Chapter 4: Internal Environment Analysis: Foreign Trade University

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INTERNAL
ENVIRONMENT
ANALYSIS
Chapter 4
Assoc Prof. Dr. Lê Thái Phong
Faculty of Business Administration
Foreign Trade University
E: [e-mail]
T: 0975.055.299
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Learning objectives
1. Understanding resources + capability +
distinctive/core competencies
2. Value creation of firm
3. Value chain analysis
4. Key success factors (KSFs)
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THE
MACRO-ENVIRONMENT
THE
INDUSTRY
External and Internal Analysis
THE
COMPANY
STRATEGIC GROUPS
INDUSTRY STAGE of DEVELOPMENT
5 FORCES MODEL (Plus 1)
•Rivalry
•Barriers to entry
•Suppliers
•Buyers
•Substitutes
•Complementors
•COMPETITOR ANALYSIS
EXTERNAL
Macroeconomics
Economic
Political & Legal
Technology
Socio-cultural
Demographic
EXTERNAL
COMPANY STAGE of DEVELOPMENT
RESOURCES, COMPABILITY, DISTINCITIVE
COMPETENCIES, VALUE CREATION
•Efficiency
•Innovation
•Customer Responsiveness
•Quality
INTERNAL
STRENGTHS and
WEAKNESSES
OPPORTUNITIES
and THREATS
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“Before leaders can set up a new
strategy, they must reach a
common understanding of the
current position of the company .”
- W. Chan Kim & Renee Mauborgne -
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The purpose of internal analysis is to pinpoint the
strengths and weaknesses of the organization.
• The aim of the strategy is to generate better
business results (competitive advantage).
Internal environment analysis
Strengths
Lead to superior performance.
Weaknesses
Lead to inferior performance
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Internal environment analysis
• Internal analysis includes:
– Quality + quantity of resources + capabilities
– The method of construction of unique skills and
distinctive capacity of enterprises
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Competitive advantage
• Competitive advantage
Firm’s ability to gain profitability that is greater than the
average profitability of the industry.
• Sustainable Competitive advantage
– Ability to maintain profitability and good profit growth that
is higher than average level of the industry for many years.
The main objective of the strategy is to
achieve a sustainable competitive advantage
which is measured by better profit and profit
growth rate.
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Competitive advantages
Dell achieved sustainable competitive advantage, in comparison with competitors
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Strategy and competitive advantage
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Resources
• Tangible (visible):
assets that can be
seen, touch, and
quantified
• Intangible
(invisible): assets
that cannot be seen,
touch, and
quantified
• THE ASSETS THAT ORGANISATIONS HAVE OR
CAN CALL UPON (from partners or suppliers)
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Types of Firm Resources
• Tangible resources are assets that are
relatively easy to identify:
– Physical assets: plant & facilities, location, machinery &
equipment
– Financial assets: cash & cash equivalents, borrowing capacity,
capacity to raise equity
– Technological resources: trade secrets, patents, copyrights,
trademarks, innovative production processes
– Organizational resources: effective planning processes &
control systems
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Types of Firm Resources
• Intangible resources are difficult for
competitors to account for or imitate – are
embedded in unique routines & practices:
– Human resources: trust, experience & capabilities of
employees; managerial skills & effectiveness of work teams
– Innovation resources: technical & scientific expertise &
ideas; innovation capabilities
– Reputation resources: brand names, reputation for fairness
with suppliers; reliability & product quality with customers
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Example: FTU
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Capability
• Ability/Skills at coordinating its resources
and putting them into productive use
• Coming from organisational’s routines, rules,
and procedures (internal processes)
• Product of its organisational structure,
processes, control, and hiring systems
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Types of Firm Resources
• Organizational capabilities are competencies or
skills that a firm uses to transform inputs into
outputs; the capacity to combine and use
tangible & intangible resources, e.g.:
– Outstanding customer service
– Excellent product development capabilities
– Superb innovation processes & flexibility in
manufacturing processes
– Ability to hire, motivate, & retain human capital
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