Module:

Strategic Management
Dr Tamer Karam
Strategic Management and
Business Policy 15e, Global Edition
Chapter 5
Organizational
Analysis and
Competitive
Advantage
15e

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Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.
Learning Objectives (1 of 2)

1 Apply the resource-based view of the firm

and the VRIO framework to determine core
and distinctive competencies
2 Understand a company business models
and how they can be imitated
3 Use value chain to assess the
activities of an industry and of an
organization

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Learning Objectives (2 of 2)

4 Explain why different organizational

structures are utilized in business
5 Assess a company’s corporate culture and
how it might affect a proposed strategy
6 Construct an IFAS Table that summarizes
internal factors

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5-4
The Internal Audit discusses
the techniques of evaluating a
company’s internal situation,
including its collection of
resources and capabilities, its
cost structure and customer
value
proposition, and its competitive
strength versus its rivals.
Can you differentiate clearly
between Common Types of
Tangible and Intangible
Resources?
A Resource-Based Approach
to Organizational Analysis
• Organizational analysis
– concerned with identifying and
developing an organization’s
resources and competencies

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Core and Distinctive Competencies
(1 of 5)
• Resources
– An organization’s assets.
– Tangible, intangible
• Capabilities
– Refer to a corporation’s ability to exploit
its resources.
– Consist of business processes and routines
that manage the interaction among
resources to turn inputs into outputs
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Core and Distinctive Competencies
(2 of 5)
• Competency
– a cross-functional integration and
coordination of capabilities
• Core competency
– a collection of competencies that cross
divisional boundaries, is wide-spread
throughout the corporation and is something the
corporation does exceedingly well
• Distinctive competency
– core competencies that are superior to those of
the competition

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5-7
VRIO Framework of Analysis
1. Valuable: Does it provide customer value
and competitive advantage?
2. Rareness: Do no other competitors possess
it at the same level?
3. Imitability: Do the competitors have
the financial ability to imitate?
4. Organization: Is the firm organized to
exploit the resource?

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5-8
 Using Resources to Gain Competitive
Advantage
1. Identify and classify resources in terms of strengths
and weaknesses
2. Combine the firm’s strengths into specific capabilities
and core competencies
3. Appraise profit potential- Are there any
distinctive competencies?
4. Select the strategy that best exploits the firm’s
capabilities and competencies relative to external
opportunities
5. Identify resource gaps and invest in
upgrading weaknesses

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Core and Distinctive
Competencies (3 of 5)
• Imitability an Advantage
• Durability
– the rate at which a firm’s underlying
resources, capabilities, or core
competencies depreciate or become
obsolete

• Imitability
– the rate at which a firm’s underlying resources,
capabilities, or core competencies can be
duplicated by others

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Core and Distinctive Competencies
(4 of 5)
• Transparency
– the speed at which other firms under the relationship
of resources and capabilities support a successful
strategy
• Transferability
– the ability of competitors to gather the resources
and capabilities necessary to support a
competitive challenge
• Replicability
– the ability of competitors to use duplicated resources
and capabilities to imitate the other firm’s success

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Access to a Distinctive Competency

• Asset endowment
• Acquired from someone else
• Shared with another business
• Built and accumulated within the
company

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Core and Distinctive Competencies
(5 of 5)
• Determining the Sustainability of an Advantage
• 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 the company’s culture

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Business Models (1 of 4)
• Business model
– a company’s method for making money in
the current business environment
– includes the key structural and operational
characteristics of a firm—how it earns
revenue and makes a profit

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Business Models (2 of 4)
A business model is usually composed of
five elements:
• Who it serves
• What it provides
• How it makes money
• How it differentiates and sustains
competitive advantage
• How it provides its product/service

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Business Models (3 of 4)
Some of the many possible business models are:
• Customer solutions model
• Profit pyramid model
• Multi-component system/installed base
model
• Advertising model
• Switchboard model

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Business Models (4 of 4)
Some other possible business models are:
• Time model
• Efficiency model
• Blockbuster model
• Profit multiplier model
• Entrepreneurial model
• De facto industry standard model

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Value-Chain Analysis
• Value chain
– a linked set of value-creating activities that begin
with basic raw materials coming from suppliers
moving on to a series of value-added activities
involved in producing and marketing a product or
service, and ending with distributors getting the final
goods into the hands of the ultimate consumer.

Figure 5-1: Typical Value Chain for a Manufactured Product

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Industry Value Chain Analysis
Value chain segments include:
• Upstream
• Downstream

• Center of gravity
– the part of the chain that is most
important to the company and the point
where its core competencies lie

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 A Corporation’s Value Chain

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 Corporate Value Chain Analysis
(1 of 2)
Primary Activities Support Activities

• Inbound logistics • Procurement

• Operations • Technology
development
• Outbound logistics
• Human resource
management
• Firm infrastructure

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Corporate Value Chain Analysis
(2 of 2)
1. Examine each product line’s value
chain in terms of the various activities
involved in producing the product or
service
2. Examine the linkages within each product
line’s value chain
3. Examine the potential synergies among
the value chains of different product
lines or business units
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Basic Organizational Structures
(1 of 2)
• Simple
• Functional
• Divisional
• Strategic business
units
• Conglomerate

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Figure 5-3: Basic Organizational
Structures (2 of 2)

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Culture (1 of 2)
• Corporate culture (the Company way)
– the collection of beliefs, expectations, and
values learned and shared by a corporation’s
members and transmitted from one generation
of employees to another

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Culture (2 of 2)
• Cultural intensity
– the degree to which members of a unit accept
the norms, values and other cultural content
associated with the unit
– shows the culture’s depth
• Cultural integration
– the extent of which units throughout the
organization share a common culture
– culture’s breadth

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Functions of Corporate Culture
• Conveys a sense of identity for employees
• Generates employee commitment
• Adds to the stability of the organization as a
social system
• Serves as a frame of reference for
employees to understand organizational
activities and as a guide for behavior

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Table 5-2: Synthesis of Internal Factors (IFAS)

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