Internal Analysis of a Company PDF

Guerras and Navas, 2022 (v. Chapter Index 4.1 THE FIRM’S INTERNAL DIAGNOSIS 4.1.1. The firm’s identity 4.1.2. A firm’s functional analysis and its strategic profile 4.2 THE VALUE CHAIN 4.2.1. Value chain activities 4.2.2. Value Ch ain interrelations...

Guerras and Navas, 2022 (v. Chapter Index 4.1 THE FIRM’S INTERNAL DIAGNOSIS 4.1.1. The firm’s identity 4.1.2. A firm’s functional analysis and its strategic profile 4.2 THE VALUE CHAIN 4.2.1. Value chain activities 4.2.2. Value Ch ain interrelations 4.3 ANALYSIS OF RESOURCES AND CAPABILITIES 4.3.1. Identifying resources and capabilities 4.3.2. Strategically evalu atin g resources and capabilities 4.3.3. Managing resources and capabilities 4.4 SWOT ANALYSIS © Guerras and Navas, 2022 (v Learning Goals Identify a firm’s strengths and weaknesses through its strategic profile and its value chain An a l yz e a f i rm ’s r eso ur c es an d c a p ab i l i t i es w i th a v i ew t o p r op er l y i de nt i fyi n g, a sse ss i ng , a nd ma n ag i n g t hem Summarize the strategic analysis (strengths, weaknesses, opportunities, and threats) using the SWOT matrix © Guerras and Navas, 2022 (v Importance of company’s internal Analysis Industry Effect Company Effect Success depends on each company’s skills Success depends on the (resources and capabilities structure of the industry Industry Analysis Internal Analysis The company effec t i s genera lly greater than the industry effect © Guerras and Navas, 2022 (v  Internal Analysis of a Company Objective: Identify the company’s strengths & weaknesses Potential to suc ce ssfully carr y out the strategy Stages for analysis 1 2 3 Determine the fundamental Identify key Internal diagnosis based on characteristics of the company dimensions and variables identified variables (identity) for analysis (techniques) © Guerras and Navas, 2022 (v  Company’s Identity Age Size Scope of the firm S ta r t - up Small A do le s c e n t B as i c product-market Medium Developed or balanced combinations Large Mature or adult Anaemic or old Functions, groups of Geographical customers, technologies scope Local, regional, national, Type of multinational Legal structure ownership Private or public C ompany location: Familiar or Not single-plant, multi-plant L egal: Plc, Ltd, Concentrated or diffused S pa t ia l d ispersion: Cooperative, etc concentrated or dispersed S in gl e o r Multi- corporate (group of companies) © Guerras and Navas, 2022 (v The Strategic Profile of the company Aim Internal analytical techniques used to identify its strong and weak points through a study and analysis of its functional analysis Methodology of evaluation 1 Identify key variables 2 Assessment of Key variables Functional analysis Strengths & weaknesses © Guerras and Navas, 2022 (v © Guerras and Navas, 2022 (v Evaluation of strategic Profile Advantage s systematic Simple to elaborate Qualitative Intuitive Limitations Subjective Relative Static © Guerras and Navas, 2022 (v  Identification of Variables: Functional Analysis Market share, b ran d image, etc Management Style, Commercial Costs structure, Organizational structure, Area Quality control, Corporate culture, etc productivity, etc Management & Organization Area Production Area Human Financial Resources Area Incentives systems, Area Financial structure, cost Social climate, level of of capital, fin an ci al profitability, training, etc Technological etc Area Available technology, R&D efforts, etc © Guerras and Navas, 2022 (v  The Value Chain Concept: Breaking down the company into the basic activities needed to sell a product or service. Value Value chain of a company related to the value of Suppliers and system customers Price Margin Identify the sources of the company’s Aim competitive advantage Cost © Guerras and Navas, 2022 (v  Porter’s Value Chain Application Source: Porter (2010:67) © Guerras and Navas, 2022  The Value chain: sources of advantage Possible sources of competitive advantage Horizontal links: Basic activities Interrelations between activities COMPANY Value Suppliers value VALUE CHAIN Customers chain VALUE CHAIN System Vertical links: Interrelations with the value system Brief case 8 © Guerras and Navas, 2022 (v  Analysis of Resources and Capabilities Aim: Identify the potential of the company to establish compe titive advantages The key to success li es withi n each Company company, in their resources and capabilities effect Starting Assumptions The company is a unique combination of resources and capabilities Heterogeneity of the Imperfect mobility of companies resources and capabilities Brief case 37 © Guerras and Navas, 2022 (v  Analysis of Resources and Capabilities STRATEGIC PROCESS STAGES OF THE ANALYSIS Pr o vis ion of resources Identification and and capabilities measurement Generating, su stain in g and Evaluation appropriating fr om a competitive advantage Strategy: R&C management: formulation and improvement and implementation exploitation Source: Guerras and Navas © Guerras and Navas, 2022 (v  Concept of resources and capabilities Factors Different terms Assets Competencies Skills Resources Capabilities Two levels Resources Capabilities Set of factors and assets collective skills to carry out a specific that the company controls activity. © Guerras and Navas, 2022 (v  