bs_l06_internal business environment analysis

8/9/2019 BS_L06_Internal Business Environment Analysis

1/21

INTERN L BUSINESS

ENVIRONMENT N LYSIS

Prof.Dr.Dr.Dr.H.C. Constantin Bratianu

Facul ty of Bus iness Adm inis t rat ion

Academy of Econom ic Studies

Bucharest , Romania


2/21

Strategic

Intention

Strategic

Analysis

Strategies

Elaboration

Strategies

Implementation

Strategic managementprocess


3/21

Strategic Analysis

InternalEnvironment

Analysis

External

EnvironmentAnalysis

SWOT Analysis


4/21

Internal Environment Analysis

Resources

-Tangible

- Intangible

Capabilities

CoreCompetencies

Finding

CoreCompetencies

Strategic

Advantage

Unique

Rare

Valuable

Costly toimmitate

Value ChainAnalysis


5/21

Resources

Tangible resources

- Financial (money, borrowing capacity)

- Physical objects (buildings, equipments)

- Human resources (as physical bodies) Intangible resources:

- Human resources (experience, talent, intelligence)

- Explicit knowledge (documents)

- Structural capital

- Brands, symbols, company image


6/21

Market/Book values

Company Market value

($ billions)

Book value

($ billions)

eBay 54.5 4.9

Intel 170.9 33.5

Microsoft 286.2 57.5

Nucor(Steel) 4.8 2.3

J.C.Penny 10.0 6.4

General

Motors

27.3 25.3


7/21

Intellectual capital

Intellectual capital

Human capital

Structuralcapital

Customercapital


8/21

Human capital

Information and knowledge at individual level

Thinking models, as cognitive approximations of the real

world in which we are living

Talent and creativity potential

Rational intelligence

Emotional intelligence


9/21

Explicitknowledge

Tacit knowledgeTacit knowledge

Explicitknowledge

Combination

Socialization

InternalizationExternalization


10/21

Socialization

It is a process of exchange of tacit knowledge betweentwo or more individuals.

The most difficult process since tacit knowledge is basedon sharing feelings, emotions, and experiences.

Individual face-to-face interaction is the only way to

capture the full range of physical sensations andemotional reactions that are necessary for transferring

tacit knowledge.


11/21

Combination

This is the most used and practical mode for sharingexplicit knowledge between two or several individuals

It is based on rational arguments and verbal language

Knowledge flows from the individual with a higher levelof knowing toward the individual with a lower level ofknowing

Sharing knowledge is different than sharing tangiblethings, since there is no law of conservation


12/21

Externalization

This is a process of transforming tacit knowledge intoexplicit knowledge

It is a transformation of knowledge taken from directexperience and from the non-rational mind and put it into

a rational way able of being explained using the verbal

language

For the Japanese companies this is a knowledgecreation process, which contributes significatly to theinnovation process


13/21

Internalization

It is the reverse process by which explicit knowledge istransformed into tacit knowledge

This is very helpful in developing different skills and in

creating some control mechanisms

It is a process which goes from the organizationalknowledge to the individual knowledge, in order to

increase individuals understanding

It is a very useful process in developing organizationalculture and behavior


14/21

Capabilities

Capability = Managerial capacity of usingefficiently given resources

Capabilities can be obtained by integrating in

time human resources, organizational structureand organizational knowledge

Examples:

- Microsoft employees motivation capability

- Walt Disney, 3M innovation capability

- Toyotajust in time process capability


15/21

Core Competencies Core competency = any of the strengths that represent

unique skills or resources that can determine theorganizations competitive edge

Core competency = an integration of resources andcapabilities in a specific way in order to increasecompanys competitiveness

Any core competency is base on resources andcapabilities, but not any of these can become corecompetency

Finding core competencies: 4 criteria & chain valueanalysis


16/21

The 4 criteria Uniqueness = A resource or capability which is

not to be found in the other companies

Rarity = A resource or capability ob being rare(Walt Disney talent and creativity)

Valuable = A resource or capability of being initself very valuable (Harvard Universityprofessors)

Imitation cost = the higher the imitation costs,the longer it takes to competitors to copy thecore competency


17/21

VRINE Model

Value - Rarity - Inimitability Nonsubstitutability Exploitability

Value A resource or capability is valuable if it enables a firm to takeadvantage of opportunities or to fend off threats in its environment.

Does the resource or capability allow the firm to meet a marketdemand or protect the firm from market uncertainty?

If it is true, it satisfies the value requirement. Valuable resources areneeded in an industry, but value in itself does not convey anadvantage.

Union Pacific (UP) Railroad, for example, maintains an extensivenetwork of rails and equipment on the US Golf Coast (S-E). It has agreat value in any competition with others carriers.


18/21

VRINE Model

Rarity Rarity is defined as scarcity relative to demand. Anotherwise valuable resource that isnt rare wont necessarily

contribute to competitive advantage.

Assuming that a resource or capability is valuable, is it scarcerelative to demand or is it widely possessed by competitors?

Valuable resources that are also rare contribute to a compet i t iveadvantage, but that advantage may be only temporary.

When McDonalds signs an agreement to build a restaurant insidea Wal-Mart store, it has an intangible location advantage overBurger King and Wendys that is not only valuable but also rare

because it has an exclusive right to that geographic space.


19/21

VRINE Model

Inimitability and Nonsubstitutability A valuable and rare resource or capability will grant an

advantage only so long as competitors dont gain possession

of it or find a close substitute.

The criterion of inimitability is satisfied if competitors cannotfind a way to imitate or copy the product, or if there is a costbarrier to do it.

The criterion of nonsubstitutability is satisfied if a competitor

cannot achieve the same benefits using different combinationsor resources and capabilities.


20/21

VRINE Model

Exploitability

The possession and control of a resource or capability isnecessary but not sufficient to gain a competitive advantage. Afirm must have the organizational capability to exploit it.

Although the issue is quite broad, the point is for the firm tohave the ability to get value out of any resource or capabilitythat it may generate.


21/21

Chain value analysis

Human resources management

General administration

Energy systems

Information systems & technologies

MarketingOutputlogistics

Productionprocesses

Inputlogistics

Activitiesfor support

BasicActivities

bs_l06_internal business environment analysis

Documents