Covers value chain analysis, resource-based view (RBV) and balanced scorecard

1. Lecture 5
Internal Analysis
Lecturer: Dr. Preston Teeter
MGTS7301
Tools and Techniques
for Business Analysis

2. Outline
• Value chain analysis
• Resource-based view (RBV)
• Balanced scorecard

3. VALUE CHAIN ANALYSIS

4. 4
What the Firm Might Do
What the Firm Can Do
External Environment
Five Forces Analysis, PESTEL, etc.
Internal Environment
Resources, Capabilities and Core
Competencies
Sustainable
Competitive
Advantage

5. Criticisms of
industry-based view
• Assumption of performance homogeneity among
firms in an industry…not supported by research, even
by Porter’s research
• Porter is only a part advocate for IBV…
‘Both industry attractiveness and competitive position
can be shaped by a firm, and this is what makes the
choice of competitive strategy both challenging and
exciting…’

6. • Rumelt 1991.Strategic Management Journal, 12:167-
186
– Industry Effects 9-16%
– Business Unit Effects 44-46%
– Corporate Parent Effects 1-2%
• McGahan & Porter.1997. Strategic Management
Journal, 18:15-30
– Industry Effects 19%
– Segment Specific Effects 32%
– Corporate Parent Effects 4%
Criticisms of
industry-based view

7. The Value Chain

8. Source: Stuckey and White 1993

9. Example: Salmon Farming in Tasmania

10. Value chains in
salmon farming
• First commercial harvest of salmon in 1987
• By 1996 feed costs had become the critical
point in the value chain (almost 50% of
production costs)
• Opportunity recognised by biologist employee
who formed a company with computer
programmer and a mathematician
• Result: automated feeder based upon fuzzy
logic control cut feed wastage by 30%

11. RESOURCE-BASED VIEW (RBV)

12. RBV
Consider the case of CSL. CSL is a global
biotechnology companied that was founded in
Australia with current headquarters in Melbourne.
In 2016, the company had revenues of nearly
USD$7 billion, making it one of the largest biotech
companies in the world.
See video
And the following articles…

13. Source: https://www.smh.com.au/business/markets/beautiful-blood-how-csl-became-a-global-
success-story-20180601-p4zis1.html

14. Source: https://www.smh.com.au/business/markets/beautiful-blood-how-csl-became-a-global-
success-story-20180601-p4zis1.html

15. RBV
So how has this Australian company transformed
itself into a market leader? Answer the following:
1) What is the resource-based view of strategy and
competition? What types of resources create a
sustained competitive advantage?
2) Apply the RBV to CSL. What resources do they
possess and how do these resources create a
competitive edge?

16. RBV
• Tangible resources: real estate, production
facilities, raw materials, etc.
• Intangible resources: reputation, brand names,
culture, knowledge, etc.
• Organisational capabilities: complex
combinations of assets, people and processes
used to transform inputs to outputs

17. RBV
Resources can generate competitive advantage
when they are…
• Valuable
• Rare
• Difficult to imitate
• Without substitutes

18. RBV

20. Imitation
• Physically unique
• Path dependency
– How accumulated over time
• Causal ambiguity
– Difficult to disentangle what it is or how it could be
recreated
• Social complexity
– Trust, interpersonal relationships, culture, reputation

21. Knowledge Map: Arup UK

22. BALANCED SCORECARD

23. Balanced
scorecard
Consider the case of Amazon, the Seattle-based e-
commerce company that was founded in 1994 and is
currently the world’s largest internet retailer and the
second largest employer in the U.S. (behind Walmart).
Somewhat amazingly, Amazon is the fourth most valuable
firm on the U.S. stock market, despite its profits being
less than 1% of Exxon Mobil’s over the past two decades.
Watch video
And see the following slides…

25. Source: https://www.fool.com/investing/general/2016/02/19/the-1-key-to-amazoncom-
incs-success-that-no-one-ta.aspx

26. Source: https://www.forbes.com/sites/michaelcannivet/2018/02/02/3-secrets-of-amazons-
success-anyone-can-emulate/#6b73a7ff4826

27. So what explains Amazon’s ‘profitless path to world
domination’?
1. What is the balanced scorecard? What are its
four perspectives?
2. How can the balanced scorecard help to explain
Amazon’s strategy and growth over the past 20
plus years?
Balanced
scorecard

30. Balanced
scorecard
Perspective Generic Measures
Financial Return on investment and economic
value-added
Customer Satisfaction, retention, market and
account share
Internal Quality, response time, cost and new
product introductions
Learning and growth Employee satisfaction and information
system availability

31. Quiz
• Phones, laptops, tablets, notes away
• Please stay in simulation groups

32. Mon – Quiz #5
1. Why did early (1990s) e-tailers often fail? (choose one)
a. Service
b. Human resource management
c. Logistics and operations
2. True or False: Arup’s quality is difficulty to imitate
because its resources are physically unique and path
dependent.
3. What is the core problem with financial measurements
that led to the introduction of the balanced scorecard?

33. Questions?