Resources, capabilities and strategy RESOURCES Organizational routines KEY FACTORS FOR IND USTRY CAPABILITIES SUCCESS COMPETITIVE CORPORATE STRATEGY STRATEGY COMPETITIVE FIELD OF ADVANTAGE ACTIVITY Source: Wars and Navas © Guerras and Navas, 2022 (v  Classification of Resources MATERIAL (Machinery, furnishing, vehicles, buildings, etc) TANGIBLES FINANCIAL (cash or similar, account receivables, etc.) TECHNOLOGICAL RESOURCES (Technologies, patents, etc.) NOT HUMANS ORGANIZATIONAL (brand, products and INTANGIBLES company reputation, etc.) HUMANS (Knowledge, skills, motivation) Source: Guerras and Navas © Guerras and Navas, 2022 (v  Tangible Resources Physical and financial assets Easy to identify and value Its accounting valuation is not very in the balance sheet significant for strategic purposes Potential for competitive advantage Possibility of more Opportunities for mor e profitable efficient implementation alternative uses © Guerras and Navas, 2022 (v  Intangible Resources They have no physic al existence Assets based on Humans and Non-humans information and knowledge (technological & organizational) Basic features Difficult identification Rights of bad Difficult to sell and assessment property in the market defined Slow and costly The passage of time accumulation does increase its value Application © Guerras and Navas, 2022 (v  Organizational Capabilities Capabiliti Combination and coordination of individual available resources es Ability The collective abili ty of the organization to distinctive perform activities better than the Competitors The capabilities are always intangibles Distinction between resources and capabilities Stock Flow (things, items) (ways of doing) Resources Capabilities Individual Collective character character © Guerras and Navas, 2022 (v  Analysis of the Organizational Capabilities Problem: Difficult to identify and classify capabilities Types of capabilities Functional Cultural Aimed at solving spec ifi c Linked to people’s attitudes technical or management problems and values Manufacturing a product, managing a loan, Ability to manage organizational changes, controlling quality, etc to innovate, to work in a team, etc © Guerras and Navas, 2022 (v  Hierarchical structure of capabilities Complex capabilities Simple capabilities Resources Ways to integrate Formal coordination Organizational routine Mechanisms © Guerras and Navas, 2022 (v  Organizational Routines Regular pattern of activities formed by a sequence of actions coordinated by individuals Important ideas Routines are to the Organization what The ability of senior skills are to people management to achie ve valuable routines is key They are developed and perfected through experience and practice Main form of information and knowledge storage in the organization Compromise between flexibility and efficiency Application © Guerras and Navas, 2022 (v Dynamic Capabilities A company’s ability to integrate, build and reconfigure internal and external competencies to c ope with rapi dl y changing envi ronments Aim Change the base of resources, capabilities and routines Renew Higher-order complex Capabilities Improve Enlarge © Guerras and Navas, 2022 (v  Measuring intangibles Vision of the Knowledge-Based Enterprise The company as a set of intangibles based on knowledge (intellectual capital) Knowledge Importance Management How management can generate and exploit intangibles explain the knowledge to create valu e differences between the boo k value and th e market value of companies Problem Intellectual capital models They classify and measure intangibles do no t appear intangibles in accounting Brief case 31 © Guerras and Navas, 2022 (v Strategic Evaluation Criteria for resources and capabilities Strategic resources and capabilities They allow for obtaining sustai nabl e co mpeti ti ve advantages and incomes that can be appropriated by the company Not all the resources and capabilities are strategic To identify them, it is necessary to evaluate… Ability to Competitive Capacity to generate advantage appropriate income Ability to m ain tai n © Guerras and Navas, 2022 (v  Strategic Evaluation Criteria for resources and capabilities Scarcity Generation of Appropriability Competitive advantage Relevance Rent EVALUATION appropriation CRITERIA Sustaining Competitive advantage Durability Complementarity Transferability Substitutability Imitability Source: own elaboration from Amit and Schoemaker (1993) and Grant Application 6. ©7 Guerras and Navas, 2022 Criteria for obtaining a competitive advantage Not available for Scarcity all Competitors Relevance Utility to compete in a speci fi c industry Relationship with the key succ ess factors of the industry © Guerras and Navas, 2022 (v Criteria for sustaining a competitive advantage It does not lose its potential to generate a Durability competitive adva nta ge over time Possibility of transferring Transferability assets between companies Competitors' ability to replicate valuable Imitability resources and capabilities Possibility of competitors finding alternative Substitutability resources and capabilities The value of resources and capabilities increases when Complementarity they are used together Application Brief cases 18 and © Guerras and Navas, 2022 (v Evaluation Criteria: Appropriation of Rents from Competitive advantage