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Environmental analysis and building blocks

StrategicManagement

Submitted by:

Nilam Jadhav

R.No: 121019

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External Analysis

Identify strategic opportunities and threatsin the operatingenvironment.

Macroenvironment National

Immediate (Industry)

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Internal Analysis

Identify strengths

Quality and quantity of resources available

Distinctive competencies

Identify weaknesses

Inadequate resources

Managerial and

organizational deficiencies

The purpose of internal analysis is to pinpoint the strengthsand weaknesses of the organization.

Strengths lead to superior performance.

Weaknesses lead to inferior performance.

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Internal Analysis:

A Three-Step Process

1. Understand the process by which companies create value forcustomersand profit for themselves.

Resources

Capabilities

Distinctive competencies

2. Understand the importance of superiorityin creating value andgenerating high profitability.

Efficiency

Quality

3. Analyze the sources of the companys competitive advantage.

Strengthsthat are driving profitability

Weaknessesopportunities for improvement

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Business-Level Strategies

Cost leadership

Attaining, then using the lowest total cost basis as a

competitive advantage.

Differentiation Using product features or services to distinguish the

firms offerings from its competitors.

Market niche focus

Concentrating competitively ona specific market segment.

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Competitive Advantage :

Competitive Advantage A firms profitability is greater than the average profitability

for all firms in its industry.

SustainedCompetitive Advantage A firm maintains above average and superior profitability andprofit growthfor a number of years.

The Primary Objective of Strategyis to achieve aSustained Competitive Advantage

which in turn results inSuperior Profit and Profit Growth.

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Strategy, Resources, Capabilities,

and Competencies :

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Building Blocks of Competitive

AdvantageThe Generic

Distinctive CompetenciesAllow a company to:

Differentiate product offering

Offer more utility to customer

Lower the cost structure

regardless of the industry,its products, or its services

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1.Efficiency Measured by the quantity of inputs it takes to

produce a given output:

Efficiency = Outputs / Inputs

Productivity leads to greater efficiency and lowercosts:

Employee productivity

Capital productivity

Superior efficiency helps a company attain acompetitive advantage through a lower cost

structure.

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3.Innovation

Innovation is the act of creating new products or new processes

Product innovation

Creates products that customers perceive as more valuable

and

Increases the companys pricing options

Process innovation

Creates value by lowering production costs

Successful innovation can be a major source ofcompetitive advantageby giving a company

something unique, something its competitors lack.

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4.Responsiveness to Customers

Superior quality and innovation are integral to superior

responsiveness to customers.

Customizing goods and services to the unique demands of

individual customers or customer groups.

Superior responsiveness to customers differentiates acompanys products and services and leads to brand

loyalty and premium pricing.

Identifying and satisfying customers needs better thanthe competitors

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Analyzing Competitive

Advantage and Profitability

Competitive Advantage When a companies profitability is greater than the average of all other

companies in the same industry that compete for the same customers

Benchmarking Comparing company performance against that of competitors and the

companys historic performance

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Competitive Advantage :

The Value Creation Cycle

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Competitive Advantage:

The Value Creation Cycle

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Thank you!!!