4. The purpose of SWOT Analysis
• It is an easy-to-use tool for developing
an overview of a company’s strategic
situation
– It forms a basis for matching your
company’s strategy to its situation
Ch3
5. Strengths
• A STRENGTH is something a company
is good at doing or a characteristic that
gives it an important capability.
• Possible Strengths:
– Name recognition
– Proprietary technology
– Cost advantages
– Skilled employees
– Loyal Customers
Ch3
6. Weaknesses
• A WEAKNESS is something a company
lacks or does poorly (in comparison to
others) or a condition that places it at a
disadvantage
• Possible Weaknesses:
– Poor market image
– Obsolete facilities
– Internal operating problems
– Poor marketing skills
Ch3
7. Strengths and Weakness form a
basis for INTERNAL analysis
• By examining strengths, you can
discover untapped potential or identify
distinct competencies that helped you
succeed in the past.
• By examining weaknesses, you can
identify gaps in performance,
vulnerabilities, and erroneous
assumptions about existing strategies.
Ch3
8. Competitive
Discovering Core Advantage
Gained through
Competencies Core Competencies
Strategic
Competitiveness
Discovering Above-Average
Core Returns
Core
Competencies
Competencies
Sources of
Competitive
Advantage
Capabilities Criteria of Value
Teams of Sustainable Chain
Resources Advantages Analysis
Resources
* Tangible
* Valuable * Outsource
* Intangible * Rare
* Costly to Imitate
* Nonsubstitutable Ch3
9. Key Questions for Managers
in Internal Analysis
How do we assemble bundles of Resources,
Capabilities and Core Competencies to create
VALUE for customers?
And...
Will environmental changes make our core
competencies obsolete?
Are substitutes available for our core
competencies?
Are our core competencies easily imitated?
Ch3
11. Resources What a firm Has...
What a firm has to work with:
its assets, including its people and
the value of its brand name
Ch3-
12. Resources What a firm Has...
What a firm has to work with:
its assets, including its people
and the value of its brand name
Resources represent inputs into a
firm’s production process...
such as capital equipment, skills of
employees, brand names, finances
and talented managers
Ch3-
13. Resources What a firm Has...
What a firm has to work with:
its assets, including its people
and the value of its brand name
Resources represent inputs into a
firm’s production process...
such as capital equipment, skills
of employees, brand names,
finances and talented managers
“Some genius invented the Oreo. We’re just
living off the inheritance.” F. Ross Johnson,
Former President & CEO,
RJR Nabisco
Ch3-
14. Resources What a firm Has...
What a firm has to work with:
its assets, including its people
Tangible Resources
and the value of its brand name
* Financial
* Physical Resources represent inputs into a
* Human Resources firm’s production process...
* Organizational
such as capital equipment, skills
of employees, brand names,
finances and talented managers
Intangible Resources
* Technological
“Some genius invented the Oreo.
* Innovation We’re just living off the inheritance.”
* Reputation F. Ross Johnson,
Former President & CEO, RJR Nabisco
Ch3-
16. Capabilities What a firm Does...
Capabilities represent:
the firm’s capacity or ability to integrate
individual firm resources to achieve a desired
objective.
Ch3-
17. Capabilities What a firm Does...
Capabilities represent:
the firm’s capacity or ability to integrate individual
firm resources to achieve a desired objective.
Capabilities develop over time as a result of complex
interactions that take advantage of the interrelationships
between a firm’s tangible and intangible resources that
are based on the development, transmission and
exchange or sharing of information and knowledge as
carried out by the firm's employees.
Ch3-
18. Capabilities What a firm Does...
Capabilities represent:
the firm’s capacity or ability to integrate individual
firm resources to achieve a desired objective.
Capabilities develop over time as a result of complex
interactions that take advantage of the interrelationships
between a firm’s tangible and intangible resources that are
based on the development, transmission and exchange or
sharing of information and knowledge as carried out by the
firm's employees.
Capabilities become important when they are combined
in unique combinations which create core competencies
which have strategic value and can lead to competitive
advantage.
Ch3-
19. Discovering Core
Competencies
Discovering
Core
Core
Competencies
Competencies
Sources of
Competitive
Advantage
Capabilities
Teams of
Resources
Resources
* Tangible
* Intangible
Ch3-
20. Core Competencies What a firm Does...
that is Strategically
Valuable
“…are the essence of what makes an organization
unique in its ability to provide value to
customers.”
Leonard-Barton, Bowen, Clark, Holloway & Wheelwright
McKinsey & Co. recommends identifying three to four
competencies to use in framing strategic actions.