Property right over str ategic resources Appropriability and capabilities and the extraordinary income they generate Appropriability by types of resources Some Tangibles Intangibles intangibles Trademarks and logos, Reputation, organizational Buildings, vehicles, culture, pa rt ners trust, patents, industrial machinery, … customer loyalty, property, … Easy Moderate Difficult appropriability appropriability appropriability © Guerras and Navas, 2022 (v  Managing Resources and Capabilities Resources and capabilities are the basis for the formulation of corporate and competitive strate gi es with a long-term horizon Improve External acquisition resources allocation Internal development and improvement Resources and Capabilities Competitive management strategy Internl Exploitation Corporate Exploiting strategy current resources External Marketing Exploitation of resources Source: Guerras and Navas © Guerras and Navas, 2022 (v Improving the provision of resources and capabilities Maintain and improve the current and enlarge the strategic resources base From the current endowment… Know the relative position Detect Know the Identify strategic to Competitors shortcomings or Future needs R&Cs weaknesses of new R&Cs Ways to get new resources and capabilities External Internal Acquisition Development © Guerras and Navas, 2022 (v External Acquisition of resources and capabilities Search the environment for the necessary resources to incorporate into the company Methods of acquisition Acquisitions of Direct Strategic companies or Business units Benchmarking Purchase Alliances Advantage Limitations s Shorten the Reduce Integration The most valuable accumulation risks and problems resources are not process costs available © Guerras and Navas, 2022 (v Internal Development of resources and capabilities Achieve the R&C with own resourc es through investment in: R&D, advertising, human capital, continuous improvement process, etc Advantag Limitations High e Source of valuable Longer High investment time strategic R&C specificity Appropriability problems Key organizational elements for Organizational successFlexible Human Organizational learning organizational resources culture structure policy Strategic tale 6.1 © Guerras and Navas, 2022 (v  Exploitation of resources and capabilities Appropriate strategic use of resources and capabilities Internal exploitation Competitive strategy Corporate strategy Fundamental basis for Diversification Internationalization generating competitive advantage External exploitation Marketing of non-specific Additional source of R&C profitability © Guerras and Navas, 2022 (v  The SWOT Analysis SWOT Summary of internal and external analysis SWOT F Matrix D Weaknesses Threats Strengths Weaknesses Strengths Opportunities Strengths Weaknesses Opportunities Threats Opportunities Threats​ EIT TO HER © Guerras and Navas, 2022 (v  SWOT ANALYSIS: Generic Actions SWOT Maintain F D Correct Strengths Weaknesses Opportunities Threats Tackle EIT TO Leverage HER © Guerras and Navas, 2022 (v  Assessment of SWOT Analysis SWOT Advantages Support for Overview of the Popular tool Conceptual strategy selection company and its and Standard simplicity environment Limitations It does not allow Static tool Identification of the Lack of integration better strategy between external and internal analysis © Guerras and Navas, 2022 (v  SWOT MATRIX S Management capacity W Trained Staff SWOT Bad reputation Proprietary patented Technology Difficulty in accessing distribution channels Good relationship with customers and Suppliers Li tt le advertising effort Availability of financial resources Reduced market share Adequate financing structure High Costs of Production High staff motivation Profitability below the i ndust ry average Good products portfolio Multiple substitute products High rate of market growth Ease of entrance of new competitors Abundant possi bi li t y for ind ustry segmentation Rapid changes in consumers' needs and tastes Ease of access to foreign markets Economic downturn Location wit hin an i ndust ri al district High interest rate with ext ensi ve common services Poor Infrastructures Suppliers sect or with a hi gh capac ity f or Huge bureaucracy for the development of innovation new business O T Application © Guerras and Navas, 2022 (v  Cases of discussion Cases long Case 6: Melia International Hotels: transition to A knowledge-based model Case 7: The Real Madrid: A glo bal sporting and economic b enc h ma rk in the fo otba ll industry Case 25: Inditex, the strategy of a leader of the future Case 26: El Corte Ing les, the la rge-sca le retailer in S pa in Further resources in www.guerrasynavas.com © Guerras and Navas, 2022 (v  Videos: pills strategic The valu e chain https://www.youtube.com/watch?v=SI5lYaZaUlg Analysis of resources and capabilities https://www.youtube.com/watch?v=afrPC91z CkQ Further teaching resources in © Guerras and Navas, 2022 (v Readings recommended DESS, GG; MCNAMARA, G.; EISNER, AB; READ, S. (2019): “ Strategic management. Text and cases ”, McGraw-Hill, New York, 9th edition, chapter 3. GRANT, RM (2019): “ Contemporary strategy analysis ” , Wiley, Hoboken, 10th edition, chapter 5. FORTUNE VICTORY, J. (2008): " Strategic Analysis of the company ", Auditorium Cengage Learning, Madrid, chapter 12. © Guerras and Navas, 2022 (v