Internal Analysis Flashcards
SWOT analysis:
- Firms that use their internal strengths in exploiting environmental opportunities and neutralizing environmental threats, while avoiding internal weaknesses, are more likely to gain competitive advantages
- Importance of both external and internal phenomena in understanding the sources of competitive advantage
BUT
- SWOT analysis is not a sophisticated framework
- Development of tools for analysing a firm’s internal strengths and weaknesses had been insufficient (Barney, 1995)
- Not really applicable as we are focusing on internal aspect
Analyse internal ressources:
Barney’s VRIO framework:
- Value
- Rareness
- Imitability
- Organization
To be applied to a specific resource or capability NOT a company overall
The Cola-Wars: A Case of Competitive Parity
- Both are marketing powerhouses
- Both have enormous financial capabilities and strong management teams
- Any effort by one to take share away can instantly be matched by the other to protect that share
- Share acquisition strategies may be valuable but
- They are not rare and neither firm has a cost advantage in implementing them
Assuming that these firms are appropriately organized, then the cola wars should be a source of competitive parity for these firms.
in order to gain competitive advantages, Coca-Cola and Pepsi…
Need to alter their strategies and exploit different resources.
- Pepsi owns a lot of food brands while Coca-Cola is only in the drink industry
- Coca-Cola bought Costa, an industry in which Pepsi isn’t a player
Tangible Ressources:
Visible, Physical Attributes
- Labour
- Capital
- Buildings
- Equipment
Intangible Resources:
Invisible, No Physical Attributes
- Culture
- Knowledge
- Reputation
- Intellectual Property
Difference between Ressources and Capabilities:
What makes a resource or capability valuable? Valuable vs Non-valuable ressources
The Questions of Value, Rareness, Imitability, and Organisation:
V : Do a firm’s resources and capabilities add value by enabling it to exploit opportunities and/or neutralise threats?
R : How many competing firms already possess these valuable resources and capabilities?
I : Do firms without a resource or capability face a cost disadvantage in obtaining it compared to firms that already possess it?
O : Is a firm organised to exploit the full competitive potential of its resources and capabilities?
Competitive Advantage of Marks & Spencer:
The Resource-Based Theory of Competitive Advantage: practical framework
Resource-based theory of competitive advantage, example:
Ressources are the base of any competitive advantage that can be generated (according to reading).
Cost advantage :
- Process technology
- Size of plants
- Access to low-cost inputs
Differentiation advantage :
- Brands
- Product technology
- Marketing, distribution, service capabilities
Core Competencies =
Embedded key abilities or strengths that a company has developed that give it a competitive advantage over its peers and contribute to its long-term success.
Core competencies are difficult for competing businesses to duplicate.
Resources, Capabilities, Core Competencies, and Competitive Advantage:
Core Competencies Examples
Management Information Systems: Source of competitive advantage
Information represents a major source of competitive advantage
A management information system (MIS) is a computer system consisting of hardware and software that serves as the backbone of an organization’s operations. An MIS gathers data from multiple online systems, analyzes the information, and reports data to aid in management decision-making.
- It collect, code, store, synthesize, and present information to support managerial decision-making
- A MIS receives raw material from both the external and internal evaluation of an organisation:
Internal factors : Marketing, finance, production, and personnel
External factors : social, cultural, demographic, environmental, economic, political, governmental, legal, technology, and competitivion
The goal of an MIS is to be able to correlate multiple data points in order to strategize ways to improve operations. For example, being able to compare sales this month to sales a year ago by looking at staffing levels may point to ways to boost revenue. Or being able to compare marketing expenditures by geographic location and link them to sales can also improve decision-making. But the only way this level of analysis is possible is due to data that is compiled through an MIS.
Running reports that pull together disparate data points is an MIS’ key contribution. That feature, however, comes with a significant cost. MIS implementation is an expensive investment that includes the hardware and software purchases, as well as the integration with existing systems and training of all employees.
MIS, Big Data and Business Analytics:
Help firms to Identify/ analyse patterns and reveal the likelihood of an event
- By 2018, global data analytics software reached $21.7 billion in sales, a 64% increase from 2012
- Leading firms: IBM, SAP, Oracle, Microsoft
- Mobile apps make use of freely available big data and analyse/ transform it to provide a unique value to users
Dynamic capabilities definitions:
- A firm’s dynamic capabilities govern how it integrates, builds, and reconfigures internal and external competences to address changing business environments (Teece et al., 1997:516; 2016:18).
- A firm’s ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources in its quest for competitive advantage (Rothaermel, 2017:122).
- Dynamic capabilities define the firm’s capacity to innovate, adapt to change, and create change that is favourable to customers and unfavourable to competitors (Teece et al., 2016: 18).
Dynamic Capabilities, why and relationship with the Resource-Based Theory of Competitive Advantage:
Firms that fail to adapt their core competencies to a changing external environment lose their competitive advantage.
Proactive management under deep uncertainty becomes an everyday requirement
What are the three clusters of dynamic capabilities:
- Sensing of unknown futures : Identification, development, co-development, and assessment of technological opportunities and threats in relationship to customer needs
- Seizing : Mobilisation of resources to address needs and opportunities and capture value from doing so
- Shifting : Continued renewal
Sensing, seizing, and transforming are essential if the firm is to sustain itself in the longer term as customers, competitors, and technologies change
Dynamic Capabilities at IBM:
