Lecture 4: Organizational analysis and Competitive advantage

A. A resource-based approach to organizational analysis

1. Core and distinctive competencies

Resources are an organization’s assets and are thus the basic building blocks of the
organization. They include tangible assets (such as its plans, equipment, finances, and location),
human assets (the number of employees, their skills, and motivation), and intangible assets (such as
its technology, culture, and reputation)

Capabilities refer to a corporation’s ability to exploit its resources. They consist of business
processes and routines that manage the interaction among resources to turn inputs into outputs.

A core competency refers a unique ability or strength that a company or organization

possesses, which gives it a competitive advantage in the market. These are often skills, technologies, or
processes that allow a company to deliver distinctive value to customers and are difficult for
competitors to replicate.

When unique resources and/or core competencies are superior to those of the competition, they
are called distinctive competencies. Distinctive competency refers to a unique capability or
strength that an organization or individual possesses, which clearly sets them apart from
competitors. It goes beyond just doing something well; it is about excelling in a way that is difficult
for others to imitate. This competency allows a company or person to achieve superior
performance and create a competitive advantage.

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2. VRIO framework of analysis
The VRIO framework is a trusted tool for businesses to find their competitive edge by
assessing their valuable resources and capabilities. This template offers crucial guidance to
companies looking to understand their unique value and maximize their potential.
Value – Rarity – Imitability – Organizations to find their competitive edge by assessing
their valuable resources and capabilities.
 Value is intrinsically tied to the specific needs your products or services fulfill and
the capabilities it offers. Key questions to consider include:

‒ What particular abilities do you empower customers to leverage?

‒ What valuable resources do you provide to customers?

 Rarity relates to the availability of your resources and how accessible they are to your
competition. Essential questions to explore include:

‒ What hard-to-obtain resources do you have at your disposal?

‒ What unique capabilities do you provide?
‒ Which aspects of your product or service have low supply and high demand?

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 Rarity is significant because, when combined with value, it forms a promising recipe for
success. The interplay between rarity and value is crucial because, without rarity, it can be challenging
to capitalize on the value you possess.

 Imitability: Imitability parallels rarity but specifically explores the competition’s ability to
replicate your solution within their business model. It raises questions such as:

‒ What is the cost of duplicating your organization’s resources or solution?

‒ Does anything similar currently exist?

To establish a solid competitive advantage, considering the imitability of your resource or

solution is of paramount importance. Your advantage may prove fleeting if you have established value
and rarity, but it appears easy to duplicate, and your competition can readily leverage it.

 Organization: The organization component involves an internal analysis of how your

business operates and is structured for success. Key prompts for this section include: (khai thác và
quản lý toàn diện nguồn lực công ty)

‒ Maximizing potential: A company can have valuable resources, but if it lacks the
proper organizational structure, systems, or processes to leverage them, it won’t be able to sustain its
competitive advantage.

‒ Operational efficiency: Being well-organized allows a company to deploy its

resources in the right areas, enabling better decision-making, faster execution, and superior market
performance.
‒ Alignment with strategy: The company’s organizational design, culture, and
processes need to align with its strategic goals to fully capitalize on its advantages.

3. Using resources/ capabilities to gain a competitive advantage

A corporation can gain access to a distinctive competency in four ways:

‒ It may be an asset endowment, such as a key patent, coming from the founding of the
company
‒ It may be acquired from someone else.
‒ It may be shared with another business unit or alliance partner
‒ It may be carefully built and accumulated over time within the company

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 Clusters refer to geographic concentrations of interconnected companies and industries.
According to Michael Porter, clusters provide access to employees, suppliers, specialized information,
and complementary products.

B. Business model

A business model is a company’s method for making money in the current business
environment. It includes the key structural and operational characteristics of a firm – how it earns
revenue and makes a profit. A business model is usually composed of five elements:

C. Value–chain analysis
1. Definition

A value chain is 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.

2. Industry value-chain analysis

The value chains of most industries can be split into two segments, upstream and downstream
activities.

Upstream activities refer to the initial stages of the production process, primarily focused on
sourcing raw materials and converting them into usable inputs for manufacturing. These activities are

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typically more concerned with the input side of the value chain: Raw material acquisition, supplier
relations, R&D, and manufacturing/ processing.

Industries with significant upstream activities: Mining, oil and gas, agriculture, and heavy
manufacturing.

Downstream activities refer to the later stages of the value chain, which are focused on the
delivery of products to customers, sales, marketing, and customer service. These activities are
concerned with getting the product to the end user: Marketing and sales, customer support, retailing.

Industries with significant upstream activities: Mining, oil and gas, agriculture, and heavy
manufacturing.

3. Center of gravity

A company’s center of gravity is the part of the chain where the company’s greatest expertise
and capabilities lie – its core competencies. It is the area where the company’s core competencies,
resources, and competitive advantage are concentrated, and it usually defines the company’s key
activities that contribute most to its profitability and market position.

The center of gravity can reside in different parts of the value chain, depending on the
company’s focus and industry. For example:

‒ Upstream center of gravity: If a company focuses heavily on sourcing raw materials

or production (e.g., an oil company that excels in exploration and extraction), its center of gravity will
be in upstream activities.
‒ Downstream center of gravity: A company that focuses on customer relationships,
distribution, and marketing (e.g., a retail brand or technology company that relies on strong consumer
engagement) would have its center of gravity in downstream activities.
‒ Midstream: In some industries, especially those involving significant logistics or
processing stages, the center of gravity might be in the middle of the value chain, focusing on
operations such as refining or assembly.

4. Corporate value-chain analysis

Corporate value-chain analysis is a strategic tool used to examine the internal activities of a
business to understand how value is created and where improvements can be made. The goal is to

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 analyze each step of the company's value chain to identify opportunities for cost reduction,
differentiation, or improved efficiency.

Three steps in corporate value chain analysis include:

‒ Examine each product line’s value in terms of activities involved: In this step, the focus is
on breaking down each product line into its specific primary and support activities to understand how
value is created for that particular product or service. This involves mapping out the entire production
process for each product line.
‒ Examine the linkages within each product line’s value chain: After identifying the
activities involved in producing and delivering each product line, the next step is to focus on the
linkages between these activities. Linkages refer to the relationships and interdependencies between
different activities in the value chain. Improving these linkages can create cost savings or increase the
overall value delivered to customers.
‒ Examining the potential synergies among the value chains of different product lines or
business units involves identifying how the various activities and operations can complement each
other to create greater efficiencies, reduce costs, and enhance overall value. => Economies of scope
D. Organizational structures

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 Simple structure has no functional or product categories and is appropriate for a small,
entrepreneur-dominated company with one or two product lines that operate in reasonably small, easily
identifiable market niches.

Functional structure is appropriate for a medium-sized firm with several product lines in one
industry. Employees tend to be specialists in the business functions that are important to that industry,
such as manufacturing, marketing, finance, and human resources.

Divisional structure is appropriate for a large corporation with many product lines in several
related industries. Employees tend to be functional specialists organized according to product/ market
distinctions.

Strategic business units (SBUs) are a modification of the divisional structure. SBUs are
divisions or groups of divisions composed of independent product-market segments that are given
responsibility and authority for the management of their own functional areas.

A conglomerate structure is appropriate for a large corporation with many product lines in
several unrelated industries. A variant of divisional structure, the conglomerate structure is typically an
assemblage of legally independent firms (subsidiaries) operating under one corporate umbrella but
controlled through the subsidiaries’ boards of directors.

E. Culture

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1. Corporate culture

Corporate culture is the collection of beliefs, expectations, and values learned and shared by a
corporation’s members and transmitted from one generation of employees to another. The corporate
culture generally reflects the values of the founder(s) and the mission of the firm.

Corporate culture has two distinct attributes, intensity and integration. Cultural intensity is the
degree to which members of a unit accept the norms, values, or other cultural content associated with
the unit.

2. Strategic marketing issues

The marketing mix is the set of controllable elements or variables that a company uses to
influence and meet the needs of its target customers in the most effective and efficient way possible.

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 The product life cycle is the length of time that a product is available to customers. It starts
when a product (a good or a service) is introduced into the market and ends when it's removed from
the shelves.

3. Brand and Corporate reputation

A brand is a name given to a company’s product which embodies all of the characteristics of
that item in the mind of the consumer.

A corporate brand refers to the overall identity and reputation of a company as a whole,
rather than just a specific product or service. It encompasses the values, culture, and purpose of the
organization and is often conveyed through various marketing and communication strategies.

A strong corporate brand can enhance customer loyalty, differentiate the company in the
marketplace, and influence stakeholders' perceptions, including employees, investors, and the
community.

F. Synthesis of internal factor (IFAS)

The IFAS (Internal Factor Analysis Summary) model is a strategic management tool used to
evaluate an organization's internal strengths and weaknesses. It is often employed as part of a SWOT
(Strengths, Weaknesses, Opportunities, Threats) analysis, specifically focusing on the internal factors
that influence an organization's ability to achieve its objectives.

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