Ch3-
21. Discovering Core
Competencies
Discovering
Core
Core
Competencies
Competencies
Sources of
Competitive
Advantage
Capabilities Criteria of
Teams of Sustainable
Resources Advantages
Resources
* Valuable
* Tangible
* Intangible * Rare
* Costly to Imitate
* Nonsubstitutable * Outsource
Ch3-
22. Core Competencies What a firm Does...
that is Strategically
For a strategic capability to be a
Valuable
Core Competency, it must be:
Valuable
Rare
Costly to Imitate
Nonsubstitutable
Ch3-
23. Core Competencies What a firm Does...
Core Competencies must be: that is Strategically
Valuable
Valuable
Capabilities that either help a firm to exploit opportunities to
create value for customers or to neutralize threats in the
environment
Rare
Capabilities that are possessed by few, if any, current or potential
competitors
Costly to Imitate
Capabilities that other firms cannot develop easily, usually due to
unique historical conditions, causal ambiguity or social complexity
Nonsubstitutable
Capabilities that do not have strategic equivalents, such as firm-
specific knowledge or trust-based relationships Ch3-
24. Discovering Core
Competencies
Discovering
Core
Core
Competencies
Competencies
Sources of
Competitive
Advantage
Capabilities Criteria of Value
Teams of Sustainable Chain
Resources Advantages Analysis
Resources
* Valuable
* Tangible
* Intangible * Rare
* Costly to Imitate
* Nonsubstitutable * Outsource Ch3-
25. Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value
Support
Activities
Primary Activities Ch3-
26. Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value
Support
Activities
Logistics
Inbound
Primary Activities Ch3-
27. Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value
Support
Activities
Operations
Logistics
Inbound
Primary Activities Ch3-
28. Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value
Support
Activities
Operations
Outbound
Logistics
Logistics
Inbound
Primary Activities Ch3-
29. Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value
Support
Activities
Operations
Outbound
Marketing
Logistics
Inbound
& Sales
Logistics
Primary Activities Ch3-
30. Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value
Support
Activities
Service
Operations
Outbound
Marketing
Logistics
Inbound
& Sales
Logistics
Primary Activities Ch3-
31. Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value
Support
Activities
Procurement
Service
Operations
Outbound
Marketing
Logistics
Inbound
& Sales
Logistics
Primary Activities Ch3-
32. Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value
Support
Activities
Technological Development
Procurement
Service
Operations
Outbound
Marketing
Logistics
Inbound
& Sales
Logistics
Primary Activities Ch3-
33. Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value
Support
Human Resource Management
Activities
Technological Development
Procurement
Service
Operations
Outbound
Marketing
Logistics
Inbound
& Sales
Logistics
Primary Activities Ch3-
34. Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value
Firm Infrastructure
Support
Human Resource Management
Activities
Technological Development
Procurement
Service
Operations
Outbound
Marketing
Logistics
Inbound
& Sales
Logistics
Primary Activities Ch3-
35. Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value
Firm Infrastructure
Human Resource Management M
Support A
R
Activities G
Technological Development IN
Procurement
Service
Operations
Outbound
Marketing
Logistics
Inbound
& Sales
Logistics
IN
RG
A
M
Primary Activities Ch3-
36. Outsourcing
Strategic Choice to Purchase Some Activities From Outside Suppliers
Firm Infrastructure
Human Resource Management M
Support A
R
Activities G
Technological Development IN
Procurement
Service
Operations
Outbound
Marketing
Logistics
Inbound
& Sales
Logistics
IN
RG
A
M
Primary Activities Ch3-
37. Outsourcing
Strategic Choice to Purchase Some Activities From Outside Suppliers
FirmResource Management
Human
Infrastructure
M
Human Resource Management purchase a portion
Support Firms often A
Technological Development R
Activities G
of their value-creating activities
IN
Technological Development specialty external suppliers
from
Procurement
who can perform these functions
Procurement more efficiently
Service
Operations
Outbound
Marketing
Service
Logistics
Inbound
& Sales
Logistics
IN
RG
Outbound
Inbound Operations Logistics Marketing
A
& Sales
M
Logistics
Primary Activities Ch3-
38. Strategic Rationales for Outsourcing
Improve Business Focus
Lets company focus on broader business issues by having outside
experts handle various operational details
Provide Access to World-Class Capabilities
The specialized resources of outsourcing providers makes world-
class capabilities available to firms in a wide range of applications
Accelerate Business Re-Engineering Benefits
Achieves re-engineering benefits more quickly by having outsiders--
who have already achieved world-class standards--take over process
Share Risks
Reduces investment requirements and makes firm more flexible,
dynamic and better able to adapt to changing opportunities
Free Resources for Other Purposes
Permits firm to redirect efforts from non-core activities toward those
that serve customers more effectively Ch3-
39. Core Competencies--Cautions and Reminders
Never take for granted that core competencies will
continue to provide a source of competitive advantage
All core competencies have the potential to become
Core Rigidities
Core Rigidities are former core competencies that sow
the seeds of organizational inertia and prevent the firm
from responding appropriately to changes in the
external environment
Strategic myopia and inflexibility can strangle the firm’s
ability to grow and adapt to environmental change or
competitive threats
Ch3-
40. Competitive
Discovering Core Advantage
Gained through
Competencies Core Competencies
Strategic
Competitiveness
Discovering Above-Average
Core Returns
Core
Competencies
Competencies
Sources of
Competitive
Advantage
Capabilities Criteria of Value
Teams of Sustainable Chain
Resources Advantages Analysis
Resources
* Valuable
* Tangible
* Intangible * Rare
* Costly to Imitate * Outsource
* Nonsubstitutable Ch3-
