Professional Documents
Culture Documents
Assessing the Internal Environment of the Firm Prepared By: Afizar Amir
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Learning Objectives
After reading this chapter, you should have a good understanding of: - The benefits and limitations of SWOT analysis in conducting an internal analysis of the firm. - The primary and support activities of a firms value chain. - How value-chain analysis can help managers create value by investigating relationships among activities within the firm and between the firm and its customers and suppliers.
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Question
Which of the following is true regarding the SWOT analysis? A) By itself, the SWOT analysis often helps a firm develop competitive advantages that can be sustained over time. B) The SWOT analysis's not the best starting point for creating strategies. C) The SWOT analysis simulates self-reflection and group discussions on how to improve a firm and position it for success. D) The SWOT analysis is not a tried-and-true tool of strategic analysis.
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Value-Chain Analysis
Sequential process of value-creating activities The amount that buyers are willing to pay for what a firm provides them Value is measured by total revenue Firm is profitable to the extent the value it receives exceeds the total costs involved in creating its product or service
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Example
IBM Electronics Value Chain Management helps companies save money by streamlining their value chain. The benefits of streamlining a business with value chain management include: - Lower infrastructure costs associated with collaboration. - Create commonality in parts and suppliers. -.
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Example (cont.)
- Control inventory by getting the supply chain talking to the demand chain. - Cut transaction costs by integrating with public and private exchanges. - Deliver products to market faster while minimizing risk and capital investment
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Adapted from Exhibit 3.1 The Value Chain: Primary and Support Activities Source: Adapted with permission of The Free Press, a division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter.
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Interrelationships among Value-Chain Activities within and across Organizations Importance of relationships among value activities
- Interrelationships among activities within the firm - Relationships among activities within the firm and with other organization (e.g., customers and suppliers)
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Physical resources
- Modern plant and facilities - Favorable manufacturing locations - State-of-the-art machinery and equipment
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Organizational resources
- Effective strategic planning processes - Excellent evaluation and control systems
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Reputation
- Brand name - Reputation with customers - Reputation with suppliers
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Firm Resources and Sustainable Competitive Advantages Is the resource or capability Valuable Rare Difficult to imitate Implications
Neutralize threats and exploit opportunities Not many firms possess Physically unique Path dependency Causal ambiguity Social complexity
Difficult to substitute
Adapted from Exhibit 3.7 Four Criteria for Assessing Sustainability of Resources and Capabilities
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Exhibit 3.8 Criteria for Sustainable Competitive Advantage and Strategic Implications Source; Adapted from J. Barney, Firm Resources a Sustained Competitive Advantage, Journal of Management 17 (1991), pp. 99-120.
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Customer Perspective
Time Quality Performance and service Cost
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Financial Perspective
Profitability Growth Shareholder value Increased market share Reduced operating expenses Higher asset turnover
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