business Strategy 1 Part 2: Analyzing Environments Chapter 4: Analyzing the Firm

2. Taking the hard look

3. Chapter 4: Analyzing the Firm Reading and studying this chapter should enable you to: 1. Explain how to identify the firm’s strengths and weaknesses by using an internal analysis. 2. Define resources, capabilities, and core competencies and explain their relationships. 3. Describe the four characteristics that core competencies must have to be competitive advantages. 3

4. Chapter 4: Analyzing the Firm Reading and studying this chapter should enable you to: 4. Explain the value chain and describe the differences between primary and support activities. 5. Define outsourcing and describe its advantages and disadvantages. 4

5. Conducting an Internal Analysis A firm cannot successfully implement any strategy without being able to use the appropriate set of resources, capabilities, and core competencies. These must be identified and understood as a precursor to selecting a strategy: Strengths Weaknesses 5

6. Conducting an Internal Analysis In general terms, strengths suggest possibilities while weaknesses suggest constraints. Firms deal with two kinds of resources – tangible and intangible. Tangible resources are valuable assets that can be seen or quantified, such as manufacturing equipment and financial capital. Financial capital 6

7. Conducting an Internal Analysis Intangible resources are assets that contribute to creating value for customers but are not physically identifiable. Reputation Brand know-how Organizational culture The full set of resources a firm holds is called a resource portfolio. 7

8. Conducting an Internal Analysis Tangible resources may be bought and sold. Not hard to identify: human capital, money, physical assets. Not hard to evaluate through accounting systems and external auditors. Intangible resources must be constantly attended to. Harder to identify: organization culture, reputation, brand names. 8

9. Resources as Options 9