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SHR 247.5.BB (Fall) - Analyzing the Firm Internal...

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Analyzing the Firm Internal Environment (Chapter 4)
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The role of resources and capabilities in strategy formulation Strategy is concerned with matching a firm’s resources and capabilities to the opportunities that arise in the external environment So far, we have looked at the identification of profit opportunities in the external environment Now we will look at the interface between strategy and the internal environment of the firm Recent emphasis in business strategy in resources and capabilities…resource analysis has always been central in military analysis
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THE FIRM Goals and Values Leaders Resources Capabilities Core Competencies THE ENVIRONMENT Macro Industry Direct Competitors STRATEGY STRATEGY The Firm-Strategy Interface The Environment-Strategy Interface Shifting the Focus of Strategy Analysis: From the External to the Internal Environment
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Outcomes from External and Internal Environmental Analyses Examine opportunities and threats Examine unique resources, capabilities, and competencies (sustainable competitive advantage)
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Competitive Advantage What business strategy is all about is, in a word, competitive advantage . . . The sole purpose of strategic planning is to enable a company to gain, as efficiently as possible, a sustainable edge over its competitors. Corporate strategy thus implies an attempt to alter a company’s strength relative to that of its competitors in the most efficient way.” Kenichi Ohmae “Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.” Michael Porter
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Competitive Advantage How does a firm achieve a competitive advantage? Resource Based View (RBV or inside-out)) or Positioning (industrial org model or outside-in model) “Should managers take the environment as the starting point, choose an advantageous market position and then build the resource base and activity system necessary to implement this choice? Or should managers take the organization’s resource base (and possibly also its activity system) as the starting point, selecting and/or adapting an environment to fit with these strengths?” (De Witt and Meyer, 2004)
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How does a firm achieve a CA? RBV (inside out) or positioning (industrial org model or outside-in model)? RBV The firm is essentially a pool of resources and capabilities, and that these capabilities are the primary determinants of its strategy and performance Positioning RBV says that a “market focused strategy may not provide the constancy of direction needed to guide strategy over the long term. When the external environment is in a state of state of flux, the firm itself, in terms of its bundle of resources and capabilities, may be much more stable basis on which to define its identity.
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